Philippine Tourism Authority v. Philippine Golf Development
REITERATIONFacts
1. The Antecedents: The Philippine Tourism Authority (PTA), a government agency, contracted Atlantic Erectors, Inc. (AEI) for the construction of the Intramuros Golf Course Expansion Projects. AEI subsequently subcontracted the golf course construction to Philippine Golf Development & Equipment, Inc. (PHILGOLF). The subcontract stipulated that PTA would directly pay PHILGOLF for its progress billings. PHILGOLF subsequently filed a collection suit against PTA for an unpaid obligation amounting to ₱11,820,550.53, plus interest, for the construction work performed. 2. Procedural History: The Regional Trial Court (RTC) granted PTA two successive motions for extension to file an answer. Despite this leniency, PTA failed to submit its responsive pleading, leading the RTC to declare PTA in default and render a judgment against it on April 6, 2004. PHILGOLF then filed a motion for execution pending appeal, which the RTC granted, leading to a garnishment of PTA's bank account. PTA filed a petition for certiorari with the Court of Appeals (CA) challenging the execution pending appeal, which the CA granted, setting aside the execution order. Subsequently, PTA withdrew its appeal of the RTC decision and instead filed a petition for annulment of judgment with the CA, arguing that its counsel's gross negligence prevented it from presenting its case. On December 13, 2006, the CA dismissed the petition for annulment of judgment. 3. The Petition: The Philippine Tourism Authority (PTA) filed a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, seeking to annul the Court of Appeals' decision that dismissed its petition for annulment of judgment. PTA argued that its counsel's negligence constituted extrinsic fraud, that as a government entity it should not be bound by its counsel's inaction, and that it had no other available remedies. The Supreme Court, however, found the petition unmeritorious, holding that PTA was bound by its counsel's procedural mistakes, that the negligence did not constitute extrinsic fraud, and that an ordinary appeal was the proper remedy, not a petition for annulment of judgment or a special civil action for certiorari.
Issue(s)
Whether the negligence of PTA's counsel constituted extrinsic fraud warranting annulment of the RTC judgment. Whether PTA, as a government entity, is exempt from the binding effects of its counsel's negligence. Whether a petition for annulment of judgment was the proper and sole remedy available to PTA, and whether PTA could invoke state immunity.
Ruling
The petition is unmeritorious. The Supreme Court dismissed the petition for certiorari, affirming the decision of the Court of Appeals which dismissed PTA's petition for annulment of judgment.
Ratio Decidendi
On the issue of counsel's negligence and extrinsic fraud: The Court reiterated that a client is bound by the acts, including mistakes, of his counsel in procedural matters, unless such acts constitute gross negligence that prevents the presentation of the client's case. The Court defined gross negligence as a want of even slight care, acting or omitting to act willfully and intentionally with conscious indifference to consequences. The failure of PTA's counsel to file an answer despite sufficient notice and extensions did not rise to the level of gross negligence or extrinsic fraud. Extrinsic fraud was defined as a fraudulent act committed outside the trial that prevented a party from fully exhibiting its case. The negligence of PTA's counsel in failing to file a responsive pleading did not constitute extrinsic fraud, as it did not involve any deceptive act by the opposing party that prevented PTA from presenting its case. Therefore, the RTC did not err in declaring PTA in default. On the binding effect of counsel's negligence on a government entity: The Court held that government entities are not exempt from the binding effects of their counsel's negligence, especially when it pertains to procedural matters. The Court emphasized that allowing parties to escape legal technicalities by simply blaming their counsel would defeat the purpose of procedural rules. The rule that a client is bound by the acts of his counsel applies to government entities as well, unless the negligence is so gross as to amount to extrinsic fraud. On the propriety of annulment of judgment as a remedy and the issue of state immunity: The Court clarified that annulment of judgment under Rule 47 of the Rules of Court is an equitable remedy available only in exceptional circumstances where ordinary remedies are no longer available through no fault of the petitioner. In this case, PTA had the ordinary remedy of appeal from the RTC decision. The Court found it perplexing that PTA withdrew its appeal and opted for a petition for annulment of judgment, when the issues raised could have been addressed through an ordinary appeal. Furthermore, a special civil action for certiorari under Rule 65 is not a substitute for appeal and is only available when there is no other plain, speedy, and adequate remedy, or when there is grave abuse of discretion amounting to lack or excess of jurisdiction. Since appeal was available, certiorari was not the proper recourse. The Court ruled that PTA could not invoke state immunity because the contract for the golf course expansion project was proprietary in nature. The Court distinguished between sovereign and commercial activities, stating that when the State enters into business contracts, it descends to the level of an individual and tacitly consents to be sued. The Intramuros Golf Course Expansion Projects were considered a commercial or economic activity, not a sovereign function, thus PTA could not avoid its financial liability by invoking immunity.
Main Doctrine
A client is bound by the acts, even mistakes, of his counsel in the realm of procedural technique, unless such acts involve gross negligence that prevents the presentation of the client's case. A petition for annulment of judgment is not a substitute for appeal when appeal is available, and it is not proper for mere procedural errors or negligence of counsel that do not constitute extrinsic fraud. Government entities engaging in proprietary activities are not immune from suit.