FIRST DIVISION

April 19, 2017

G.R. No. 194533

PHILIPPINE STEEL COATING CORP., Petitioner,

DECISION

SERENO, CJ:

Assailed in this Petition for Review  under Rule 45 is the Decision  dated July 28, 2009 and Resolution  dated
1 2 3

February 9, 2010 of the Court of Appeals  (CA) in CA G.R. CV No. 86540 which affirmed with modification the
4

Regional Trial Court's (RTC) Decision  dated October 7, 2004 and ordered Petitioner Ultra Mar Aqua Resource, Inc.,
5

(Ultra Mar) to pay Respondent Fermida Construction Services (Fermida) the construction costs of a warehouse
pursuant to the parties' agreement.

The Facts of the Case

On December 8, 2003, Fermida entered into a Contract Agreement  with Ultra Mar for the construction of a
6

warehouse in Wawandue, Subic, Zambales (Project) with a contract price of PhPl,734,740. In the course of
construction, variations as to roof coverage, drainage canal, painting and electrical work were made by Fermida
upon Ultra Mar's request and instructions.  7

After completing the Project on January 17, 2004, Fermida sent to Ultra Mar a Billing Statement exclusive of the
cost of variation orders and extra work orders made. Pursuant to the parties' agreement, Fermida secured a Surety
Bond to satisfy the 10 percent retention to cover any defect in materials and workmanship. A Contractor's Affidavit
stating that all claims and obligations for labor services, materials supplied, equipment and tools have been fully
settled was likewise executed.  8

However, Fermida received a letter from Ultra Mar expressing discontentment on some of the former's work.
Resultantly, Fermida undertook repairs and another Billing Statement was thereafter sent to Ultra Mar. 9

Just the same, Ultra Mar refused to pay because of Fermida's alleged failure to submit the PDT Report and Building
Permits, and substandard work and delay in the completion of the Project.

Because of Ultra Mar's failure to comply with its obligations, Fermida demanded payment not only of the contract
price but for the cost of the variation orders as well. In response, Ultra Mar stated that it did not ask for variations on
the Project but only rectifications as the work done by Fermida was below standard.  10

Consequently, Fermida commenced the Complaint for Collection of Sum of Money with Prayer for Injunction  before 11

the RTC.

The RTC ordered  an ocular inspection of the subject premises and an ocular inspection by an independent
12

engineer was conducted. The case was then set for pre-trial conference.

However, the scheduled pre-trial conference on August 9, 2004 was postponed upon motion of Ultra Mar's counsel
and was then re-scheduled to August 17, 2004. This was again reset to September 7, 2004. Despite several
resettings, counsel for Ultra Mar failed to attend the pre-trial conference and failed to file the required pre-trial brief.
As a result, the RTC declared Ultra Mar in default and allowed Fermida to present its evidence ex parte.  13

On September 8, 2004, Ultra Mar, through counsel, filed an Omnibus Motion to Lift Order of Default, Admit Attached
Pre-Trial Brief and Set the Case for Pre-Trial Conference   (Omnibus Motion) alleging that his failure to file the Pre-
14

Trial Brief was due to the intermittent nausea he was experiencing as a result of a sudden drop in his blood sugar
level. Affording leniency, the RTC required a supporting Medical Certificate upon submission of which Ultra Mar's
Omnibus Motion shall be resolved.

Ultra Mar's counsel failed to comply with the said Order thus the RTC denied Ultra Mar's Omnibus Motion and, on
October 7, 2004, issued a Decision  , the fallo portion of which states:
15

"WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of [Fermida] and against [Ultra Mar]
as follows: ordering the [Ultra Mar] to pay [Fermida] the amount of Pl,106[,]000.38; with interest thereon at the legal
rate from the date of the filing of this complaint. The amount of P50,000.00 as attorney's fees and Pl0,000.00 as
litigation expenses; Pl00,000.00 as nominal damages and to pay the costs of suit.

SO ORDERED."  16

Ultra Mar moved for reconsideration and attached thereto its counsel's Medical Certificate.  The RTC denied the
17

same for being a second motion for reconsideration.   Similarly, the RTC denied Ultra Mar's motion for
18

reconsideration of its main Decision dated October 7, 2004.

Ultra Mar then elevated the case to the CA. The CA, however, found no error on the part of the RTC when it denied
Ultra Mar's Omnibus Motion.  The CA noted that Ultra Mar's counsel failed to provide a plausible justification why he
1awp++i1

failed to submit the required pre-trial brief.

