Multi Trans Agency Phils vs. Oriental Assurance Corp PDF

9/25/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 590 9/25/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 590
676
676 SUPREME COURT REPORTS ANNOTATED
Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance Corp.

the October 16, 2007 Resolution denying the motion for
reconsideration, are AFFIRMED.
SO ORDERED. gross negligence of counsel deprives the client of due process of
law; or where the application of the rule will result in outright
Chico-Nazario, Velasco, Jr., Nachura and Bersamin,** deprivation of the client’s liberty or property; or where the
JJ., concur. interests of justice so requires and relief ought to be accorded to
the client who suffered by reason of the lawyer’s gross or palpable
Petition denied, judgment and resolution affirmed. mistake or negligence. In order to apply the exceptions rather
than the rule, the circumstances obtaining in each case must be
Note.—Being an admission against interest, the
looked into. In cases where one of the exceptions is present, the
documents are the best evidence which affords the greatest
courts must step in and accord relief to a client who suffered
certainty of the facts in dispute. (Rufina Patis Factory vs.
thereby.
Alusitain, 434 SCRA 418 [2004])
——o0o—— Same; Same; Definition of Gross Negligence.—Gross
negligence has been defined as the want or absence of or failure to
exercise slight care or diligence, or the entire absence of care. It
examines a thoughtless disregard of consequences without
G.R. No. 180817. June 23, 2009.* exerting any effort to avoid them.
Same; Same; For a claim of counsel’s negligence to prosper,
MULTI-TRANS AGENCY PHILS., INC., petitioner, vs.
nothing short of clear abandonment of the client’s cause must be
ORIENTAL ASSURANCE CORP., respondent.
shown.—For a claim of counsel’s negligence to prosper, nothing
short of clear abandonment of the client’s cause must be shown.
Remedial Law; New Trial; One of the grounds for the granting In this case, the only pleading filed by petitioner’s former counsel
of a new trial under Section 1 of Rule 37 of the 1997 Revised Rules was a motion to dismiss. After the same had been denied, he did
of Civil Procedure is excusable negligence; It is settled that the not file anything more until a decision was rendered by the trial
negligence of counsel binds the client; Exceptions.—One of the court. This is compounded by the fact that he misrepresented to
grounds for the granting of a new trial under Section 1 of Rule 37 petitioner that he had filed the proper motion to set aside the
of the 1997 Revised Rules of Civil Procedure is excusable order of default. These acts of petitioner’s counsel amount to gross
negligence. It is settled that the negligence of counsel binds the negligence.
client. This is based on the rule that any act performed by a Same; Same; A client may reasonably expect that his counsel
counsel within the scope of his general or implied authority is will make good his representations and has the right to expect that
regarded as an act of his client. Consequently, the mistake or his lawyer will protect his interests during the trial of his case.—In
negligence of counsel may result in the rendition of an Sarraga, Sr. v. Banco Filipino Savings and Mortgage Bank (393
unfavorable judgment against the client. We have, however, SCRA 566 [2002]), we held: A client may reasonably expect that
carved out exceptions to this rule; as where the reckless or his counsel will make good his representations and has the right
to expect that his lawyer will protect his interests during the trial
_______________ of his case. For the general employment of an attorney to
prosecute or defend a case or proceeding ordinarily vests in a
** Designated as additional member of the Third Division per raffle dated plaintiff’s attorney the implied authority to take all steps or do all
June 17, 2009. acts necessary or incidental to the regular and orderly prosecution
* THIRD DIVISION. and management of the suit, and in a defendant’s attorney, the
power to take such steps as he deems necessary to defend the suit
and protect the interests of the defendant.
central.com.ph/sfsreader/session/00000174c2e8339e649cfa18003600fb002c009e/t/?o=False 1/20 central.com.ph/sfsreader/session/00000174c2e8339e649cfa18003600fb002c009e/t/?o=False 2/20
677 Corp.

