G.R. No. 136350




SECOND DIVISION G.R. No. 136350 October 25, 2004 SPOUSES IKE S. BARZA and ZENAIDA A. BARZA, petitioners, vs. SPOUSES RAFAEL S. DINGLASAN, JR., and MA. ELENA Y. DINGLASAN, RURAL BANK OF MAAYON (CAPIZ), INC., RURAL BANK OF CAPIZ (ROXAS CITY), INC., PHILIPPINE DEPOSIT INSURANCE CORPORATION and the PROVINCIAL SHERIFF OF CAPIZ, respondents. D E C I S I O N AUSTRIA-MARTINEZ, J.: Before this Court is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. CV No. 38517¹ promulgated on October 23, 1998 which affirmed the decision and the resolution of the Regional Trial Court, Branch 17, Roxas City in Civil Case No. V-4941. The facts are as follows: On March 22, 1984, the spouses Ike and Zenaida Barza together with Gil Almosa² filed a complaint with the Regional Trial Court of Roxas City against the spouses Rafael and Ma. Elena Dinglasan, the Rural Bank of Maayon (Capiz), Inc., (Maayon Bank) Rural Bank of Capiz (Roxas City), Inc., (Capiz Bank) and the Provincial Sheriff of Capiz, for annulment of contract and damages, with prayer for a temporary restraining order. Spouses Barza allege that: they are owners of several fishponds with a total area of 145 hectares located in Panay, Capiz; respondent Rafael S. Dinglasan, Jr., meanwhile, is a lawyer-banker-businessman who effectively controls the Maayon Bank and has substantial stockholdings in the Rural Bank of Capiz (Roxas City) where he also acts as chairman of the board of directors; upon the enticement of Dinglasan, they mortgaged their fishponds in favor of Maayon Bank to secure loans from the Central Bank-International Bank for Reconstruction and Development (CB-IBRD) fund, which by law are available only to persons owning or cultivating lands of not more than fifty hectares in area; to qualify for said loans, they agreed to execute three fictitious documents of sale and fifteen simulated leases, with Gil Almosa as one of the dummy buyers; Dinglasan then caused to be filed with the Maayon Bank nineteen loan applications, one each for Ike Barza, the three fictitious owners and the fifteen dummy lessees by asking the applicants to sign promissory notes, real estate mortgages, checks, signature cards and withdrawal slips in blank; the applicants were also asked to open savings deposit accounts with the rural bank which retained the passbooks; Dinglasan, also induced them (spouses Barza) to invest, from the loan proceeds, ₱1.16 million in the Elmyra Trading, a store owned by the Dinglasans, and about ₱1.7 million to the Capiz Bank; in the meantime, they were deprived of the loan proceeds totaling ₱3.7 million; when they realized in 1983 that spouses Dinglasan abused their trust and confidence, they complained with the Central Bank which in turn conducted its investigation; in retaliation, Dinglasan initiated foreclosure proceedings on several parcels of their property which were under the names of the dummy owners and lessees. The Barza spouses claim that since the mortgages on their property are the product of schemes, contrivances and transactions contrary to law, morals, good customs and/or public policy, they are entitled to obtain a declaration of its nullity.³ In their Answer, the Dinglasan spouses argued that: the true nature of the properties mentioned in the complaint is all accurately shown by the public documents submitted by the spouses Barza and the mortgagors with Maayon Bank; if it is true that the spouses Barza merely simulated the sale and leases in favor of dummies, they are now estopped and should be bound by the mortgages in question; and whatever the spouses Barza did with their money, such as deposit it with Capiz Bank or invest it elsewhere, is of their own volition and cannot nullify the transactions they made with Maayon Bank.⁴ On July 16, 1985, the trial court issued an Order terminating the pre-trial conference and setting the initial trial for the presentation of spouses Barza’s evidence. Several postponements were made by their counsel alleging sickness or conflict of schedule. On March 16, 1988, Zenaida Barza was presented to testify as first witness for the spouses Barza. However she was not able to finish her direct testimony, despite several postponements, because she left for the United States. The Barza spouses then presented Precy Bascos, a private secretary of Zenaida Barza who identified tax declarations of real property in the name of the Barza spouses; and Alfredo Contreras, a supervising bank examiner of the Central Bank who testified how IBRD loans are granted by the rural banks and are administratively supervised by the Central Bank. After the testimony of Contreras, Atty. Jose Alovera, counsel for the Barza spouses, asked for time to formally offer their exhibits which the trial court granted on August 28, 1990. Motions for its extension were also granted twice by the trial court in its Orders dated October 24, 1990 and December 5, 1990.