GR 176628; (March, 2012) (Digest)
G.R. No. 176628 ; March 19, 2012
PHILIPPINE TOURISM AUTHORITY, Petitioner, vs. PHILIPPINE GOLF DEVELOPMENT & EQUIPMENT, INC., Respondent.
FACTS
The Philippine Tourism Authority (PTA) entered into a contract with Atlantic Erectors, Inc. (AEI) for a golf course expansion project. AEI subcontracted the golf course construction to Philippine Golf Development & Equipment, Inc. (PHILGOLF), with a stipulation that PHILGOLF would bill PTA directly. PHILGOLF filed a collection suit against PTA for unpaid obligations. PTA, despite being granted two motions for extension of time to file an answer, failed to do so. Consequently, the Regional Trial Court (RTC) rendered a judgment by default against PTA, ordering it to pay PHILGOLF the principal amount plus damages.
PTA initially appealed the default judgment but later withdrew this appeal. Instead, it filed a petition for annulment of judgment with the Court of Appeals (CA), arguing that its counsel’s gross negligence constituted extrinsic fraud. The CA dismissed the petition. PTA then elevated the case to the Supreme Court via a petition for certiorari under Rule 65, reiterating its claims of counsel’s negligence and asserting that as a government entity, it should not be bound by such negligence.
ISSUE
Whether the CA committed grave abuse of discretion in dismissing PTA’s petition for annulment of judgment.
RULING
The Supreme Court dismissed the petition, finding no grave abuse of discretion by the CA. The Court ruled that a client is generally bound by the acts, including mistakes, of its counsel in procedural matters. For counsel’s negligence to warrant an annulment of judgment, it must amount to gross negligence, characterized by a conscious indifference to consequences. The failure to file an answer despite receiving the summons and being granted extensions did not constitute such gross negligence or extrinsic fraud. Extrinsic fraud involves a fraudulent act by the prevailing party committed outside of trial that prevents the other party from presenting its case, which was not present here as the neglect was attributable to PTA’s own counsel.
Furthermore, the Court held that PTA, as a government entity, is not exempt from the general rule that binds a client to the actions of its counsel. The proper remedy from the RTC’s default judgment was an ordinary appeal, which PTA initially pursued but then abandoned. A petition for certiorari under Rule 65 cannot substitute for a lost appeal. Since PTA failed to establish that the CA acted with grave abuse of discretion in dismissing the annulment petition, the Supreme Court upheld the CA’s resolution.