VOL. 590, JUNE 23, 2009 677
CHICO-NAZARIO, J.:
Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance Corp. Before Us is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court, which seeks the reversal and
setting aside of the Decision1 of the Court of Appeals dated
Same; Same; Default; Trial courts should be liberal in setting 4 December 2006 in CA-G.R. CV No. 67581 affirming with
aside orders of default and granting motions for new trial if the modification the decision2 and order3 of the Regional Trial
defendant appears to have a meritorious defense.—In Amil v. Court (RTC) of Manila, Branch 13, in Civil Case No. 97-
Court of Appeals (316 SCRA 317 [1999]), we ruled that trial courts 84259; and its Resolution4 dated 10 December 2007
should be liberal in setting aside orders of default and granting denying petitioner Multi-Trans Agency Phils., Inc.’s (Multi-
motions for new trial if the defendant appears to have a Trans) Motion for Reconsideration.
meritorious defense. Parties must be given every opportunity to The instant case arose from a complaint for sum of
present their side. The issuance of orders of default should be the money filed by respondent Oriental Assurance Corporation
exception rather than the rule, to be allowed only in clear cases of (Oriental) against petitioner and Neptune Orient Lines,
obstinate refusal by the defendant to comply with the orders of Ltd. (Neptune) before the RTC of Manila on 22 July 1997.
the trial court. The case was raffled to Branch 13. The complaint alleged,
Same; Same; Same; If the incompetence, ignorance or inter alia, that Multi-Trans was the operator/ship
inexperience of counsel is so great and the error committed as a agent of the vessel “Tokyo Bay” while Neptune was the
result thereof is so serious that the client who otherwise has a good operator/ship agent of the vessel “M/V Neptune Beryl.”
cause, is prejudiced and denied his day in court, the litigation may Oriental’s predecessor-in-interest – Imrex Enterprises –
be reopened to give the client another chance to present his case.— imported from England seventy-two (72) boxes and one (1)
Our pronouncement in Apex Mining, Inc. v. Court of Appeals (319 pal/box of various colors of Opacolor, contained in one
SCRA 456 [1999]), applies to this case: If the incompetence, container van which was transported from Southampton to
ignorance or inexperience of counsel is so great and the error Manila on board the vessel “Tokyo Bay” as evidenced by
committed as a result thereof is so serious that the clients, who Bill of Lading No. MA-19943/02. The shipment was
otherwise has a good cause, is prejudiced and denied his day in transshipped from Singapore on board the vessel “M/V
court, the litigation may be reopened to give the client another Neptune Beryl,” which arrived and docked at the Manila
chance to present his case. Similarly, when an unsuccessful party International Port, Manila, on 29 August 1996. The
has been prevented from fully and fairly presenting his case as a shipment was insured by respondent against loss and/or
result of his lawyer’s professional delinquency or infidelity the damage for P1,078,012.16 under Marine Insurance Policy
litigation may be reopened to allow the party to present his side. No. OAC-M-96/688.
Where counsel is guilty of gross ignorance, negligence and
dereliction of duty, which resulted in the client’s being held liable _______________
for damages in a damage suit, the client is deprived of his day in
court and the judgment may be set aside on such ground. 1 Penned by Associate Justice Celia C. Librea-Leagogo with Associate
Justices Rodrigo V. Cosico and Edgardo F. Sundiam, concurring. Rollo, pp.
PETITION for review on certiorari of the decision and 40-69.
resolution of the Court of Appeals. 2 Records, pp. 138-140.
The facts are stated in the opinion of the Court. 3 Id., at pp. 180-180a.
Melgar, Tria and Associates for petitioner. 4 Rollo, pp. 71-72.
Melody Anne E. Calo-Villar for respondent.
679
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VOL. 590, JUNE 23, 2009 679

678 SUPREME COURT REPORTS ANNOTATED Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance
Neptune filed its Answer with Compulsory