⁵ Due to the failure of the Barza spouses to make a formal offer of their evidence despite the extensions given them, the trial court issued an Order on January 29, 1991 as follows: ACCORDINGLY, the plaintiffs are deemed to have waived their rights to offer their documentary exhibits in writing and the presentation of their evidence is hereby declared terminated. On motion by Atty. Arceño, the defendants is (sic) allowed to present their evidence on the counterclaim. Also, as opportunedly (sic) reminded by Atty. Arceño, the testimony of plaintiff Zenaida Barza in the direct examination is ordered striken (sic) out of the records. She failed to return to Court to be cross-examined by the defendants. SO ORDERED.⁶ The respondents then manifested that they were foregoing with their counterclaim and were no longer presenting any evidence.⁷ On April 17, 1991, the trial court issued its Order dismissing plaintiffs’ complaint as well as defendants’ counterclaim, thus: An empirical evaluation of the evidence for the plaintiffs indicates that the oral testimony of Zenaida Barza as well as exhibits "A" to "ZZ-2-B" inclusive she testified to, were properly ordered stricken out of the records. She never returned to finish her direct testimony and to be cross-examined by the defendants. That of Precy Bascos was to corroborate the unfinished testimony of Zenaida Barza principally on exhibits "AA" to "BB." Both exhibits were never formally offered. Hence, of no probative value. That of Alfredo Contreras may have been given credence if exhibits Nos. "AAA" to "NNN-1" which he had testified to, were offered in evidence as part of his testimony. But they also were not. In a nutshell therefore plaintiffs had not presented any evidence to establish and prove their complaint. Defendants forego with their counterclaim. It was noted that they were also not keen in their claim for attorney’s fee. ACCORDINGLY, the complaint is hereby ordered dismissed. Also, dismissed is defendants’ counterclaim. No award of attorney’s fee for defendants. SO ORDERED.⁸ Atty. Alovera, counsel for the Barza spouses, filed a motion for reconsideration dated May 8, 1991 stating that: he took over the case midstream; his clients are now in the United States; and he had great difficulty gathering all the documents for submission as exhibits. He pleaded that in the greater interest of justice, he be allowed to submit exhibits which if considered would change the tenor of the case.⁹ This was denied by the trial court in its Order dated September 4, 1991.¹⁰ The Barza spouses then went to the Court of Appeals claiming that the dismissal of their complaint was done with grave abuse of discretion amounting to lack or excess of jurisdiction since the court failed to apply the rules with liberality which deprived them of substantial justice.¹¹ On October 23, 1998, the Court of Appeals rendered its decision dismissing the appeal.¹² Hence, the present petition where the Barza spouses are raising the following issues: 1. PETITIONERS’ PREVIOUS COUNSEL HAD BEEN GROSSLY, RECKLESSLY, AND PALPABLY NEGLIGENT IN HANDLING PETITIONERS’ CAUSE. ACCORDINGLY, SUCH GROSS, PALPABLE AND RECKLESS NEGLIGENCE CANNOT AND COULD NOT IN ANY WAY BIND PETITIONERS. 2. THE NEGLIGENCE OF PETITIONERS IN PROSECUTING THEIR CAUSE, IF ANY, WAS MERELY SIMPLE AND EXCUSABLE, NEVER GROSS. IN ANY EVENT, PETITIONERS’ NEGLIGENCE IS IMMATERIAL AND INCONSEQUENTIAL ON ACCOUNT OF THE GROSS, PALPABLE AND RECKLESS NEGLIGENCE OF PETITIONERS’ PREVIOUS COUNSEL. 3. IN THE GREATER INTEREST OF SUBSTANTIAL JUSTICE, RULES OF PROCEDURE MUST HAVE BEEN (SIC) LENIENTLY APPLIED IN ORDER TO AVOID GRAVE INJUSTICE SINCE PETITIONERS HAVE A GOOD AND MERITORIOUS CASE AGAINST RESPONDENTS.¹³ Petitioners claim that: the firm Valencia, Lopez-Vito & Arungayan was negligent in handling their case; Atty. Arungayan, the assigned lawyer, asked for several postponements due to sickness, sickness of his spouse, conflict of schedule, lack of preparation to proceed to trial, etc.; even if such excuses were true, the firm could have easily appointed another associate or partner to take over the case, such as Atty. Alovera who appeared several times in behalf of Atty. Arungayan, and the firm to ask the court for postponements; Atty. Alovera, whom Zenaida Barza eventually employed on May 8, 1990 in open court, failed to include in the Offer of Exhibits for Admission filed on June 25, 1991 the documents which were testified on by Alfredo Contreras during the trial; Atty. Alovera also failed to seasonably file any Motion for Reconsideration to set aside the Order of the trial court dated January 29, 1991; the conduct of Attys. Arungayan and Alovera constitute gross, palpable and reckless negligence in handling their case, thus the general rule that the mistake of a counsel binds the client should not apply to petitioners.