On the merits, the CA found that Fermida was able to preponderantly establish that it entered into a construction
agreement with Ultra Mar and that despite demands, the latter failed to pay. To resolve which between Fermida on
one hand, claiming that the Project has been completed, and Ultra Mar on the other, claiming that the Project was
not yet complete and the work done was defective, the CA made reference to the Report and Supplemental Report
of the court-appointed independent engineer who made the following findings:

"8. Since there were variations made construction does not conform with the approved plan and specifications. It
appears there were items of works completed which are not included from the scope of work indicated in the
contract documents.

9. No variation order approved and issued by the owner to contractor regarding the additional works performed by
the contractor, but no written notice from ULTRA MAR AQUA RESOURCES INC., that they opposed the alteration
or variation during the construction. It is apparent that PERMIDA [sic] CONSTRUCTION had received a verbal
instruction regarding the supposed additional works.

CONCLUSIONS AND RECOMMENDATIONS

(a) Under GC-12 Completion and Acceptance of General Conditions of Contract which states that: 'Upon completion
of the Work, written notice thereof shall be served by the Contractor to the Owner. Upon receipt of the said notice,
the Owner shall inspect the Work to determine if it has been satisfactorily performed and completed in accordance
with the Contract. xxx'

Based on the result of my ocular inspection, the contractor have [sic] to repair all defected [sic] works, and this
project cannot be considered substantially completed and final billing should be withheld pending completion of
repair and uncompleted item.

x x x           x x x          x x x
19

Supplementing the foregoing, the independent engineer stated:

"Considering that there are minor repair works noted in my July 1, 2004 report, I have recommended that the
contractor have [sic] to repair all defected [sic] works and the final billing should be withheld pending completion of
repair of defected [sic] works. I wish to be corrected that I just based that withholding of final billing on the usual way
of collection being done by most private contractor that is 30% down payment followed by progress billing and a
10% final retention. Ultra Mar should withheld the payment of Fermida Construction for the 10% retention and not
based on the final billing which includes the whole of contract amount and the supposed variation works. However,
in this case, a surety bond was already posted by Fermida Construction, hence, the bond should be liable in this
case to Ultra Mar if in case the contractor refuses to repair any of alleged defected [sic] works. " 20

As such, the CA held that the construction works are not without defects. Be that as it may, the CA noted that such
defective work is covered by the 10 percent retention that Ultra Mar is allowed to withhold from F ermida. Hence, the
CA ruled that Ultra Mar is indeed liable to pay Fermida the construction cost of P1,106,038.82 but subject to the 10
percent retention. Finally, the CA deleted the awards of nominal damages, attorney's fees and litigation expenses
for being unsubstantiated.

The CA, in its fallo portion, disposed as such:

1. Appellant Ultra Mar Aqua Resources, Inc. is directed to pay appellee Fermida Construction Services the
amount of P1,106,038.82 with legal interest thereon from the date of the filing of the Complaint subject to the
10% retention.

2. The awards of nominal damages, attorney[']s fees and litigation expenses are DELETED.

SO ORDERED." 21

Ultra Mar partially moved for reconsideration essentially arguing that it was denied the right to present evidence due
to the gross negligence of its former counsel.  The CA denied Ultra Mar's partial motion for reconsideration. 
22 23

The Issues

Unperturbed, Ultra Mar filed the instant Petition on the following grounds   :24

"(1) The Court of Appeals erred in holding that the Trial Court did not commit any reversible error in denying the
Omnibus Motion to Lift Order of Default, Admit Attached Pre-trial Brief and Set the Case for Pretrial Conference filed
by Atty. Mas and in denying Atty. Mas' Motion for Reconsideration [of the Order dated September 17, 2004] with
Compliance pursuant to Section 2, Rule 52 of the Rules of Court.

(2) The Court of Appeals erred in not relieving the petitioner from the effects of gross negligence of its counsel Atty.
Leonuel Mas who despite receipt of the Decision of the Trial Court on October 15, 2004 did not inform the petitioner
albeit deceivingly sent the petitioner a report dated November 26, 2004 that he moved the case be set for pre-trial." 25

The Ruling of the Court

Ultra Mar essentially argues that it should have been allowed to present its evidence because its non-appearance at
the pre-trial conference and failure to file pre-trial brief were attributable to its counsel's gross negligence for which it
should not be made to suffer the consequences. Ultra Mar further postulates that it has a meritorious defense which
could lead the RTC to rule otherwise had it been presented.