The container van containing the shipment was Counterclaim.6 It alleged, among other things, that it was a
unloaded from the carrying vessel and stripped of its mere commercial agent of “M/V Neptune Beryl”; and that it
contents at the open Container Yard of the Manila North had no knowledge of the contents, quantity, quality,
Harbor. Only 72 boxes were found, while the one pal/box of condition and value of the subject shipment, as it was
Opacolor CC 22932 Yellow weighing 500 kilos was not carried on a “Said to Contain” (or STC) and “Shipper’s Load
delivered by the carrying vessel, or was shortlanded, as and Count” basis. It claimed that the dorsal portion of Bill
evidenced by Good Order Cargo Receipt No. 1792 issued by of Lading No. MA-19943/02 was not produced. It added
Neptune. The 72 boxes were withdrawn from the Manila that the shipment was discharged from the vessel complete
North Harbor and delivered to the consignee’s (Imrex and in good order, and that it exercised the diligence
Enterprises’) warehouse at No. 7 Jose Cruz St., Barrio required by law in the handling of and vigilance over the
Ugong, Pasig City. shipment. It also alleged that no demand was made. It
Respondent alleged that the non-delivery or invoked the following defenses: the complaint stated no
shortlanding of one box of the shipment was due to the cause of action; the plaintiff and subrogor had no privity of
negligence of petitioner and Neptune and/or the captain contract with Neptune; plaintiff and Neptune were not the
and crew of the vessels “Tokyo Bay” and/or “MV Neptune real parties-in-interest; the subject shipment was
Beryl” in loading, stowing, taking care of, handling and discharged at the Port of Manila complete and in good
unloading the shipment. By being negligent, petitioner and order; its responsibility ceased upon the shipment’s
Neptune breached their contract of carriage in failing to discharge from the ship’s tackle; the damages, losses and
deliver one box of the shipment to Imrex Enterprises at the spillages, if any, were due to the inherent nature, vice or
point of destination. Imrex Enterprises filed a claim with defect of the goods; or the perils, dangers and accidents of
respondent for the value of the one box that was the sea; pre-shipment loss or damage; or the insufficiency
shortlanded. Pursuant to the terms and conditions of of the packing thereof, for which it was not liable; the
Marine Insurance Policy No. OAC-M-96/688, respondent alleged payment made by plaintiff to the alleged
paid Imrex Enterprises the amount P256,937.03, for which assured/consignee was not legally due and demandable, so
reason, it claims that it is subrogated into the rights of there was consequently no legal subrogation in favor of the
Imrex Enterprises to be indemnified by petitioner and plaintiff; its liability should not exceed the cost insurance
Neptune. freight value of the loss or damaged shipment or the
Respondent made demands upon petitioner and amount of $500 per package; or in any event, said liability,
Neptune to pay, but they refused to satisfy the former’s if any, should not exceed the limitation of liability provided
claim. As a result, the complaint was filed and both for in the Bill of Lading; no invoice of loss/damage was
petitioner and Neptune were sued, because respondent was made by the consignee within the time required by law, the
uncertain from whom it was entitled to relief. It prayed Bill of Lading, and the pertinent charter party; the
that either or both petitioner and Neptune be ordered to complaint was barred by prescription and/or laches;
pay (a) P256,937.03 with legal interest from the date of the plaintiff’s claim was excessive and unreasonable; the terms
filing of the complaint; (b) P50,000.00 as attorney’s fees; and conditions of the relevant Bill of Lading, Carriage of
and (c) costs of suit.5 Goods by Sea Act and existing laws absolved it from any
and all liability for the
_______________
_______________
5 Records, pp. 1-4.
6 Id., at pp. 21-27.
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Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance VOL. 590, JUNE 23, 2009 681
Corp. Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance
Corp.
alleged loss/damage; the damage, if any, to the shipment petitioner a copy of the Order dated 25 October 1997 it
was due to the negligent acts or omissions committed by appearing that Multi-Trans was not sent a copy thereof.
the consignee or its representatives, or to causes for which For this reason, it declared that petitioner’s period to file
defendant is not responsible; the shipment was loaded on an answer had not yet started to run.11
board the vessel subject to the terms and conditions of the On 15 January 1999, the trial court archived the case,
relevant Bill of Lading; the subject shipment was carried there being no movement in the case.12
under “weight, measure, marks and numbers, quality, On 17 February 1999, respondent filed a motion to
contents and value unknown,” indicating that the carrier declare defendant Multi-Trans in default for failure to file
did not know the exact quantity, quality and weight of the its answer to the complaint.13
shipment, as it was not given the opportunity to inspect the In its order14 dated 26 February 1999, the trial court
same; and the Bill of Lading was issued based on the stated that the copy of the Order dated 25 October 1997
declaration made by the shipper; and the vessel (M/V was sent to defendant Multi-Trans and not to its counsel.
Neptune Beryl) acted as a special carrier, and Neptune was For this reason, the period to file an Answer had not yet
a mere commercial agent of “M/V Neptune Beryl.” started to run. It directed that a copy of the 25 October
On the other hand, petitioner, through its counsel Jose 1997 Order be sent to defendant Multi-Trans’ counsel. A
Ma. Q. Austria, filed a Motion to Dismiss7 on the ground notice of the transmittal of the Order dated 25 October
that the complaint did not state a cause of action. It argued 1997 to Atty. Austria was shown to the trial court without
that the complaint stated that petitioner Multi-Trans was any return.
the “operator/ship agent of the vessel “Tokyo Bay.” Per Order dated 27 March 1999, petitioner Multi-Trans
However, in the Bill of Lading attached to the complaint, was declared in default, there being a certification from the
petitioner was named agent of Multimodal Post Office of Makati showing that counsel for petitioner
Transport Operator and not of the vessel “Tokyo received a copy of the Order dated 25 October 1997 denying
Bay.” Neither can it be the operator of the said vessel, its motion to dismiss, and that it had not yet filed an
there being no allegation that said vessel was on a bareboat Answer.15
charter to Transtainer Lines, the principal of petitioner. It
maintains that the evidence presented by plaintiff defeats _______________
its own allegations as to the participation of petitioner in
the transaction. 10 Id., at p. 47.
On 8 October 1997, respondent opposed the motion to 11 Id., at p. 50.
dismiss.8 On 23 October 1997, respondent filed its answer 12 Id., at p. 53.
to counterclaim.9 13 Id., at pp. 57-58.
14 Id., at p. 60.
_______________ 15 Id., at p. 70.
7 Id., at pp. 30-32. 683

