DELBROS v.

IAC (Short title)
GR # 72566 | April 12, 1988
Petition: Petition for review on certiorari of IAC decision
Petitioner: Delbros Hotel Corporation
Respondent: The Intermediate Appellate Court [First Special Cases Division], Hilton
International Company, Achim Ihlenfeld as successor to Richard Chapman and
Flaviano Mosquera Jr., the latter two in their respective capacities as former General
Manager and Comptroller of the Manila Hilton International Hotel
(Rule 11, Rules on Civil Procedure)
DOCTRINE
A supplemental pleading is not like an amended pleading substitute for the original
one. It does not supersede the original, but assumes that the original pleading is to
stand, and the issues joined under the original pleading remain as issues to be tried in
the action.
FACTS
- DELBROS filed before the RTC of Manila a complaint for termination of
agreement and damages, with prayer for the issuance of a restraining order
and/or writ of preliminary mandatory injunction against Hilton Hotels
International and Richard Chapman.
o It was alleged that pursuant to the Agreement and Lease
DELBROS financed, built, furnished and equipped a first-class hotel
and that for their respective undertakings, DELBROS was to
receive a share in the gross operating profit (GOP) of the hotel.
o That in violation of the terms of the agreement, HILTON a) refused,
despite repeated demands to remit to DELBROS its share b)
transferred, without DELBROS' prior approval, a portion of the
reserve funds to its operating funds and c) used said operating
funds for capital expenditures without the consent of DELBROS.
- In their Answer with Compulsory counterclaim, HILTON and Chapman
specifically denied the allegations of DELBROS
o DELBROS had no valid and sufficient cause of action for failure to
give a five-day notice of termination of the Agreement and the
causes of action, if any, were barred by estoppel or laches;
- RTC 1st order: Judge Dayrit issued a writ of preliminary injunction,
enjoining1 HILTON and Chapman
1
a] Disposing, removing, tampering, destroying, or otherwise concealing corporate records, books of
accounts, statement of accounts receivables, ledgers, vouchers, invoices, receipts, purchase orders, job
orders, bank statements, returned checks, gate passes, incident reports, debit/credit memos and/or any other
document of similar nature, pertaining to the operation, management and administration of the business and
affairs of the hotel known as the 'Manila Hilton' located at the United Nations Avenue, Ermita, Manila;
- HILTON and Chapman went to the Intermediate Appellate Court on a
petition for certiorari.
- IAC 1st order: Issued a temporary restraining order enjoining the
implementation of the orders of Judge Dayrit.
- DELBROS then filed a motion to admit Supplemental Complaint.
o Impleaded as an additional defendant Flaviano Mosquera, Jr.
o Sought the confirmation by the trial court of the termination of the
Management Contract effected by DELBROS.
- RTC 2nd order: Admitted the Supplemental Complaint, directing summons
and copy of the supplemental complaint to be served on the additional
defendant and requiting HILTON and Chapman to answer the supplemental
complaint within five 5 days from notice.
- An ex-parte motion for an extension of 12 days to answer the supplemental
complaint was filed in behalf of all three defendants.
- DELBROS had filed a motion to declare HILTON and Chapman in default
with respect to the supplemental complaint.
- RTC 3rd order: Default order was granted and DELBROS was allowed to
present its evidence ex-parte in support of its supplemental complaint.
- RTC 4th order: Rendered a judgment confirming as legal and valid the
termination and ordering the surrender the Manila Hilton International Hotel
to DELBROS as well as to pay DELBROS its due.
o HILTON, et al. filed their Answer to the Supplemental Complaint,
and also filed a notice of appeal from the judgment by default.
- DELBROS moved for the execution of the judgment pending appeal which
was granted in a Special Order. A writ of execution was issued and served
upon defendants on the same day.
- HILTON, et al. instituted before the then IAC a petition for certiorari with
prayer for a restraining order/preliminary injunction,
- IAC 2nd order: Issued a temporary restraining order enjoining the
implementation and/or enforcement of the Special Order
- HILTON, et al. filed an urgent ex-parte motion to deputize Manila police
authorities to enforce/implement the restraining order.
- IAC 3rd order: Issued a resolution reiterating 'the continuing efficacy of its
restraining order and granted HILTON's motion to deputize Manila police
authorities to enforce the restraining order.
- DELBROS filed an urgent motion for reconsideration.
o More than a month without the IAC acting on its motion for
reconsideration, DELBROS filed the instant petition.
o
ISSUE/S
1. W/N the RTC erred in declaring a party in default for failure to answer a
supplemental complaint.

