SPIDC vs. Municipal Government of Murcia

A dismissal for failure to prosecute under Section 3, Rule 17 of the Rules of Court is a final order that operates as a judgment on the merits, and the proper remedy therefrom is an ordinary appeal under Rule 41, not a petition for certiorari under Rule 65; the negligence of counsel binds the client unless the client proves to have been entirely faultless.

SPIDC is a corporation that engaged the Kapunan Lotilla Garcia and Castillo Law Offices to pursue a civil collection case and an administrative case against the Municipal Government of Murcia arising from goods or services already delivered or rendered. The engagement, dated August 27, 2010, provided for acceptance, contingency, and deposit fees. The dispute centers on the dismissal of the collection case for failure to prosecute and SPIDC's subsequent choice of an improper appellate remedy.

In August 2010, Systems and Plan Integrator and Development Corporation (SPIDC) engaged the Kapunan Lotilla Garcia and Castillo Law Offices to pursue a civil collection case and an administrative case against the Municipal Government of Murcia. The engagement, documented on August 27, 2010, provided for acceptance, contingency, and deposit fees. SPIDC paid the law office Php 50,000.00 and Php 30,000.00, as evidenced by official receipts dated February 4, 2011 and February 17, 2011, respectively.

The law office thereafter filed on behalf of SPIDC a collection case before the Regional Trial Court (RTC) of Quezon City, docketed as Civil Case No. Q-11-68595 and raffled to Branch 220. On January 4, 2011, SPIDC paid filing fees in the amounts of Php 185,146.00 and Php 277,594.00. On January 28, 2012, the RTC issued an order directing SPIDC to show cause why the complaint should not be dismissed for failure to prosecute. On March 6, 2012, the RTC received SPIDC's compliance, in which the law office explained that it had not been furnished with notices regarding the proceedings and undertook to examine the case records to allow the case to proceed. Despite the lapse of several months, the law office still failed to examine the records.

Consequently, the RTC issued an order dated July 23, 2012 dismissing the case for failure to prosecute. SPIDC received a copy of the dismissal order on August 30, 2012. SPIDC claimed that a certain "Atty. Garcia" from the law office manifested that a motion for reconsideration would be filed. Instead, on September 21, 2012, SPIDC received a copy of the law office's motion to approve its withdrawal as counsel for non-payment of service fees, which the RTC granted on October 19, 2012. Upon inquiry, a certain "Atty. Castillo" explained that fees paid for services rendered were not properly recorded and that the lawyers assigned to the case had resigned, requiring SPIDC to wait for the law office to reconcile its records.

SPIDC then engaged the services of Atty. Aries B. Mirandilla, who filed a motion for reconsideration against the July 23, 2012 dismissal. The RTC denied the motion through its order dated October 16, 2013 for having been filed out of time. SPIDC thereafter filed a petition for certiorari under Rule 65 before the Court of Appeals, which dismissed it on May 30, 2014 for being the wrong mode of appeal, ruling that the RTC's dismissal for failure to prosecute was a final order appealable under Rule 41 and not Rule 65. The CA denied SPIDC's motion for reconsideration on February 23, 2015.

• Liberality in Application of Procedural Rules: Petitioner argued that even if there was inadequacy on the part of the law office in prosecuting the case, the RTC should have exercised liberality lest there be a deprivation of substantive rights.
• Grave Abuse of Discretion: Petitioner maintained that the dismissal of the case by the RTC violated SPIDC's substantive rights and that the alleged violation should be considered as grave abuse of discretion amounting to lack or excess of jurisdiction.

• Erroneous Mode of Appeal: Respondent countered that SPIDC had erroneously filed before the CA a petition for certiorari under Rule 65 instead of an ordinary appeal under Rule 41, rendering the RTC Order dated July 23, 2012 final.
• Binding Effect of Counsel's Acts: Respondent argued that SPIDC is bound by the acts of its counsel, and that granting the instant petition would be violative of the principles of finality of judgments and stability of judicial doctrines.
• Insufficiency of Arguments: Respondent asserted that SPIDC failed to present legal arguments against the validity of the CA Resolutions dated May 30, 2014 and February 23, 2015.

• Propriety of Certiorari: Whether the dismissal of the case by the RTC violated SPIDC's substantive rights.
• Grave Abuse of Discretion: Whether the alleged violation of substantive rights should be considered as grave abuse of discretion amounting to lack or excess of jurisdiction.

• Propriety of Certiorari: No. The dismissal for failure to prosecute is a final order operating as a judgment on the merits under Section 3, Rule 17, and the proper remedy is an ordinary appeal under Rule 41, not certiorari under Rule 65.
• Grave Abuse of Discretion: No. Grave abuse of discretion was not established; certiorari does not lie where appeal is available, and the negligence of counsel binds the client absent proof that the client was entirely faultless.