8 Id., at pp. 33-37.
9 Id., at pp. 45-46.
VOL. 590, JUNE 23, 2009 683
682 Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance
Corp.
The trial court scheduled the pre-trial between
Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance respondent and Neptune and required them to submit their
Corp.
pre-trial briefs.
On 14 April 1999, respondent reiterated its motion to
In an Order dated 25 October 1997, petitioner’s motion declare petitioner Multi-Trans in default.16 On 15 April
to dismiss was denied.10 1999, the trial court reiterated its earlier Order of 27
In an Order dated 20 February 1998, the trial court March 1999 declaring petitioner Multi-Trans in default.17
directed its personnel to transmit immediately to counsel of
Respondent Oriental filed its pre-trial brief on 6 May for petitioner filed a Motion for New Trial and to Admit
1999,18 while Neptune filed its pre-trial brief on 18 May Attached Answer.27 Petitioner prayed that the judgment of
1999.19 the trial court be set aside and a new trial be granted on
In an Order dated 20 May 1999, respondent Oriental the ground of its former counsel’s negligence/incompetence
was allowed to present its evidence ex parte for failure of constituting excusable neglect, and that its Answer to the
Neptune and its counsel to appear at pre-trial despite Complaint be admitted. The following are contained in the
notice.20 Affidavit of Merit executed by petitioner’s Administration
On 17 June 1999, Oriental presented two witnesses: (1) Manager:
Erlinda Espiritu and (2) Perfecto Mojica. It formally offered
in evidence Exhibits A to O, inclusive,21 which the trial “4. That I was surprised considering that per last
court admitted.22 conversation with our lawyer Atty. Jose Ma. Austria, he informed
On 30 August 1999, the trial court rendered its decision us that we have been declared in default and that they have
finding petitioner and Neptune solidarily liable to already filed a Motion to Lift Order of default;
respondent. The dispositive portion of the decision reads: 5. That upon verification of the records of the case, I found
out that our lawyer Atty. Jose Ma. Austria did not actually file
“WHEREFORE, judgment is rendered ordering defendants any Motion to Lift Order of Default despite receipt of the Order of
Multi-Trans Agency Phils., Inc. and Neptune Orient Lines Ltd. the Court declaring us in default;
jointly and severally to pay the plaintiff Oriental Assurance 6. Furthermore, review of the records of the case, disclosed
Corporation the sum of P256,937.03 with legal interest of 6 that the only action taken by our counsel was to file in our behalf
percent per annum from the date of filing of the complaint until a Motion to Dismiss but the same was denied by this Honorable
payment, plus reasonable attorney’s fees of P30,000, and costs.”23 Court on October 25, 1997 and received by Atty. Austria on
February 25, 1998 as evidenced by the Certification coming from
On 10 September 1999, Atty. Jose Ma. Austria, with the Post Office of Makati City;
conformity of petitioner, filed a Notice of Withdrawal of x x x x
Appear- 9. As can be clearly seen, from the time he received the order
of this Court dated October 25, 1997 denying its Motion to
_______________ Dismiss, up to the time he received plaintiff’s motion to declare
defendant in default until the time he received the Order of this
16 Id., at pp. 72-73.
Court declaring us in default, our lawyer has not done nothing
17 Id., at p. 74. (sic) either by filing
18 Id., at pp. 80-86.
19 Id., at pp. 90-94. _______________
20 Id., at p. 95.
21 Id., at pp. 108-134. 24 Id., at pp. 142-143.
22 Id., at p. 135. 25 Id., at p. 144.

