GR 137448; (January, 2002) (Digest)
G.R. No. 137448 & G.R. No. 141454; January 31, 2002
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. BENGSON COMMERCIAL BUILDINGS, INC., et al., respondents.
FACTS
Bengson Commercial Buildings, Inc. obtained loans from GSIS secured by mortgages. Due to Bengson’s failure to pay, GSIS extrajudicially foreclosed the properties. Bengson filed an action for annulment of the foreclosure sale. The trial court nullified the foreclosure, a decision affirmed with modification by the Court of Appeals. GSIS did not appeal, making the CA decision final in 1988. The case was remanded for determination of costs of suit. After hearings, the trial court issued an Order on April 6, 1995, awarding Bengson ₱31 million as costs. GSIS’s counsel, Atty. Terrado, received the order but went AWOL, failing to file any motion for reconsideration or appeal. Upon learning of the order through a subsequent execution order, GSIS filed an Urgent Omnibus Motion, treated as a petition for relief from judgment, citing its counsel’s gross negligence.
ISSUE
Whether the gross negligence of GSIS’s counsel constitutes excusable negligence warranting relief from the final and executory order awarding costs of suit.
RULING
No. The Supreme Court denied the petitions, affirming the Court of Appeals’ dismissal. The general rule is that a client is bound by the mistakes and negligence of its counsel. Exceptions apply only in cases of gross negligence so reckless and reprehensible that it amounts to a deprivation of due process. While Atty. Terrado’s abandonment of his duties was gross, GSIS itself was guilty of inexcusable neglect. The Order of April 6, 1995, was a significant monetary award. GSIS had a legal department, yet it took no proactive steps to monitor the case’s status for over a month until after an execution order was issued. This corporate inaction constitutes negligence binding upon it. A petition for relief from judgment is an equitable remedy, and equity requires the party seeking it to be free from fault. GSIS’s failure to oversee its counsel and the case precludes equitable relief. Furthermore, the Court found that the trial court’s award of “costs of suit” amounting to ₱31 million was a patent nullity, as it encompassed claims for damages and indemnities far beyond the procedural concept of taxable costs. However, this substantive error could not be corrected via a petition for relief, as the proper remedy of appeal was lost due to the negligence of counsel, for which GSIS is accountable.