• Propriety of Certiorari: The Court applied Section 3, Rule 17 of the Rules of Court, which expressly provides that a dismissal due to fault of the plaintiff shall have the effect of an adjudication upon the merits unless otherwise declared by the court. Because such a dismissal is a final order, the established remedy is appeal under Rule 41, not certiorari under Rule 65. The general rule is that a writ of certiorari will not issue where the remedy of appeal is available. Section 5(f), Rule 56 further authorizes dismissal of an appeal motu proprio or upon motion when a party resorts to an erroneous mode. The CA therefore correctly dismissed SPIDC's petition. Even assuming the Court were to exercise leniency, treat the belated motion for reconsideration as timely, and consider the certiorari petition as an ordinary appeal, it would still be dismissible on other grounds.

• Grave Abuse of Discretion: The Court applied the doctrine that the dereliction of duty by counsel affects the client, subject to a narrow exception where the client may be excused upon proving to have been entirely faultless. The records showed that the law office's lackadaisical efforts — failing to examine case records despite an undertaking to do so, and eventually moving to withdraw as counsel — should have prompted SPIDC to take precautionary measures, such as being constantly updated about proceedings and promptly engaging substitute counsel. Instead, SPIDC left the fate of its case entirely to the law office. SPIDC was not entirely blameless; hence, no compelling reason existed to exempt the case from the general rule. The Court emphasized that where a party is given the opportunity to be heard, there is no denial of due process, and that disowning counsel's negligence would render court proceedings indefinite and invite endless litigation.

• Dismissal for Failure to Prosecute as Judgment on the Merits — Under Section 3, Rule 17 of the Rules of Court, a dismissal due to fault of the plaintiff operates as an adjudication upon the merits unless otherwise declared by the court. Such a dismissal is a final order, and the proper remedy is an ordinary appeal under Rule 41, not certiorari under Rule 65. The Court applied this doctrine to hold that the CA correctly dismissed SPIDC's certiorari petition for being an erroneous mode of appeal.

• Counsel's Negligence Binds the Client — As a general rule, the negligence or dereliction of duty by counsel affects the client. The exception is that the client may be excused from counsel's failure only if the former can prove to have been entirely faultless. The client has a duty to be in touch with counsel and to be constantly posted about the case; no prudent party would leave the fate of a case completely to a lawyer. The Court found SPIDC not entirely blameless, as it failed to take precautionary measures despite the law office's evident lack of diligence, and thus refused to exempt the case from the general rule.

• Certiorari Not a Substitute for Appeal — A writ of certiorari will not issue where the remedy of appeal is available to the aggrieved party. Section 5(f), Rule 56 of the Rules of Court authorizes dismissal of an appeal motu proprio or upon motion when a party resorts to an erroneous mode thereof.

• "the RTC orders dismissing the case for failure to prosecute are final orders, because such orders of dismissal operate as a judgment on the merits." — This passage, quoted from Young vs. Spouses Sy, articulates the controlling rule that dismissal for failure to prosecute is a final order appealable under Rule 41, not certiorari under Rule 65.

• "The dereliction of duty by counsel affects the client. While, exceptionally, the client may be excused from the failure of counsel, the factual and case settings in this instance, however, would not warrant such an exception; indeed, petitioners themselves may not be said to be entirely faultless." — This passage, quoted from Philhouse Development Corporation vs. Consolidated Orix Leasing and Finance Corporation, states the canonical formulation of the doctrine that counsel's negligence binds the client, subject to the exception where the client proves to have been entirely faultless.

• "No prudent party would leave the fate of his case completely to his lawyer. It should be the duty of the client to be in touch with his counsel so as to be constantly posted about the case." — This passage defines the affirmative duty of the client to monitor the progress of the case, which the Court applied to find SPIDC not entirely blameless.

• Young vs. Spouses Sy, 534 Phil. 246 (2006) — Controlling precedent cited for the proposition that RTC orders dismissing a case for failure to prosecute are final orders operating as a judgment on the merits, and that the remedy is appeal, not certiorari. Followed and applied directly to the facts of the instant case.

• Philhouse Development Corporation vs. Consolidated Orix Leasing and Finance Corporation, 408 Phil. 392 (2001) — Controlling precedent cited for the doctrine that the dereliction of duty by counsel affects the client, with the exception that the client may be excused only if entirely faultless. Followed and applied to hold SPIDC bound by its counsel's negligence.

• Chingkoe vs. Republic, G.R. No. 183608, July 31, 2013, 702 SCRA 677 — Cited in support of the rule that certiorari will not issue where appeal is available.

• Badillo, et al. vs. CA, et al., 578 Phil. 404 (2008) — Cited in support of the rule that certiorari is not a substitute for the lost remedy of appeal.

• Section 3, Rule 17, Rules of Court — Provides that a dismissal due to fault of the plaintiff shall have the effect of an adjudication upon the merits unless otherwise declared by the court. Applied to characterize the RTC's dismissal of SPIDC's complaint as a final order appealable under Rule 41.

• Section 5(f), Rule 56, Rules of Court — Authorizes the dismissal of an appeal motu proprio or upon motion if a party resorts to an erroneous mode thereof. Applied to sustain the CA's dismissal of SPIDC's certiorari petition.

• Rule 41, Rules of Court — Governs ordinary appeals from final orders of the RTC. Identified as the correct remedy available to SPIDC instead of certiorari under Rule 65.

Velasco, Jr. (Chairperson), Peralta, Perez, and Jardeleza, JJ., concurred.