26 Id., at p. 145.
23 Id., at p. 140.
27 Id., at pp. 146-162.
684
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684 SUPREME COURT REPORTS ANNOTATED VOL. 590, JUNE 23, 2009 685
Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance Corp.
Corp.
an answer or a motion to lift the order of default (which he led us
ance.24 The trial court ordered notices be furnished to believe that he indeed filed the same) which is clearly a breach
petitioner until a new counsel appeared.25 of trust that we have reposed in him;
On 27 September 1999, Melgar Tria & Associates 10. By the negligence of our counsel, we were denied the
entered its appearance for petitioner Multi-Trans.26 opportunity to present evidence and participate in the trial, and
Simultaneously with its entry of appearance, new counsel
thus deprived us the chance to contest the suit that has been filed the time it received this in April until the decision on August 30,
against us by the plaintiff; 1999—a period of four months—it did nothing to regain its
11. That we have a good and meritorious defense in that our standing. Defendant was already alerted to the fact that its
company is just a mere freight forwarding firm. Likewise our counsel was remiss in his duties. A normally prudent and careful
principal in London, John Goods & Sons (London) Ltd. is also a person would have taken pains to rectify the situation when there
freight forwarder. While Transtainer Systems (UK) Ltd., was still time to do so. In not making a response until it was too
Multimodal Operators (wherein John Goods & Sons Ltd. is the late, defendant can no longer claim any relief. It is as
agent) is a non-operating vessel cargo consolidator. irresponsible as its lawyer and unworthy to invoke the higher
12. As can be shown, neither one of us is the owner/operator right of equity to rescue it from the consequences of its inaction.
of the vessel “Tokyo Bay” wherein the subject cargo was loaded As provided in Section 1, Rule 37 of the Rules of Court, a party
and shipped nor have we any participation in the filing up, may move to set aside the judgment and ask for new trial if it can
packing, storing of the subject cargo in the container nor in the show that its negligence was, at the least, excusable. The facts
loading and shipping of the same in the vessel; x x x.”28 show otherwise.
The plaintiff has also presented enough evidence to establish the
On 28 September 1999, Neptune filed a Motion for liability of defendant for the loss of a part of the cargo. As stated
Reconsideration of the decision of the trial court.29 in the decision, the bill of lading clearly points to the defendant as
Respondent filed its opposition to the motions for new the shipagent of the vessel in which the cargo was loaded. The
trial and for reconsideration.30 loss of the cargo is deducible from the quantity loaded at the point
In its Order dated 29 November 1999, the trial court of shipment and the quantity discharged at the point of
denied the motion for new trial. It declared: delivery.”31
“In seeking new trial, defendant Multi-Trans Agency assails its The motion for reconsideration filed by Neptune was
former counsel Atty. Jose Ma. Austria for not taking any action at denied by the trial court in its Order dated 1 December
all from the time that he received the denial of his motion to 1999.32
dismiss until the decision was rendered. It cites rulings to the Petitioner filed a notice of appeal informing the trial
effect that negligence or incompetence of counsel is a well- court that it was appealing from the decision it had
recognized ground for new trial. While this may be true in a rendered and the Order denying the motion for new trial.33
number of cases, the factual backdrop therein will reveal that the Neptune also filed a notice of appeal.34 With notices of
parties aggrieved by the inaction of their counsels had not appeal having been filed, the trial court forwarded the
contributed to the situation in which they found themselves. A records of the case to the Court of Appeals.35
party must truly be a victim of its counsel’s
_______________
_______________
31 Id., at pp. 180-180a.
28 Id., at pp. 153-154.
32 Id., at pp. 181-182.
29 Id., at pp. 163-168.
33 Id., at p. 188.
30 Id., at pp. 172-179.
34 Id., at p. 190.
686 35 Id., at p. 191.
687
VOL. 590, JUNE 23, 2009 687
misconduct for it to claim new trial. This is not the case here. Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance
Atty. Austria may have ignored the orders and other papers sent Corp.
to him, but the records will show that defendant was also
furnished copies of the same papers. It cannot pretend to be On 4 December 2006, the Court of Appeals promulgated
ignorant of what was going on. In particular, it had received copy its decision denying the petitioner’s appeal, while granting
of the Order of March 27, 1999 declaring it in default, but from that of Orientals. It affirmed with modification the trial
court’s decision dated 30 August 1999 and Order dated 29 and to act after receipt of the declaration of default merely
November 1999 ruling that it was only petitioner that was constituted “simple negligence” binding the petitioner and
liable to respondent. not entitling it to a new trial. In support of its position,
Petitioner filed a Motion for Reconsideration.36 petitioner enumerates the significant and uncontroverted
Respondent filed a Partial Motion for Reconsideration, acts of its counsel amounting to a “betrayal” of its interests.
praying that the Court of Appeals’ decision be reversed and These are:
set aside, and that Neptune be held solidarily liable with
petitioner.37 On 10 December 2007, the Court of Appeals 1. He failed to file its Answer to the Complaint despite receipt
denied both motions.38 of the Court’s Order denying his motion to dismiss.
Petitioner Multi-Trans Agency Phils. Inc. is now before 2. He failed to inform his client of the fact of his failure to file
us via a petition for review, praying that the decision and its Answer and of the Court Order declaring them in default and
Order of the Court of Appeals be set aside, and that its allowing plaintiff to present evidence ex-parte.
Motion for New Trial and to Admit Answer be granted.39 3. He failed to file the Motion to Lift Order of Default to
Respondent Oriental Assurance Corporation filed its regain his client’s standing in Court.
Comment on the petition filed by Multi-Trans.40 4. He misrepresented that he already filed the Motion to Lift
Both petitioner and respondent filed their respective Order of Default when confronted by client when it learned of said
memoranda.41 Order of default.
Petitioner makes the following assignment of errors: 5. He never bothered to verify what transpired at the ex-parte
hearing and was not able to file the necessary pleadings to lift
FIRST order considering that the case was submitted for decision
THE HONORABLE COURT OF APPEALS ERRED IN without petitioner’s evidence.
DISREGARDING THE SIGNIFICANT AND 6. He miserably failed to inform client of the adverse decision
UNCONTROVERTED ACTS OF PETITIONER’S FORMER despite receipt and practically did nothing to protect its client’s
COUNSEL AMOUNTING TO A “BETRAYAL” OF HIS CLIENT’S interest.43
INTEREST AND WHICH ARE SUFFICIENT REASONS FOR A
NEW TRIAL. The foregoing acts, petitioner maintains, amply show
that its former counsel misrepresented the true status of
_______________
the case. On account of these acts which amount to
incompetence or
36 CA Rollo, pp. 153-161.
37 Id., at pp. 165-173.
_______________
38 Id., at pp. 215-216.
39 Rollo, pp. 10-38. 42 Id., at p. 21.
40 Id., at pp. 87-99. 43 Id., at pp. 23-24.
41 Id., at pp. 106-141; 154-173.
689
688
VOL. 590, JUNE 23, 2009 689

Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance
Corp.
SECOND
negligence, it has been unduly deprived of its rights to be
THE HONORABLE COURT OF APPEALS ERRED WHEN IT
heard and to present its defense and thus has been
AFFIRMED THE AWARD OF DAMAGES DESPITE
deprived of its day in court, violating its right to due
LACK/INSUF-FICIENT EVIDENCE AND THE FACT THAT
process of law through no fault of its own. It explains that
PETITIONER IS NOT THE AGENT OF THE CARRIER.42
while it is settled that negligence of counsel binds the
Petitioner argues that the Court of Appeals erred in client, this rule is not without exception. In cases where
holding that its former counsel’s failure to file an answer reckless or gross negligence of counsel, like in this case,

deprives the client of due process of law, or when the exceptions to this rule; as where the reckless or gross
application would result in outright deprivation of the negligence of counsel deprives the client of due process of
client’s liberty or property, or where the interest of justice law; or where the application of the rule will result in
so requires, relief is accorded to the client who suffered by outright deprivation of the client’s liberty or property; or
reason of the lawyer’s gross or palpable mistake or where the interests of justice so requires and relief ought to
negligence. Citing Tan v. Court of Appeals,44 petitioner be accorded to the client who suffered by reason of the
pleads that because it is similarly situated with the lawyer’s gross or palpable mistake or negligence.48 In order
petitioner therein, the ruling in said case—granting the to apply the exceptions rather than the rule, the
motion for new trial after counsel failed to file an answer circumstances obtaining in each case must be looked into.
and the client was declared in default—should be applied In cases where one of the exceptions is present, the courts
to the case at bar. must step in and accord relief to a client who suffered
Petitioner further disputes the Court of Appeals’ ruling thereby.49
that there is no compelling reason to relax the rules in its Gross negligence has been defined as the want or
favor, because it is not entirely blameless and should have absence of or failure to exercise slight care or diligence, or
taken a more active role in the proceedings of the case the entire absence of care. It examines a thoughtless
against it. It contends that it is not correct to state that it disregard of consequences without exerting any effort to
did not do anything despite being alerted that it was avoid them.50
already declared in default. In the case before us, we find the negligence of
After going over the records of this case, we find the petitioner’s former counsel to be so gross that it was
petition meritorious. deprived of its day in court, thus denying it due process.
One of the grounds for the granting of a new trial under The records show that petitioner was declared in default
Section 1 of Rule 37 of the 1997 Revised Rules of Civil for failure of its former
Procedure is excusable negligence.45 It is settled that the
negligence _______________
which such aggrieved party has probably been impaired in his rights;
_______________
x x x.
44 341 Phil. 570, 582; 275 SCRA 568 (1997).
46 Salonga v. Court of Appeals, 336 Phil. 514, 526; 269 SCRA 534, 545-
45 Section 1. Grounds of and period for filing motion for new trial or
546 (1997).
reconsideration.—Within the period for taking an appeal, the aggrieved
47 Victory Liner, Inc. v. Gammad, G.R. No. 159636, 25 November 2004,
party may move the trial court to set aside the judgment or final order
444 SCRA 355, 361.
and grant a new trial for one or more of the following causes materially
48 Gacutana-Fraile v. Domingo, 401 Phil. 604, 615; 348 SCRA 414, 422
affecting the substantial rights of said party:
(a) Fraud, accident, mistake or excusable negligence which ordinary (2000).
prudence could not have guarded against and by reason of 49 Heirs of Antonio Pael v. Court of Appeals, 382 Phil. 222, 244-245;
325 SCRA 341, 361-362 (2000).
690 50 National Bookstore, Inc. v. Court of Appeals, 428 Phil. 235, 245; 378
SCRA 194, 202 (2002).
690 SUPREME COURT REPORTS ANNOTATED 691