¹⁴ Petitioners also contend that: there were many circumstances that were beyond their control which contributed to the delay of the case; the case passed the hands of six judges and events took place after they filed their complaint which constrained them to file three supplemental complaints; they had to wait for the resolution of the administrative cases they filed against some of the respondents before the Central Bank since these might have a bearing on the civil case; if ever they were negligent in this case, such negligence is only simple and excusable; and the fact that Zenaida Barza had been in the U.S.A. should not be deemed that they lost interest in prosecuting their case.¹⁵ Finally, petitioners argue that: they have a good and meritorious case against respondents; Senior State Prosecutor Anastacio I. Lobaton issued a resolution dated September 4, 1989 strongly recommending that respondent Rafael Dinglasan, Jr. and two other persons be criminally charged with the crime of Estafa Thru Falsification of Public and /or Commercial Documents; subsequently, Criminal Case No. C-2999 was filed on September 26, 1989 against Rafael Dinglasan, et al.; petitioners stand to lose a 145-hectare fishpond worth several millions, all because of the gross, palpable and reckless negligence of their previous lawyers; thus the greater interest of justice demands that the rules of procedure be relaxed in order to prevent manifest injustice.¹⁶ Petitioners then prayed that the following be annulled and set aside: a. The Order issued by the Regional Trial Court, Sixth Judicial Region, Branch 17, Roxas City on April 17, 1991, which dismissed the complaint filed by petitioners against respondents in Civil Case No. V-4941; b. The Order issued by said Court in the same civil case on September 4, 1991, which denied Petitioners’ Motion for Reconsideration of the Order dated April 17, 1991; and c. The Decision rendered by the Court of Appeals on October 23, 1998 in CA-G.R. CV No. 38517, which affirmed the aforesaid two Orders.¹⁷ They also prayed that the Court issue a Decision: a. Declaring null and void the real estate mortgage in question as well as the extra-judicial foreclosure sales conducted by respondent Provincial Sheriff of Capiz involving the 145-ha fish pond owned by petitioners; b. In the alternative, admitting petitioners’ oral and documentary evidence which were adduced during the trial conducted by the court a quo.¹⁸ Philippine Deposit Insurance Corporation (PDIC), as the receiver/liquidator of respondents Maayon Bank and Capiz Bank countered that: the validity of the loan obligations of petitioners is beyond question since petitioners applied for and obtained the same willingly and voluntarily; the anomaly would not have been perpetrated without the willing and voluntary cooperation of petitioners; the eventual foreclosure of their properties is the natural consequence of their failure to pay their loan obligations; petitioners failed to adduce any evidence during the trial which would support their cause of action; and settled is the rule that negligence of the lawyer binds the client; if petitioners were not satisfied with the way their lawyer was handling their case, they could have changed their counsel earlier on.¹⁹ Respondent spouses Rafael and Ma. Elena Dinglasan in their comment stated that: they are adopting the comments of the PDIC; the present petition was merely filed by petitioners to avoid paying their debts; the filing of criminal charges for falsification of the bank documents against them is baseless because they are not party signatories to said loan documents which petitioners have voluntarily executed and signed; and it is not the negligence of petitioners’ counsel that caused the dismissal of the case but the utter lack of merit of petitioners’ case which demoralized petitioner Zenaida Barza from appearing in the case to be cross-examined.²⁰ In essence, petitioners are asking this Court to annul the decisions and orders of the courts a quo because of the alleged negligence of their lawyers. They insist that they have a meritorious case such that whatever negligence they or their counsels might have committed should be overlooked in the greater interest of justice. We are not persuaded. Settled is the rule that a client is bound by the mistakes of his counsel.²¹ The only exception is when the negligence of the counsel is so gross, reckless and inexcusable that the client is deprived of his day in court. In such instance, the remedy is to reopen the case and allow the party who was denied his day in court to adduce evidence.²² Perusing the case at bar, we find no reason to depart from the general rule. Petitioners, as plaintiffs a quo, were given ample opportunity to present their case despite the several postponements asked by their counsel. Records show that the trial court allowed petitioners a total of twenty-eight postponements, in a span of seven years, from the time the case was filed on March 22, 1984 until its dismissal on April 17, 1991. They cannot claim, therefore, that they were deprived of their day in court. As we have repeatedly stated, due process is simply an opportunity to be heard.