Velasquez v. Court of Appeals
REITERATIONFacts
1. The Antecedents: This case originated from a complaint for a sum of money filed by Philippine Commercial International Bank (PCIB) against Rodolfo P. Velasquez and several others. The defendants were officers and stockholders of Pick-up Fresh Farms, Inc. (PUFFI), which had obtained a loan from PCIB. As security, PUFFI executed promissory notes and a chattel mortgage, and Velasquez, along with others, executed deeds of suretyship. When PUFFI defaulted, PCIB foreclosed the chattel mortgage, but the proceeds were insufficient to cover the outstanding obligation. PCIB then filed suit to recover the remaining balance, including interests, penalties, and attorney's fees. 2. Procedural History: The case was filed with the Regional Trial Court (RTC) of Makati City. During the proceedings, petitioner Rodolfo P. Velasquez failed to appear at the pre-trial conference, leading to his declaration as in default. Despite this, he adopted the position paper of a co-defendant. An ex parte hearing was conducted against him. The RTC rendered a summary judgment holding Velasquez and a co-defendant solidarily liable for the outstanding debt. Velasquez's motion for reconsideration was denied. He appealed to the Court of Appeals, which affirmed the RTC's decision. His subsequent motion for reconsideration was also denied, leading to the present petition. 3. The Petition: This petition for review on certiorari seeks to reverse the Court of Appeals' decision. Petitioner Velasquez argues that the appellate court erred in affirming the summary judgment despite the existence of genuine triable issues of fact, specifically regarding his personal liability on the deed of suretyship, the alleged novation of the loan agreement due to PCIB's acceptance of royalty fees, and the propriety of the entire debt. He also contends that the default order against him should have been set aside due to the negligence of his counsel and his own excusable absence abroad. The petition asserts that the appellate court committed reversible error in sustaining the summary judgment and refusing to set aside the default order.
Issue(s)
Whether the Court of Appeals committed reversible error in sustaining the summary judgment despite the existence of genuine triable issues of fact. Whether the Court of Appeals committed reversible error in refusing to set aside the default order against petitioner.
Ruling
The petition is DENIED. The Decision of the Court of Appeals affirming the RTC judgment, ordering petitioner Rodolfo P. Velasquez and Mariano N. Canilao, Jr. to solidarily pay respondent Philippine Commercial and Industrial Bank (PCIB) the amount of P7,227,624.48 with annual interest of 17% and attorney's fees of P700,000.00 plus cost of suits, as well as its Resolution denying reconsideration, is AFFIRMED.
Ratio Decidendi
On the existence of genuine triable issues of fact: The Court held that the petitioner's insistence on triable issues of fact was untenable. Regarding his denial of personal liability on the deed of suretyship, a perusal of the deed readily showed his personal liability, making it proper for summary judgment. The Court applied the "complementary contracts construed together" doctrine, emphasizing that the surety bond must be read in its entirety with the principal contract, the loan agreement, to ascertain the true meaning of the provisions. Article 3.4 of the loan agreement explicitly stated that petitioner and others would execute a suretyship agreement, confirming the intention for personal liability. Furthermore, petitioner failed to contest the deed of suretyship under Sec. 8, Rule 8 of the Rules of Court, resulting in an admission of its due execution and genuineness, which eliminated defenses related to its authenticity or validity. The contention that PCIB's acceptance of royalty fees constituted novation was also dismissed, as novation requires the extinguishment of an old obligation by a new contract between the same parties, which was not the case here since the franchise agreement was solely between PUFFI and Arturo Rosales, with PCIB not being a party to it. The Court reiterated that receiving payments from a third party does not constitute novation unless there is an agreement to release the original debtor. The defense of overpayment was deemed waived as it was raised for the first time on appeal. On the refusal to set aside the default order: The Court found no grave abuse of discretion in the RTC's decision, which was affirmed by the CA. The RTC decision was considered a judgment by default as an ex parte hearing was held against petitioner. The Court emphasized that a client is bound by the mistakes of his counsel, and even more so by the result of his own negligence. The records showed that petitioner's counsel failed to appear at the pre-trial, leading to the default order. However, the CA found that petitioner was also guilty of negligence by leaving for abroad after executing a special power of attorney in favor of his lawyer and apparently paying no further attention to his case until the decision was received. The Court concluded that there was no fraud, accident, mistake, or excusable negligence that would warrant lifting the order of default, as the petitioner was bound by the negligence of his counsel and his own inaction.
Main Doctrine
A party is bound by the negligence of his counsel and his own negligence, and such negligence does not constitute excusable negligence warranting the lifting of a default order or setting aside a judgment.