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VOL. 590, JUNE 23, 2009 691
of counsel binds the client. This is based on the rule that
Corp.
any act performed by a counsel within the scope of his
general or implied authority is regarded as an act of his
client.46 Consequently, the mistake or negligence of counsel counsel to file an answer to the complaint after the motion
may result in the rendition of an unfavorable judgment to dismiss he filed was denied by the trial court. Atty.
against the client.47 We have, however, carved out Austria did not do anything to protect the interests of
petitioner. He neither opposed the plaintiff’s motion to higher right of equity to rescue it from the consequences of
declare his client in default despite due notice thereof; nor its inaction.”
filed any motion to set aside the order declaring his client Under the circumstances of the case, petitioner cannot
in default, also after he was apprised of the adverse order. be blamed for relying on the assurance of its former
He failed to inform his client of the fact that he failed to file counsel. Petitioner cannot be said to have utterly failed to
an Answer and of the Court Order declaring it in default do anything to regain its standing after being declared in
and allowing plaintiff to present evidence ex parte. He even default. After being informed that it was declared in
misrepresented that he already filed a Motion to Lift Order default, it confronted Atty. Austria of the same and was
of Default when confronted by his client after the latter assured by him that a motion to lift the order of default had
learned of said Order of Default. As a result of Atty. been filed. This, we know, was not true since petitioner
Austria’s inaction, respondent was allowed to present its never regained its standing, and a decision was rendered
evidence. Petitioner failed to adduce any evidence to rebut by the trial court in favor of the plaintiff without petitioner
the allegations contained in the complaint. It was deprived having the opportunity to present its evidence.
of due process. The gross negligence of petitioner’s former In Sarraga, Sr. v. Banco Filipino Savings and Mortgage
counsel, coupled with its deprivation of due process, will Bank,52 we held:
ultimately result in its deprivation of property.
For a claim of counsel’s negligence to prosper, nothing “A client may reasonably expect that his counsel will make
short of clear abandonment of the client’s cause must be good his representations and has the right to expect that his
shown.51 In this case, the only pleading filed by petitioner’s lawyer will protect his interests during the trial of his case. For
former counsel was a motion to dismiss. After the same had the general employment of an attorney to prosecute or defend a
been denied, he did not file anything more until a decision case or proceeding ordinarily vests in a plaintiff’s attorney the
was rendered by the trial court. This is compounded by the implied authority to take all steps or do all acts necessary or
fact that he misrepresented to petitioner that he had filed incidental to the regular and orderly prosecution and
the proper motion to set aside the order of default. These management of the suit, and in a defendant’s attorney, the power
acts of petitioner’s counsel amount to gross negligence. to take such steps as he deems necessary to defend the suit and
The Court of Appeals said that petitioner was not protect the interests of the defendant.”
entirely blameless, because it failed to take a more active
In Amil v. Court of Appeals,53 we ruled that trial courts
role in the proceedings. Quoting the trial court, it declared
should be liberal in setting aside orders of default and
that “Defendant was already alerted to the fact that its
granting motions for new trial if the defendant appears to
counsel was remiss in his duties. A normally prudent and
have a meritorious defense. Parties must be given every
careful person
opportunity to present their side. The issuance of orders of
default should
_______________
51 Que v. Court of Appeals, G.R. No. 150739, 18 August 2005, 467 _______________
SCRA 358, 369.
52 442 Phil. 55, 65; 393 SCRA 566, 575 (2002).
692 53 374 Phil. 659, 666; 316 SCRA 317, 323-324 (1999).
693
Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance VOL. 590, JUNE 23, 2009 693
Corp.
Corp.
would have taken pains to rectify the situation when there
was still time to do so. In not making a response until it be the exception rather than the rule, to be allowed only in
was too late, defendant can no longer claim any relief. It is
clear cases of obstinate refusal by the defendant to comply
as irresponsible as its lawyer and unworthy to invoke the with the orders of the trial court.

