Deprived of day in court - A Law Each Day (Keeps Trouble Away)

A client is bound by the mistake of his lawyer. He cannot be heard to complain that the result might have been different had his lawyer proceeded differently. Otherwise, there would never be an end to a suit because a new counsel could be employed who could allege and show that prior counsel had not been sufficiently diligent or experienced or learned. This is the principle which the spouses Rosendo and Gloria tried to use in this case.

This case involves a 500 square meter parcel of registered land covered by Transfer Certificate of Title in the name of Demetrio. On November 14, 1987, Demetrio executed a "Deed of Pacto de Retro Sale" involving the said land and its improvements unto Rosendo and Gilda for and in consideration of P30,000.00. Demetrio however reserved for himself the right to redeem or repurchase the property and Rosendo and Gilda obligated themselves to resell the land sold within a period of three years thereafter for the same price of P30,000.00. Provided however that if Demetrio fails to exercise his right to redeem or repurchase within the period stipulated, "then this conveyance shall be deemed to be an absolute and irrevocable sale without the necessity of executing any further deed or instituting judicial action to consolidate ownership in the name of Rosendo and Gilda.

A month later an addendum to the Deed of Pacto de Retro Sale was executed between the parties wherein Demetrio as "mortgagor" of said land agrees to pay Rosendo and Gilda as "mortgagees" an additional P1,800.00 to cover the cost or expenses of the capital gains in tax paid by the latter. So that if Demetrio will redeem the property within 3 years he had to pay the total sum of P31,800.00.

The redemption period had expired but Demetrio failed to redeem it. So Rosendo and Gilda filed a petition for consolidation of their ownership over the property. The counsel of Demetrio however failed to file his answer to said petition within the reglementary period so Rosendo and Gilda filed a motion to declare him in default. Demetrio's counsel likewise failed to oppose this motion to declare him in default. And when Demetrio was declared in default, his counsel likewise did not move to set aside the order of default. So the case was heard ex parte and judgment was rendered in favor of Rosendo and Gilda consolidating their ownership over the property.

This prompted Demetrio to hire a new counsel who immediately filed a motion for a new trial. But the lower court and the Court of Appeals denied this motion. According to the said courts, it is the duty of Demetrio to make inquiries from his counsel about the case and that the failure of his former counsel to file an answer cannot be considered as excusable negligence which ordinary prudence could not have guarded against. Demetrio is bound by the mistakes of his former counsel, the Court of Appeals concluded. Were the lower court and the Court of Appeals correct?

No. To be sure, a party is indeed bound by the mistakes of his counsel. Generally the failure of counsel to file an answer within the reglementary period cannot be considered as excusable negligence sufficient to grant him a new trial.

But if such mistakes are so gross that a party is deprived of property without due process of law, the said general rule will not apply. In this case, Demetrio was declared in default for failure of his former counsel to file an answer on time and to take any action to protect his interest in subsequent proceedings before the Trial Court. These constitute gross negligence as a consequence of which Demetrio was deprived of his day in court.

Furthermore, trial courts should be liberal in setting aside orders of default and granting new trial if the defendant appears to have a meritorious defense. It would appear that the contract between and the spouses Rosendo and Gilda is an equitable mortgage rather than a pacto de retro sale. The price of P30,000.00 for the subject property appears to be inadequate. The words "mortgage", "mortgagor", "mortgagee" appears in the Addendum to the Deed of Pacto de Retro Sale. Finally the stipulation which provides that the conveyance shall be deemed to be an absolute and irrevocable sale if Demetrio fails to exercise his right to redeem within the stipulated period, is void for being a pactum commissorium (an agreement that if the debtor did not pay on time, the property he mortgaged shall be automatically forfeited in favor of the creditor). Considering all these, the trial court should have granted Demetrio a new trial to enable him to present evidence on the true nature of the contract in question (Arnil vs. Court of Appeals et. al. G.R. No. 125272 October 7, 1999).