GR 81123; (February, 1989) (Digest)
G.R. No. 81123 February 28, 1989
CRISOSTOMO REBOLLIDO, FERNANDO VALENCIA and EDWIN REBOLLIDO, petitioners, vs. HONORABLE COURT OF APPEALS and PEPSICO, INC., respondents.
FACTS
Petitioners filed a damages suit against Pepsi Cola Bottling Company of the Philippines, Inc. (Pepsi Cola) and its driver, Alberto Alva, arising from a vehicular accident on March 1, 1984. Summons was served on September 21, 1984, received by Nanette Sison, who identified herself as the secretary of Pepsi Cola’s legal department. Pepsi Cola failed to answer, was declared in default, and a judgment was rendered against it on June 24, 1985. When petitioners moved for execution, the motion was received by private respondent PEPSICO, Inc., a foreign corporation.
It was revealed that Pepsi Cola had dissolved on March 2, 1984, one day after the accident. Prior to dissolution, in June 1983, PEPSICO, Inc. had executed a written undertaking assuming all debts and liabilities of Pepsi Cola. PEPSICO opposed the execution, moving to vacate the judgment for lack of jurisdiction, arguing invalid service of summons on a dissolved corporation and improper service upon itself.
ISSUE
The primary issue is whether the trial court validly acquired jurisdiction over the dissolved Pepsi Cola through the service of summons on its alleged secretary, thereby binding its successor, PEPSICO, Inc., which assumed its liabilities.
RULING
The Supreme Court ruled in favor of petitioners, reinstating the trial court’s judgment. The Court held that jurisdiction was validly acquired. While Pepsi Cola was dissolved, Section 122 of the Corporation Code provides that a corporation continues to exist for three years for the purpose of prosecuting and defending suits. Service of summons on Nanette Sison, who represented herself as part of the legal department, was deemed proper service upon the corporation during this winding-up period.
Crucially, PEPSICO, Inc., by virtue of its written undertaking, assumed all liabilities of Pepsi Cola, including any judgment for damages. The Court emphasized that this assumption agreement made PEPSICO the real party in interest obligated to satisfy the claim. PEPSICO’s receipt of the motion for execution constituted sufficient notice of the suit. Its failure to intervene and defend the action, despite its clear contractual obligation to handle such liabilities, amounted to gross negligence. The substantive right of the petitioners to recover damages outweighs the technical defense of improper service raised by PEPSICO. Therefore, the valid service on Pepsi Cola effectively bound PEPSICO, and the default judgment is enforceable against it.