In the case under consideration, petitioner appears to for damages in a damage suit, the client is deprived of his day in
have a defense that should be looked into more closely. court and the judgment may be set aside on such ground.
Petitioner insists that it is not the agent of the vessel In view of the foregoing circumstances, higher interests of
“Tokyo Bay,” the vessel that carried the subject shipment. justice and equity demand that petitioners be allowed to present
As can be seen from the International Bill of Lading54 evidence on their defense. Petitioners may not be made to suffer
issued by John Goods & Sons (London), and as admitted by for the lawyer’s mistakes and should be afforded another
petitioner, it is the local agent of John Goods & Sons opportunity, at least, to introduce evidence on their behalf. To
(London) that is, in turn, the agent of Transtainer Systems cling to the general rule in this case is only to condone rather
(UK) Ltd., Multimodal Transport Operators. Looking at the than rectify a serious injustice to a party whose only fault was to
complaint,55 respondent alleges that petitioner is the repose his faith and entrust his innocence to his previous lawyers.
operator/shipagent of the vessel “Tokyo Bay.” Both lower What should guide judicial action is that a party be given the
courts ruled that petitioner was liable for being the agent fullest opportunity to establish the merits of his action or defense
of “Tokyo Bay,” the vessel in which the cargo was loaded. rather than for him to lose life, liberty, honor or property on mere
There appears to be some inconsistency between the technicalities. In cases involving gross or palpable negligence of
allegation in the complaint and the decisions of the lower counsel the courts must step in and accord relief to a client who
courts that was not fully explained. In light of these, it has suffered thereby. This Court will always be disposed to grant
would be in accord with justice and equity to allow relief to parties aggrieved by perfidy, fraud, reckless inattention
petitioner’s prayer for new trial, so that it can present its and downright incompetence of lawyers, which has the
evidence; and for the trial court to determine with certainty consequence of depriving their clients, of their day in court.”
where the liability, if any, of petitioner arises—whether as
agent of “Tokyo Bay” or as agent of John Goods & Sons WHEREFORE, premises considered, the petition is
(London). GRANTED. The Decision of the Court of Appeals dated 4
Our pronouncement in Apex Mining, Inc. v. Court of December 2006 in CA-G.R. CV No. 67581 is SET ASIDE.
Appeals56 applies to this case: The case is hereby REMANDED to the Regional Trial
Court of Manila, Branch 13, for a new trial. It is
“If the incompetence, ignorance or inexperience of counsel is so DIRECTED to admit the Answer of petitioner and to
great and the error committed as a result thereof is so serious receive the latter’s evidence, and rebuttal and sur-rebuttal
that the clients, who otherwise has a good cause, is prejudiced evidence if warranted, and to dispose of the case with
and denied his day in court, the litigation may be reopened to give reasonable dispatch.
the client another chance to present his case. Similarly, when an The former counsel for petitioner, Jose Ma. Q. Austria,
unsuccessful party has been prevented from fully and fairly is hereby required to show cause within ten (10) days from
presenting his case as a result of his lawyer’s professional notice why he should not be held administratively liable for
delinquency or infidelity the his acts and omissions as aforementioned in this decision.
_______________
54 Exh. “K.”
55 Records, p. 1.
56 377 Phil. 482, 495-496; 319 SCRA 456, 468-469 (1999).
© Copyright 2020 Central Book Supply, Inc. All rights reserved.
694

litigation may be reopened to allow the party to present his side.

Where counsel is guilty of gross ignorance, negligence and
dereliction of duty, which resulted in the client’s being held liable

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9/25/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 590 9/25/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 590

676 SUPREME COURT REPORTS ANNOTATED

Multi-Trans Agency, Phils., Inc. vs. Oriental Assurance Corp.

VOL. 590, JUNE 23, 2009 679

Neptune filed its Answer with Compulsory

680 SUPREME COURT REPORTS ANNOTATED

7 Id., at pp. 30-32. 683

22 Id., at p. 135. 25 Id., at p. 144.

VOL. 590, JUNE 23, 2009 689

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690 SUPREME COURT REPORTS ANNOTATED 691

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694 SUPREME COURT REPORTS ANNOTATED

litigation may be reopened to allow the party to present his side.

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