²³ So long as a party is given the opportunity to advocate her cause or defend her interest in due course, it cannot be said that there was denial of due process.²⁴ The trial court in its assailed Order dated September 4, 1991 explained that: It should not be said that this Presiding Judge lacks the compassion of a God-loving man. But in this case, if he stretches any further that compassion, it would constitute a grave abuse of discretion, a manifest and apparent injustice. If plaintiffs failed to gather all their exhibits in eight (8) months, then it is doubted if they are really serious in gathering and presenting those exhibits, with more reason when plaintiffs are in America. To the mind of this Court, the requirement of due process is more than satisfied.²⁵ The Court of Appeals also correctly noted that: . . . plaintiffs have been afforded all the opportunity to present their evidence but they did not take full advantage of the leniency of the court which granted them countless postponements to finish the testimony of Zenaida Barza, and several months more for the formal offer of evidence. The court, in an unusual display of liberality and leniency, patiently waited for the return of plaintiff Zenaida Barza from the United States to complete her testimony and to allow defendants to cross-examine her, but apparently, she never came back. Plaintiffs, in fact, are now in the United States as manifested by their counsel, and it is likely that they are already permanent residents there. Due process was accorded plaintiffs. They cannot now claim that their rights were violated.²⁶ If the problem really was with their lawyers, petitioners should have changed counsels early on in the proceedings or as soon as Atty. Arungayan already showed lack of dedication to their case. But it took them seven years before looking for another lawyer and they chose Atty. Alovera, who comes from the same law firm. As we held in Villaruel Jr. vs. Fernando:²⁷ . . . petitioner is not entirely blameless . . . After the OSG’s failure to file the answer to the petition for mandamus and damages and to have the order declaring petitioner in default lifted, petitioner should have already replaced the OSG with another lawyer. However, petitioner still retained the services of the OSG, despite its apparent lack of interest in petitioner’s case, until the trial court’s decision became final.²⁸ In Salva vs. Court of Appeals,²⁹ we also held that: . . . Her chosen counsel did not diligently exhaust all legal remedies to advance respondent’s cause, yet respondent did not terminate his services. She was aware of the repeated negligence of her counsel and cannot now complain of counsel’s errors. Hence, there is no justifiable reason to exempt her from the general rule that clients should suffer the consequences of the negligence, mistake or lack of competence of the counsel whom they themselves hired and had the full authority to fire at any time and replace with another even without justifiable reason.³⁰ (Emphasis supplied.) As petitioners themselves pointed out, they were represented by a law firm. This meant that any of its members could lawfully act as their counsel during the trial. Petitioners, however, should not have expected that all they needed to do was sit back, relax and await the outcome of their case. To do so would enable every party to render inutile any adverse order or decision through the simple expedience of alleging gross negligence on the part of its counsel.³¹ Thus, the Court finds that the Court of Appeals did not commit any error in its assailed decision. WHEREFORE, the petition is DENIED for lack of merit. The decision of the Court of Appeals promulgated on October 23, 1998 is AFFIRMED. No pronouncement as to costs. SO ORDERED. Puno, Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur. Footnotes ¹ Penned by Associate Justice Oswaldo D. Agcaoili and concurred in by Associate Justices Corona Ibay-Somera and Teodoro P. Regino, Rollo, pp. 82-90. ² Elder brother of Zenaida Barza who died sometime in May 1989, Rollo, p. 21. ³ Rollo, pp. 22-25. ⁴ Rollo, pp. 28-29. ⁵ Records, p. 565. ⁶ Rollo, p. 53. ⁷ Id., p. 83. ⁸ Id., pp. 55-56. ⁹ Records, pp. 569-570. ¹⁰ Records, pp. 591-593. ¹¹ Rollo, p. 84. ¹² Id., p. 90. ¹³ Rollo, pp. 37-38. ¹⁴ Id., pp. 38-41. ¹⁵ Rollo, pp. 44-45. ¹⁶ Id., pp. 45-47. ¹⁷ Rollo, p. 48. ¹⁸ Ibid. ¹⁹ Rollo, pp. 112-117. ²⁰ Id., p. 174. ²¹ Villa Rhecar Bus vs. Dela Cruz, No. L-78936, January 7, 1988, 157 SCRA 13. ²² Producers Bank of the Philippines vs. Court of Appeals, G.R. No. 126620, April 17, 2002, 381 SCRA 185, 192. ²³ Villaruel, Jr. vs. Fernando, G.R. No. 136726, September 24, 2003, 412 SCRA 54, 64. ²⁴ Producers Bank of the Philippines vs. Court of Appeals, G.R. No. 126620, April 17, 2002, 381 SCRA 185,194. ²⁵ Records, p. 591. ²⁶ Rollo, p. 88. ²⁷ G.R. No. 136726, September 24, 2003, 412 SCRA 54. ²⁸ Id., p. 65. ²⁹ 364 Phil 281 (1999). ³⁰ Id., p. 301. ³¹ Producers Bank of the Philippines vs. Court of Appeals, G.R. No. 126620, April 17, 2002, 381 SCRA 185, 199. The Lawphil Project - Arellano Law Foundation