G.R. No. 133750 November 29, 1999
APEX MINING, INC., ENGR. PANFILO FRIAS and ENGR. REY DIONISIO, petitioners, vs. HON. COURT OF APPEALS, HON. PEDRO CASIA, as Judge of Branch 2, Tagum, Davao del Norte, MIGUEL BAGAIPO, ALFREDO ROA, EDGAR BARERA, BONIFACIO BARIUS, JR., FRANCISCO BELLO and LEOPOLDO CAGATIN, respondents.

FACTS

Private respondents filed a complaint for damages against petitioners Apex Mining, Inc. and its engineers, alleging that Apex’s bulldozer negligently damaged their mining tunnel, halting operations. Petitioners, through retained counsel, filed an answer denying liability, asserting the tunnel was built within Apex’s claim area without authority. After private respondents presented their evidence, petitioners’ counsel filed a demurrer to evidence, which the trial court denied. The court then set the reception of the defense evidence. Counsel received notice but failed to appear at the hearing. Consequently, the trial court declared petitioners to have waived their right to present evidence and later rendered a judgment solely against Apex Mining, ordering it to pay substantial damages.
Petitioners’ counsel appealed the decision to the Court of Appeals. However, this appeal was dismissed for failure to pay the required docket fees within the reglementary period. Counsel again failed to move for reconsideration. The dismissal became final and entry of judgment was issued. A writ of execution was subsequently issued by the trial court. It was only when a third-party corporation was ordered to turn over Apex’s assets that Apex discovered the dismissal of its appeal. Petitioners then engaged new counsel and filed a Petition for Annulment of Judgment before the Court of Appeals, arguing their former counsel’s gross negligence constituted extrinsic fraud, depriving them of due process.

ISSUE

Whether the gross negligence of petitioners’ former counsel, which led to the waiver of their right to present evidence and the dismissal of their appeal, constitutes a valid ground for the annulment of judgment.

RULING

Yes. The Supreme Court granted the petition and annulled the trial court’s decision. The Court emphasized that while negligence of counsel generally binds the client, this rule admits of exceptions. Gross negligence that amounts to a deprivation of due process and effectively abandons the client’s cause can be a ground for annulment of judgment under Rule 47 of the Rules of Court, as it constitutes extrinsic fraud. Extrinsic fraud refers to any fraudulent act committed by the prevailing party or by counsel outside the trial of the case, whereby the defeated party is prevented from presenting their case fully.
In this instance, the successive failures of petitioners’ former counsel—failing to appear for the presentation of defense evidence despite notice, and then failing to pay docket fees for the appeal and to seek reconsideration of its dismissal—went beyond ordinary mistake or excusable neglect. This pattern of conduct amounted to gross negligence tantamount to a reckless abandonment of the client’s defense. This deprived petitioners of their fundamental right to be heard and to due process of law through no fault of their own. The Court held that under these exceptional circumstances, the negligence of counsel should not be imputed to the clients. The proper remedy to afford petitioners their day in court was to annul the judgment and remand the case to the trial court for the reception of the defense evidence.