Ultra Mar Aqua Resource, Inc. vs. Fermida Construction Services

A party who fails to appear at pre-trial and to file the required pre-trial brief is deemed to have waived the right to present evidence, and the court may proceed to receive the opposing party’s evidence ex parte and render judgment on that basis; the client is bound by the procedural mistakes and negligence of counsel, and a claim of counsel’s gross negligence cannot be raised for the first time on appeal.

Fermida Construction Services and Ultra Mar Aqua Resource, Inc. entered into a contract for the construction of a warehouse in Subic, Zambales, with a contract price of PhP1,734,740. During construction, variations were made at Ultra Mar’s request. After completion, Fermida billed Ultra Mar for the balance, but Ultra Mar refused to pay, citing dissatisfaction with the work, alleged failure to submit required documents, and delay. Fermida filed a complaint for collection of sum of money.

• The Construction Agreement: On December 8, 2003, Fermida Construction Services (Fermida) and Ultra Mar Aqua Resource, Inc. (Ultra Mar) entered into a Contract Agreement for the construction of a warehouse in Wawandue, Subic, Zambales, at a contract price of PhP1,734,740. During construction, Ultra Mar requested and instructed Fermida to undertake variations covering roof coverage, drainage canal, painting, and electrical work.

• Completion and Billing: Fermida completed the project on January 17, 2004, and sent a Billing Statement to Ultra Mar, exclusive of variation orders and extra work orders. Pursuant to the agreement, Fermida secured a Surety Bond equivalent to 10% of the contract price to cover the retention for defects. Fermida also executed a Contractor’s Affidavit stating that all claims for labor, materials, equipment, and tools had been fully settled.

• Ultra Mar’s Refusal to Pay: Ultra Mar expressed discontentment with some of Fermida’s work. Fermida undertook repairs and submitted another Billing Statement. Ultra Mar still refused to pay, citing Fermida’s alleged failure to submit the FDT Report and Building Permits, substandard work, and delay. Fermida demanded payment of the contract price and the cost of variation orders. Ultra Mar countered that it had not asked for variations but only rectifications of substandard work.

• Pre-trial and Default: The RTC set the case for pre-trial. Ultra Mar’s counsel repeatedly moved for postponement. On the final scheduled date of September 7, 2004, counsel neither appeared nor filed a pre-trial brief. The RTC declared Ultra Mar in default and allowed Fermida to present evidence ex parte. Ultra Mar’s counsel filed an Omnibus Motion to lift the order, alleging that his non-appearance was due to intermittent nausea from a sudden drop in blood sugar. The RTC required submission of a medical certificate; counsel failed to comply within the given period. The RTC denied the Omnibus Motion and, later, denied a subsequent motion for reconsideration as a prohibited second motion.

• Independent Engineer’s Findings: The court-appointed independent engineer found that there were variations from the approved plans, and that no written variation orders had been issued, but Ultra Mar had not opposed the alterations during construction and Fermida had received verbal instructions. The project could not be considered substantially completed due to defects that needed repair. The engineer recommended that the 10% retention be withheld pending completion of repairs, but noted that Fermida had already posted a surety bond that would answer for any failure to repair.

• Denial of Omnibus Motion: Ultra Mar contended that the CA erred in holding that the RTC did not commit reversible error in denying the Omnibus Motion to Lift Order of Default and to Admit Pre-Trial Brief, and in treating the subsequent motion for reconsideration as a prohibited second motion under Rule 52, Section 2 of the Rules of Court.

• Gross Negligence of Counsel: Ultra Mar argued that it should be relieved from the effects of its former counsel’s gross negligence. It alleged that counsel, despite receiving the RTC Decision on October 15, 2004, did not inform Ultra Mar and instead sent a false report that he had moved to set the case for pre-trial. Ultra Mar further cited its counsel’s subsequent disbarment and a pending malversation case to demonstrate gross negligence.

• Propriety of Ex Parte Proceeding: Fermida maintained that Ultra Mar’s repeated non-appearance at pre-trial and failure to file a pre-trial brief, without valid cause, justified the RTC’s order allowing ex parte presentation of evidence and the resulting judgment.

• Binding Effect of Counsel’s Negligence: Fermida argued that Ultra Mar was bound by its counsel’s procedural mistakes and could not evade liability by attributing fault to counsel only on appeal.

• Pre-Trial Default: Whether the RTC committed reversible error in denying Ultra Mar’s Omnibus Motion to lift the order of default and in allowing Fermida to present evidence ex parte.

• Relief from Counsel’s Negligence: Whether Ultra Mar should be relieved from the effects of its counsel’s alleged gross negligence, thereby entitling it to present evidence.

• Pre-Trial Default: The denial of the Omnibus Motion was proper. Ultra Mar’s counsel repeatedly moved for postponement and still failed to appear at the pre-trial conference and to file the required pre-trial brief. The excuse of ill-health was unsubstantiated; counsel did not attach the medical certificate to his motion and failed to comply with the RTC’s order to submit it within the given period. The medical certificate presented later was dated September 6, 2004, yet it was not mentioned in the Omnibus Motion filed on September 8, 2004. The justifications advanced did not constitute a valid cause to excuse non-compliance. Consequently, Fermida was correctly allowed to present evidence ex parte and the RTC’s judgment based on that evidence was proper.