The petition is devoid of merit.

At the heart of this case is the propriety of the RTC's Order declaring Ultra Mar in default, allowing Fermida to
present its evidence exparte and thereafter, rendering judgment on the basis thereof.

Prefatorily, it bears to emphasize that as the Rules of Civil Procedure presently stand, if the defendant fails to
appear for pre-trial, a default order is no longer issued. Initially, the phrase "as in default" was included in Rule 20 of
the old rules.   With the amended provision, the phrase "as in default" was deleted, the purpose of which is "one of
26

semantical propriety or terminological accuracy as there were criticisms on the use of the word default in the former
provision since that term is identified with the failure to file a required answer, not appearance in court."   While the
27

order of default no longer obtains, its effects were nevertheless retained.

Thus, Section 4, Rule 18 requires the parties and their counsel to appear at the pre-trial conference. The
effect of their failure to appear is spelled under Section 5 of the same rule, as follows:

Section 4. Appearance of parties. - It shall be the duty of the parties and their counsel to appear at the pre-trial.  The 1âwphi1

non-appearance of a party may be excused only if a valid cause is shown therefor or if a representative shall appear
in his behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations or admissions of facts and of documents.

Section 5. Effect of failure to appear. - The failure of the plaintiff to appear when so required pursuant to the next
preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless otherwise
ordered by the court. A similar failure on the part of the defendant shall be cause to allow the plaintiff to present his
evidence ex parte and the court to render judgment on the basis thereof.

Further, Section 6 of the same rule provides:

Section 6. Pre-trial brief. - The parties shall file with the court and serve on the adverse party, in such manner as
shall ensure their receipt thereof at least three (3) days before the date of the pre-trial, their respective pre-trial briefs
which shall contain, among others:

xxx

Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial.
Hence, the failure of a party to appear at pre-trial has adverse consequences: if the absent party is the
plaintiff then he may be declared non-suited and his case is dismissed; if the absent party is the defendant,
then the plaintiff may be allowed to present his evidence ex parte and the court to render judgment on the
basis thereof.  28

By way of exception, the non-appearance of a party and counsel may be excused if (1) a valid cause is shown; or
(2) there is an appearance of a representative on behalf of a party fully authorized in writing to enter into an
amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or
admissions of facts and of documents. What constitutes a valid cause is subject to the court's sound discretion and
the exercise of such discretion shall not be disturbed except in cases of clear and manifest abuse.  29

Elucidating on the circumstances surrounding the denial of Ultra Mar's Omnibus Motion, the CA had this to say:

x x x           x x x          x x x

Here, We note that in the Preliminary Pre-Trial Order dated 8 June 2004, the court a quo had already directed the
parties to submit their respective Pre-Trial Briefs at least three days before the Pre-Trial Conference, i.e., on or
before 9 August 2004. However, on said date, appellant's counsel filed an Urgent Ex-Parte Motion for
Postponement on the ground that he had an urgent matter to attend to. The records revealed that the Pre-Trial
Conference was rescheduled and eventually pushed through on 7 September 2004. Once again, however,
appellant's counsel failed to appear and file the required Pre-Trial Brief.

From the foregoing factual milieu, We find no convincing ground to apply the policy of liberality. Appellant's counsel
advanced no plausible justification why he failed to submit the Pre-Trial Brief the court a quo had directed him in its
Preliminary Pre-Trial Order. Lenient as it was, the court a quo still gave appellant's counsel a chance albeit with the
condition that he submit a Medical Certificate. Unfortunately, he failed to comply. That the subject Medical
Certificate is dated 6 September 2004 did not escape Our attention. Verily, We find it perplexing why it was never
attached to the Omnibus Motion dated 8 September 2004 or it was ever mentioned therein. As a practicing lawyer,
appellant's counsel is aware that any claim of illness must be substantiated by a Medical Certificate. Likewise, We
note that appellant's counsel was given five days from 9 September 2004 within which to submit the Medical
Certificate in question. Interestingly, counsel was mum about the impossibility of his compliance because he left his
records in Sta. Cruz, Zambales during the time he was ill. It was only on 13 October 2004 or 34 days after 9
September 2004 that he informed the court a quo the reason for his non-compliance. Under such factualness the
court a quo unerringly denied the Omnibus Motion and subsequent Motion for Reconsideration with Compliance
treating the latter as a Second Motion for Reconsideration prohibited under the Rules.