b] Disposing, removing, destroying, dissipating, or otherwise concealing hotel stocks [consisting of food,
beverage, supplies and items of similar nature], furniture, furnishings, specialized hotel equipment [which term
shall mean all equipment required for the operation of kitchen, laundries, dry cleaning facilities, restaurants,
bars, special lighting and other equipment of similar nature] operating equipment [which term shall include
chinaware, linens, silverware, kitchenwares and other similar items], operating and guest supplies [which term
shall include soaps, cleaning materials, matches, paper supplies, stationery and other similar items] and such
other furnishings equipment and other personal properties or assets as are normally required for the efficient
and continuing operation of the Manila Hilton;
c] Disbursing, expending and/or dissipating testimonies funds, time deposits, revenues, and income under the
account of Hilton International Company and/or Manila Hilton without prior approval from this Court, except
only as may be necessary to prevent total or partial disruption of the hotels services;
d] Disbursing funds in payment to Hilton International Company or transferring funds to Hilton's local bank
accounts or offsetting hotel receivables in favor of Hilton International Company and/or its affiliated
companies;
e] Remitting funds from their local bank accounts to their foreign offices.
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PROVISIONS

RULING & RATIO

1. YES
- Default orders are taken on the legal presumption that in failing to file an
answer, the defendant does not oppose the allegations and relief demanded
in the complaint.
o In the case at bar, however, no such presumption can arise
because the answer filed by HILTON and Chapman to the original
complaint; their institution of the certiorari proceedings; and their
vigorous opposition to the admission of the supplemental complaint
under consideration should have cautioned the judge from
precipitately rendering the default order.
- "A supplemental pleading is not like an amended pleading substitute for
the original one. It does not supersede the original, but assumes that the
original pleading is to stand, and the issues joined under the original
pleading remain as issues to be tried in the action."
- While it is conceded that there is authority in support of a default judgment
being predicated upon defendant's failure to answer a supplemental
complaint the same cannot apply here.
o The reason is that although in the supplemental complaint, the relief
prayed for was altered from termination of the management
contract to judicial confirmation of its termination, the basic and
principal issue of whether or not petitioner was entitled to terminate
the management contract, remained.
o As this basic issue had been previously traversed and joined by the
Answer filed by HILTON and Chapman, there was no necessity for
requiring them to plead further to the Supplemental Complaint.
Consequently, the trial judge did not have a legal ground for
declaring them in default for such failure to plead.
- The trial court should have treated the supplemental complaint as an
amended complaint, and the original answer thereto as sufficient; or
otherwise have waited for the answer of the newly-impleaded defendant
before acting on the motion to declare the original defendants in default and
rendering the default judgment, considering that a common cause of action
has been asserted against the three defendants, so that the answer of
Mosquera, Jr. could inure to the benefit of the original defendants.

DISPOSITION
WHEREFORE, the instant petition is hereby DISMISSED. The default order of July 9,
1985, the default judgment dated July 15, 1985 and the Special Order of September
3, 1985 issued in Civil Case No. 85-29489 of the Regional Trial Court of Manila are
hereby annulled and set aside. The Answer dated July 18, 1985 filed by herein private
respondents in Id case is ordered admitted and the case is remanded for trial on the
merits. No pronouncement as to costs.

SO ORDERED.

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