ANTONIO CHUA, PETITIONER, VS. TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), INC., RESPONDENT.

Chua versus Total Office Products and Services

The Case

This is Antonio Chua against Total Office Products and Services, Incorporated, known in the record as TOPROS. TOPROS sued Chua in the Regional Trial Court for annulment of a loan contract and a mortgage contract, which it alleged were fictitious. Chua never filed an answer, was declared in default, and judgment was rendered against him. He now comes to the Supreme Court blaming his former counsel's gross negligence for his failure to be heard. The case matters because it is the cleanest statement of the rule that a client is bound by the mistakes of his lawyer, and of the narrow exception that opens only when the client can first show a good cause that he was prevented from presenting.

Procedural History

TOPROS filed its complaint for annulment of contract with the Regional Trial Court on December 28, 1999. Summons was served on Chua on February 24, 2000, and on February 28, 2000 he filed a motion to dismiss. The trial court denied the motion in an order dated August 9, 2000, and denied his motion for reconsideration in an order dated October 6, 2000. Chua then went up to the Court of Appeals on a petition for certiorari against the order denying the motion to dismiss, but the Court of Appeals issued no restraining order against the trial court.

Because no answer was ever filed, TOPROS moved to declare Chua in default. On April 1, 2001, the trial court declared him in default and ordered that the plaintiff's evidence be received ex parte. After the evidence was presented before a commissioner, the trial court, on March 6, 2002, rendered judgment in favor of TOPROS. Chua's motion for reconsideration was denied on May 17, 2002. He appealed to the Court of Appeals, which, on December 9, 2005, dismissed the appeal and affirmed the trial court, holding the order of default valid under Section 3 of Rule 9 of the Rules of Court. His motion for reconsideration was denied on April 6, 2006. He then filed with the Supreme Court this petition for review on certiorari under Rule 45.

Facts

On December 28, 1999, TOPROS, through its authorized representative Junnifer Ty, sued Antonio Chua for annulment of contract, asking that a loan contract and a mortgage contract be declared null and void for being fictitious, that the annotations on two transfer certificates of title in Quezon City be cancelled, and that Chua pay attorney's fees and costs.

Summons was served on Chua in February 2000. He moved to dismiss, lost that motion, moved for reconsideration, and lost again. He then sought relief from the Court of Appeals by certiorari, but obtained no restraining order. Meanwhile, the period to answer came and went, and no answer was ever filed. TOPROS therefore moved to declare him in default, and the trial court granted the motion, receiving the plaintiff's evidence ex parte before a commissioner.

On the evidence so presented, the trial court rendered judgment for TOPROS, declaring the loan and mortgage contracts null and void for being fictitious, ordering the cancellation of the annotations on the titles, and ordering Chua to pay thirty thousand pesos in attorney's fees plus costs. His appeal and his motion for reconsideration failed. Before the Supreme Court, his central argument was that the Court of Appeals erred in dismissing his appeal on purely technical grounds, resulting in the deprivation of his property without due process of law because of his former counsel's gross negligence.

Issues

• Whether or not the Court of Appeals erred in affirming the order of default and in dismissing the appeal on technical grounds.
• Whether or not the gross negligence of petitioner's former counsel excuses him from the binding effect of his lawyer's mistakes, so as to reopen the litigation and give him his day in court.
• Whether or not petitioner has shown a good cause or meritorious defense that would justify relaxing the rules in his favor.

Applicable Provisions

Section 3 of Rule 9 of the Rules of Court, which the Court of Appeals applied in sustaining the order of default, provides:

If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to receive the plaintiff's evidence and render judgment granting him such relief as the complaint and the evidence may warrant.

This provision is the basis for the order declaring Chua in default and for the ex parte reception of the plaintiff's evidence, and its requirements were found to have been satisfied.

Ruling

On the first issue, the Court held that the petition is devoid of merit. The order of default was valid and in accordance with Section 3 of Rule 9, because Chua simply failed to file his answer within the time allowed by the rules. The Court of Appeals did not err in affirming the trial court.

On the second issue, the Court began from the well-entrenched rule that generally, the client is bound by the mistakes of his lawyer. To trivialize this rule, the Court warned, would bring about a dangerous trend of endless litigation, as parties could simply change counsels and claim that a mistake of their former counsel entitles them to a new trial. The Court acknowledged, however, that the general rule admits of exceptions, and it quoted its earlier ruling in Hilario versus People:

the exception is when the negligence of counsel is so gross, reckless and inexcusable that the client is deprived of his day in court.

The Court also quoted the fuller formulation from the same case:

If the incompetence, ignorance or inexperience of counsel is so great and the error committed as a result thereof is so serious that the client, who otherwise has a good cause, is prejudiced and denied his day in court, the litigation may be reopened to give the client another chance to present his case.

And it closed the quotation with the guiding principle:

What should guide judicial action is that a party be given the fullest opportunity to establish the merits of his action or defense rather than for him to lose life, liberty, honor or property on mere technicalities.

On the third issue, the Court held that for the exception to apply, it is of the utmost importance that the court be convinced that the petitioner had a good cause in the first place, and that it was merely through his lawyer's gross negligence and incompetence that he was unjustly denied the opportunity to present it. The Court found no such showing. Even before the trial court, Chua never presented a strong defense to persuade the court that lifting the default order would serve the interest of justice. On appeal, although he assigned no errors on the merits, the Court of Appeals painstakingly reviewed the records and concluded that the evidence sufficiently supported the judgment for TOPROS. And in this petition, his arguments revolved mainly around the claim that the trial court should have been more liberal in applying the rules. He absolutely failed to show that he had a meritorious defense.

Doctrine

First, a client is bound by the mistakes of his lawyer; otherwise, parties could change counsels at will and claim a mistake of former counsel to obtain a new trial, producing endless litigation.

Second, the general rule admits of an exception: when the negligence of counsel is so gross, reckless and inexcusable that the client is deprived of his day in court, the litigation may be reopened to give him another chance to present his case.

Third, the exception does not open automatically. The client must first convince the court that he had a good cause, a meritorious defense, and that only his lawyer's gross negligence prevented him from presenting it. Absent that showing, the exception fails, and the judgment stands.

Fourth, an order of default issued upon proof of failure to answer within the time allowed is valid under Section 3 of Rule 9, and the court may then receive the plaintiff's evidence and render judgment on the complaint and the evidence.

Disposition

The Supreme Court denied the petition and affirmed the judgment against Antonio Chua, so TOPROS won.

Remember This

The line to memorize is that the client is bound by the mistakes of his lawyer, and the exception for gross, reckless and inexcusable negligence requires the client to show a good cause that he was denied the chance to present. Examiners use this case to test the rule on default under Section 3 of Rule 9 and the doctrine of binding effect of counsel's negligence, especially where the client cannot point to any meritorious defense.