x x x           x x x          x x x"
30

Pointedly, Ultra Mar's counsel repeatedly moved for the postponement of the pre-trial conference, and yet still failed
to appear. Litigants and counsels are reminded time and again that a motion for postponement is a privilege and not
a right. The grant or denial of a motion for postponement is a matter that is addressed to the sound discretion of the
trial court. As the Court consistently affirms, an order declaring a party to have waived the right to present evidence
for performing dilatory actions upholds the trial court's duty to ensure that trial proceeds despite the deliberate delay
and refusal to proceed on the part of one party.  31

Clearly then, the justifications advanced by Ultra Mar's counsel for its repeated failure to comply with the RTC's
Order to appear at the Pre-Trial Conference, to submit the Pre-Trial Brief and to present the supporting Medical
Certificate do not constitute a valid cause to excuse such noncompliance.

Ultra Mar would nevertheless point an accusing finger at its counsel for the latter's gross negligence. However,
nothing is more settled than the rule that the negligence and mistakes of a counsel are binding on the client.

The rationale for this rule is reiterated in the case of Lagua v. Court of Appeals  : 32

"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."

Ultra Mar, on the other hand, has the following concomitant obligation:

"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.

Even in the absence of the petitioner['s] negligence, the rule in this jurisdiction is that a party is bound by the
mistakes of his counsel. In the earlier case of Tesoro v. Court of Appeals, we emphasized:
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 (citation omitted).  "
33

Consequently, neither Ultra Mar nor its counsel can evade the effects of their misfeasance.  34

To convince the Court that its counsel was indeed grossly negligent, Ultra Mar cites said counsel's disbarment and
the case filed against him for malversation pending before the Provincial Prosecutor of Cavite.   These instances,
35

however, cannot support a pronouncement as to counsel's gross negligence. For one, these events have no direct
bearing to the instant case.

SO ORDERED.

MARIA LOURDES P.A. SERENO

WE CONCUR:

TERESITA J. LEONARDO-DE CASTRO

MARIANO C. DEL CASTILLO ESTELA M. PERLAS-BERNABE

ALFREDO BENJAMIN S. CAGUIOA

CERTIFICATION

Pursuant to the Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that
the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Court’s Division.

MARIA LOURDES P.A. SERENO

Footnotes

1
 Rollo, pp. 9-31.

2
 Id. at pp. 32-46.

3
 Id. at pp. 45-46.

 Penned by Associate Justice Japar B. Dimaampao and concurred in by Associate Justices Rebecca De
4

Guia-Salvador and Estela M. Perlas-Bernabe.

5
 Rollo, pp. 87-95.

6
 Id. at pp. 54-55.

7
 Id. at p. 33.

8
 Id.

9
 Id. at p. 34.

10
 Id. at p. 35.

11
 Id. at pp. 47-53.

12
 Id. at p. 80.
  Id. at p. 82.
13

 No copy attached to the Petition.

 Rollo, pp. 45-46.

 Id.
16

 Id. at pp. 83-84.

 Section 2, Rule 52 of the Rules of Court provides: SEC. 2. Second motion for reconsideration. - No second
18

motion for reconsideration of a judgment or final resolution by the same party shall be entertained.

 Id. at pp. 41-42.

 Ibid.
20

 Supra Note 2 at p. 43.
21

 Id. at p. 45.
22

 Supra Note 3.
23

 Id. at p. 19.
24

 Ibid.
25

 Sec. 2. A party who fails to appear at a pre-trial conference may be non-suited or considered as in default.
26

 Regalado, Remedial Law Compendium, Vol. I, Ninth Revised Edition, p. 309.

 Daaco v. Yu, G.R. No. 183398, June 22, 2015.

 Ibid.
29

 Id. at pp. 39-40.

 The Philip American Life & General Insurance Company v. Enario, G.R. No. 182075, September 15, 2010.
31

 G.R. No. 173390, June 27, 2012 citing Bejarasco v. People, G.R. No. 159781, February 2, 2011,
32

641SCRA328,330-331.

 G.R. No. 173390, June 27, 2012 citing Bejarasco v. People, G.R. No. 159781, February 2, 2011, 641
32

SCRA 328,330-331.

 Tan v. Court of Appeals, 524 Phil. 752, 760-761 (2006).

 Suico Industrial Corp. v. Lagura-Yap, G.R. No. 177711, September 5, 2012, 680 SCRA 145, 159.
34

 Rollo, p. 21.
35