G.R. No. 209295 , February 11, 2015
DIANA YAP-CO, Petitioner, vs. SPOUSES WILLIAM T. UY and ESTER GO-UY, Respondents.

FACTS

Respondents Spouses William T. Uy and Ester Go-Uy secured a final and executory money judgment against Joseph Chung. To satisfy the judgment, Chung’s property (TCT No. 267949) was sold at public auction, with respondents as the sole bidders. After the redemption period lapsed, respondents registered the Final Deed of Sale on June 17, 2009. However, they discovered that a new title (TCT No. 288213) had already been issued on June 10, 2009, in favor of petitioner Diana Yap-Co, who acquired the property through an execution sale from a different case. Respondents filed a Complaint for annulment of title and damages against petitioner, alleging fraud. The RTC initially issued a writ of preliminary injunction. During trial, respondents and their counsel failed to appear at several hearings. On March 1, 2012, the RTC ordered the testimony of respondent Ester Go-Uy stricken from the record. On March 22, 2012, due to respondents’ continued absence, the RTC dismissed the case. The RTC also denied respondents’ Omnibus Motion to set aside the dismissal. The Court of Appeals (CA) granted respondents’ petition for certiorari, annulled the RTC’s dismissal, reinstated Ester Go-Uy’s testimony, and directed a full-blown trial. The CA found that respondents’ counsel was negligent in failing to attend hearings and notify his clients, and that respondents appeared to have legitimate grievances. Petitioner’s motion for reconsideration was denied.

ISSUE

Whether or not the CA erred in reinstating Civil Case No. 09-122374 on considerations of equity, notwithstanding the rule on failure to prosecute a case diligently under Section 3, Rule 17 of the Rules of Court.

RULING

The Supreme Court denied the petition and affirmed the CA Decision and Resolution. The Court held that the application of Section 3, Rule 17 (dismissal for failure to prosecute) was not warranted. The CA correctly found that respondents’ counsel acted negligently in failing to attend scheduled hearings and notify respondents, who had to travel from Aurora, Isabela to Manila. Relief is accorded to a client who suffers due to the lawyer’s palpable mistake or negligence where the interest of justice so requires. Sustaining the dismissal on this procedural technicality, caused by counsel’s negligence, would deprive respondents of the opportunity to prove their claims. Considering that respondents appear to have legal and factual bases for their grievance, the higher interest of substantial justice is better served by allowing the conflicting claims to be resolved on the merits. The Court also noted that the RTC inaccurately treated the dismissal as a favorable action on petitioner’s earlier motion to dismiss for failure to state a cause of action, which was a separate and improper ground for dismissal at that stage. The CA correctly ordered the reinstatement and full-blown trial of the case.