G.R. No. 94457 , October 16, 1997
Victoria Legarda, Petitioner, vs. The Honorable Court of Appeals, New Cathay House, Inc., et al., Respondents.

FACTS

This case originated from a complaint for specific performance filed by New Cathay House, Inc. against petitioner Victoria Legarda concerning a parcel of land. Due to the gross and inexcusable negligence of her counsel, Legarda was declared in default, leading to a judgment against her. This default judgment was subsequently affirmed by the Court of Appeals. Legarda assailed these decisions, arguing she was deprived of her day in court because of her counsel’s reckless negligence, which falls under the recognized exception to the rule that a client is bound by the mistakes of counsel.
The main decision of the Supreme Court granted Legarda’s petition, nullifying the lower courts’ decisions for lack of due process. It further ordered private respondent New Cathay House, Inc. to reconvey the subject property to Legarda and directed the Register of Deeds to cancel the existing title and issue a new one in her name.

ISSUE

Whether the proper remedy, after nullifying the decisions due to counsel’s gross negligence, is to order the reconveyance of the property to the petitioner or to remand the case for further proceedings on the merits.

RULING

Justice Kapunan, in a Separate Concurring and Dissenting Opinion, agreed with the nullification of the prior decisions. The legal logic is clear: while a client is generally bound by counsel’s procedural mistakes, an exception exists when counsel’s negligence is so gross, reckless, and inexcusable as to deprive the client of due process. In such a case, the remedy is to reopen the case to allow the deprived party to present evidence.
However, Justice Kapunan dissented from the portion of the main decision ordering reconveyance. He reasoned that reconveyance is a substantive remedy available against a party who committed fraud or wrongdoing in registering property in its name. Here, there was no definitive finding that New Cathay House, Inc. or its representative acted wrongfully. The loss stemmed from Legarda’s counsel’s negligence. Between two innocent parties, the one whose act enabled the loss (Legarda, through her counsel) should bear the consequence. Furthermore, reconveyance is not available if the property has passed to an innocent purchaser for value, a factual matter not yet determined.
Therefore, the correct course is to remand the case to the trial court for a full hearing on the merits. This will allow a proper determination of the parties’ rights, including whether subsequent transferees are innocent purchasers for value. Justice Kapunan voted to modify the decision by deleting the reconveyance order and to remand the case to the Regional Trial Court for further proceedings.