G.R. No. L-15659. November 30, 1962. THE DE LA RAMA STEAMSHIP COMPANY, INC., plaintiff-appellee, vs. NATIONAL DEVELOPMENT COMPANY, defendant-appellant.
FACTS:

This case originates from a prior litigation (G.R. No. L-8784) concerning a management agreement between De la Rama Steamship Co., Inc. (De la Rama) and the National Development Company (NDC). Under the 1949 agreement, De la Rama managed vessels for NDC and had an option to purchase them. In the prior case, the Supreme Court upheld NDC’s right to cancel the agreement, thereby nullifying De la Rama’s option to purchase. Following that adverse ruling, De la Rama filed a “Supplemental Pleading” in the same trial court case, asserting new claims: (1) to prohibit NDC from using specific vessel names, (2) to recover over P1.5 million for alleged advances and commissions under the management contract, and (3) to claim P1.1 million in damages.
The trial court admitted this supplemental pleading over NDC’s objection. During the hearing, the court appointed a Board of Accountants to examine the complex accounting claims. The Board’s chairman later submitted a report, which was based largely on an audit conducted by the NDC’s own auditor. However, before NDC could formally present its objections to this report, the trial court rendered a decision based predominantly on the Board chairman’s findings, prompting NDC’s appeal.

ISSUE

The primary issues are: (1) whether the trial court properly admitted De la Rama’s “Supplemental Pleading” to assert new causes of action after its main claim (the option to purchase) had been definitively rejected in prior litigation; and (2) whether the trial court violated NDC’s right to due process by rendering a decision based on the Board of Accountants’ report without affording NDC an opportunity to be heard on its objections to that report.

RULING

The Supreme Court set aside the trial court’s decision and remanded the case. On the first issue, the Court held that the supplemental pleading was improperly admitted. A supplemental pleading under the Rules of Court is meant to allege facts occurring after the original pleading, which are material to the existing cause of action. Here, De la Rama’s new claims for reimbursement and damages did not arise after the original complaint but were separate causes of action that existed independently at the time of the first suit. Since De la Rama’s primary right of action (the option to purchase) had already been extinguished by the prior Supreme Court decision, it could not use a supplemental pleading to inject entirely new and distinct demands. However, in the interest of expediency and to avoid further delay, the Court ordered that the supplemental pleading and subsequent pleadings be enrolled and docketed as a new and separate action, upon payment of the appropriate filing fees by De la Rama based on the total amounts claimed.
On the second issue, the Court ruled that the trial court committed a grave violation of NDC’s constitutional right to due process. The appointment of the Board of Accountants was for the purpose of aiding the court in resolving complex accounting issues. The procedure inherently required that both parties be given a full opportunity to examine the Board’s report, present their objections, and be heard. By rendering a decision based on the report immediately upon its submission, without allowing NDC to file its objections or conduct a hearing, the trial court deprived NDC of its fundamental right to be heard. This procedural defect was not waived by NDC’s failure to file a motion for reconsideration, as the denial of the right was promptly raised on appeal. The case was remanded to the trial court with instructions to allow NDC to submit its objections to the report and to conduct a proper hearing thereon.