• Relief from Counsel’s Negligence: Ultra Mar cannot be relieved of the consequences of its counsel’s negligence. The rule is settled that a client is bound by the acts and mistakes of counsel, including errors in procedural technique. The client’s remedy lies against the erring counsel, not against the adverse party or the court. Ultra Mar itself failed to exercise the standard of care of an ordinarily prudent person by not monitoring the progress of its case. Moreover, the claim of gross negligence—premised on counsel’s subsequent disbarment and a pending malversation case—was raised for the first time on appeal. Issues not raised in the proceedings below cannot be taken up for the first time on appeal. Fairness and due process dictate that evidence and issues not presented before the trial court shall not be entertained on review.

• 10% Retention: The CA’s order making payment subject to the 10% retention was deleted. The parties’ Contract Agreement provided that the retention would be released upon posting of a surety bond, and Fermida had already secured such a bond. The independent engineer also confirmed that the bond would answer for any defective work. Ultra Mar was therefore no longer entitled to withhold the retention.

• Effect of Failure to Appear at Pre-Trial and to File Pre-Trial Brief — Under Rule 18, Sections 4, 5, and 6 of the Rules of Court, the failure of a defendant to appear at pre-trial and to file a pre-trial brief authorizes the trial court to allow the plaintiff to present evidence ex parte and to render judgment on that basis. The non-appearance may be excused only upon a showing of valid cause or the appearance of a duly authorized representative. A motion for postponement is a privilege, not a right, and the trial court’s discretion in denying it will not be disturbed absent clear and manifest abuse.

• Client Bound by Counsel’s Acts and Negligence — A client is bound by the acts, omissions, and mistakes of counsel in the conduct of litigation, including errors in procedural technique. The rationale is that counsel, once retained, holds implied authority to do all acts necessary for the prosecution or management of the suit, and the client is expected to exercise ordinary prudence by keeping abreast of the case. The remedy for the aggrieved client is against the lawyer, not against the adverse party or the judgment.

• Issues Not Raised Below Cannot Be Raised for the First Time on Appeal — Fairness and due process preclude a party from raising on appeal an issue—such as counsel’s gross negligence—that was not presented and litigated in the lower court. Evidence and arguments not ventilated at the trial level cannot be considered for the first time on review.

• “The general rule is that a client is bound by the counsel[’s] acts, including even mistakes in the realm of procedural technique. The rationale for the rule is that a counsel, once retained, holds the implied authority to do all acts necessary or, at least, incidental to the prosecution and management of the suit in behalf of his client, such that any act or omission by counsel within the scope of the authority is regarded, in the eyes of the law, as the act or omission of the client himself.” (citing Lagua v. Court of Appeals)

• “As clients, petitioners should have maintained contact with their counsel from time to time, and informed themselves of the progress of their case, thereby exercising that standard of care which an ordinarily prudent man bestows upon his business.”

• “It has been repeatedly enunciated that a client is bound by the action of his counsel in the conduct of a case and cannot be heard to complain that the result might have been different had he proceeded differently. A client is bound by the mistakes of his lawyer. If such grounds were to be admitted as reasons for reopening cases, there would never be an end to a suit so long as new counsel could be employed who could allege and show that prior counsel had not been sufficiently diligent or experienced or learned.” (citing Tesoro v. Court of Appeals)

• Lagua v. Court of Appeals, G.R. No. 173390, June 27, 2012 — Followed; reiterated the rule that a client is bound by counsel’s acts, including procedural mistakes, because of the implied authority inherent in the attorney-client relationship.

• Tan v. Court of Appeals, 524 Phil. 752 (2006) — Followed; clarified that even in the absence of client negligence, the client remains bound by counsel’s mistakes, and emphasized the client’s duty to monitor the progress of the case.

• Bejarasco v. People, G.R. No. 159781, February 2, 2011, 641 SCRA 328 — Cited as supporting authority for the binding effect of counsel’s actions on the client.

• Daaco v. Yu, G.R. No. 183398, June 22, 2015 — Cited for the rule on the effect of failure to appear at pre-trial under Rule 18.

• Del Rosario v. Bonga, G.R. No. 136308, January 23, 2001 — Applied; raised the principle that issues not raised in the proceedings below cannot be raised for the first time on appeal.

• Rule 18, Sections 4, 5, and 6, Rules of Court — These provisions mandate the appearance of parties and counsel at pre-trial, prescribe that the failure of the defendant to appear shall allow the plaintiff to present evidence ex parte and the court to render judgment on that basis, and equate the failure to file a pre-trial brief with failure to appear. The RTC’s actions were anchored on these rules, and the Supreme Court found them properly applied given Ultra Mar’s unexcused non-compliance.

• Rule 52, Section 2, Rules of Court — This provision prohibits a second motion for reconsideration of a judgment or final resolution. The RTC correctly denied Ultra Mar’s subsequent motion for reconsideration as a prohibited second motion.

Velasco, Jr. (Chairperson), Bersamin, Reyes, and Jardeleza, JJ., concurred.