G.R. No. 192108; November 21, 2012
SPOUSES SOCRATES SY AND CELY SY, Petitioner, vs. ANDOK’S LITSON CORPORATION, Respondent.

FACTS

Petitioner Cely Sy is the registered owner of a parcel of land in Manila. On July 5, 2005, she entered into a five-year lease contract with respondent Andok’s Litson Corporation. Andok’s paid an advance deposit and security deposit totaling P480,000.00. Respondent alleged that it discovered Sy had an unpaid MERALCO bill of P400,000.00 and that construction of its improvements was delayed because another tenant, Mediapool, Inc., was tardy in constructing a billboard on a portion of the leased premises. Andok’s sent several demand letters to Sy regarding the delay, to no avail. Consequently, Andok’s filed a complaint for rescission of contract and damages on February 13, 2008.
During pre-trial proceedings, Sy and her counsel failed to appear. Sy’s counsel had filed an urgent motion to reset, citing a conflicting hearing in another branch of the RTC. The trial court denied the motion, deemed Sy to have waived her right to present evidence, and allowed Andok’s to present evidence ex-parte. The RTC subsequently ruled in favor of Andok’s, ordering Sy to refund the P480,000.00 deposit with interest and pay other incidental costs. The Court of Appeals affirmed the RTC decision.

ISSUE

The core issues are: (1) whether the trial court’s ex-parte proceedings and judgment violated Sy’s right to due process; and (2) whether Andok’s was entitled to rescission and damages based on Sy’s alleged breach of contract.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ decisions. On the procedural issue, the Court held there was no denial of due process. Rules of Court mandate the appearance of parties and counsel at pre-trial. Under Section 5, Rule 18, a defendant’s failure to appear authorizes the court to allow the plaintiff to present evidence ex-parte. Sy’s reason for non-appearance—a conflicting hearing schedule of her counsel—was not a valid cause. A lawyer’s calendar conflict, without a showing it was an equally important judicial setting, does not justify absence. Sy was given the opportunity to be heard through her pleadings and the chance to participate in pre-trial; her and her counsel’s voluntary non-appearance constituted a waiver. The ex-parte proceeding was a legal consequence of this waiver, not a deprivation of due process.
On the substantive issue, the Court upheld the finding of breach of contract. The lease contract obligated Sy to deliver the premises free from any obstruction or adverse claim. The delay caused by Mediapool, Inc., another tenant of Sy, in constructing a billboard on the leased property prevented Andok’s from utilizing the premises fully for its intended business purpose. This constituted a violation of Sy’s warranty of peaceful possession. The Court found that Andok’s sent repeated demands, which Sy ignored, justifying the action for rescission. The award of damages, including the refund of the deposit with legal interest, was proper. The interest rate was correctly set at 6% per annum from the date of the RTC judgment until finality, and 12% per annum thereafter until full satisfaction.