Pinausukan Seafood House v. Far East Bank
REITERATIONFacts
The Antecedents: Bonier de Guzman, as President of Pinausukan Seafood House, Roxas Boulevard, Inc. (Pinausukan), executed four real estate mortgages in 1993 on corporate property in favor of Far East Bank and Trust Company (now Bank of the Philippine Islands) to secure loans. By June 2001, the outstanding obligation had reached P15,129,303.67. Consequently, the Bank initiated extrajudicial foreclosure proceedings on August 13, 2001, scheduling a public auction for October 8, 2001. Pinausukan, learning of the impending sale, filed an action for annulment of the real estate mortgages on October 4, 2001, in the Regional Trial Court (RTC), alleging that Bonier had acted in his personal capacity and without corporate consent. Pinausukan sought to enjoin the foreclosure and sale. Procedural History: During the trial of the annulment case in the RTC, Pinausukan presented its first witness on May 30, 2002. Subsequent hearings were repeatedly reset, and settlement negotiations were attempted. However, on September 5, 2002, neither party's counsel appeared for the scheduled hearing. As a result, the RTC dismissed the case for failure to prosecute on October 31, 2002. This dismissal order became final. On June 24, 2003, a notice of extrajudicial sale was issued for Pinausukan's property. Upon learning of this, Pinausukan inquired from the RTC and discovered that its counsel, Atty. Michael Dale Villaflor, had not informed it of the October 31, 2002 dismissal order. Subsequently, Pinausukan filed a petition for annulment of judgment in the Court of Appeals (CA) on July 24, 2003, seeking to nullify the RTC's dismissal order. The Petition: Pinausukan's petition for annulment of judgment in the CA alleged that its counsel, Atty. Villaflor, was guilty of gross and palpable negligence for failing to monitor the case and inform Pinausukan of its dismissal. It argued that this negligence constituted extrinsic fraud, depriving Pinausukan of its day in court. The petition, verified by Roxanne de Guzman-San Pedro, stated that Atty. Villaflor had not notified Pinausukan of his change of office address. The CA dismissed the petition on July 31, 2003, citing the failure to attach affidavits of witnesses to support the claim of extrinsic fraud, as required by Section 4, Rule 47 of the Rules of Court. The CA denied Pinausukan's motion for reconsideration on September 12, 2003. Pinausukan appealed to the Supreme Court, arguing for a relaxation of the affidavit requirement and asserting that its counsel's negligence should not prejudice its right to a fair hearing.
Issue(s)
Whether the Court of Appeals erred in dismissing the petition for annulment of judgment for failure to attach affidavits of witnesses. Whether the alleged gross negligence of counsel constitutes extrinsic fraud warranting the annulment of the dismissal order.
Ruling
The Supreme Court affirmed the resolutions of the Court of Appeals, dismissing the petition for annulment of judgment and ordering the petitioner to pay the costs of suit.
Ratio Decidendi
On the failure to attach affidavits of witnesses: The Court reiterated that a petition for annulment of judgment under Rule 47 of the Rules of Court requires the attachment of affidavits of witnesses or documents supporting the cause of action. The verification of the petition by Roxanne de Guzman-San Pedro, a director of Pinausukan, only attested to the correctness of the allegations but did not substitute for the required affidavits of witnesses. These affidavits are crucial for the Court of Appeals to determine the substantial merit of the petition, as extrinsic fraud cannot be presumed from the pleading alone and needs to be particularized by competent witnesses. The failure to comply with this procedural requirement was deemed fatal to the petition. On whether the alleged gross negligence of counsel constitutes extrinsic fraud: The Court held that the alleged negligence of Atty. Villaflor, even if true, did not constitute extrinsic fraud as contemplated by Rule 47. Extrinsic fraud must emanate from the acts of the adverse party and must have prevented the petitioner from fully presenting its case or having its day in court. The petition itself characterized the issue as mistake and gross negligence of Pinausukan's own counsel, not fraud committed by the respondent bank. The Court emphasized that the remedy for the client's grievance against their counsel is to proceed against the lawyer, not to re-litigate the case. Furthermore, Pinausukan had a continuing duty to keep itself abreast of the developments in its case by maintaining regular contact with its counsel, and its failure to do so meant it had only itself to blame.
Main Doctrine
The failure to attach affidavits of witnesses supporting the cause of action is a fatal procedural defect in a petition for annulment of judgment under Rule 47 of the Rules of Court. Furthermore, the gross negligence of a party's own counsel does not constitute extrinsic fraud, as extrinsic fraud must emanate from the acts of the adverse party and must have prevented the petitioner from having its day in court.