G.R. No. 187836 - Social Justice Society Officers vs. Lim

Mercury Drug Corporation (MERCURY) filed a Petition for Review on Certiorari seeking the reversal of a Court of Appeals Decision.
The adverse parties in the Court of Appeals were the Spouses Eduardo and Carmen Yee (YEES).
The underlying RTC case involved Civil Case No. 93-055, an action for annulment and/or reformation of contract of lease.
The RTC judge in the Court of Appeals caption was Honorable Alejandro Velez, RTC Judge, Branch 20, Cagayan de Oro City.

On 31 March 1984, YEES had a contract of lease with Mercury covering (5) two-storey units in a commercial building owned by YEES.
The leased units were specified as door numbers 3, 4, 5, 6, and 7 of the commercial building located in front of Carmen Market, Carmen, Cagayan de Oro City.
On 27 January 1993, YEES filed the complaint in the RTC as Civil Case No. 93-055 for annulment and/or reformation of the lease contract.
The complaint sought either:

YEES anchored the request for increased rentals on paragraph 3 of the lease contract which provided that:

in case of official devaluation of the Philippine pesos, the parties would, by mutual consent, adjust rental rates; and
if they failed to agree, the matter would be submitted to a group of arbitrators composed of three members.

Mercury refused the demand for increased rentals on the ground that there was no official devaluation of the peso, hence no basis for a rental increase.

The RTC dismissal was principally based on its ruling that there was no devaluation of the peso as a result of an extra-ordinary inflation.
Despite dismissal, the RTC ordered Mercury to pay YEES a relative rent increase “in the spirit of equity and human justice,” in these increments (without interest):

Fifteen (15) percent increase of the contract rental from August 1, 1992 up to the end of the “second five years,” ending May 31, 1994.
Twenty (20) percent increase from June 1, 1994 to May 31, 1999, the end of the “third five years,” based on the new rate from the immediately preceding paragraph.
Thirty (30) percent increase from June 1, 1999 to May 31, 2004, based on the new rate from the immediately preceding paragraph.

The RTC stated that, to end litigation and preserve peace, it made no pronouncement on the counterclaim.

YEES’s former counsel, Atty. Ralph Lou I. Willkom, received a copy of the RTC decision on 3 March 1995.
Atty. Willkom did not inform YEES nor take steps to protect YEES’s interests by filing a motion for reconsideration or an appeal.
YEES learned of the judgment only on 24 March 1995 after visiting Atty. Willkom’s office.
The RTC decision became final as the 15-day period to appeal lapsed.

On 15 May 1995, YEES, through present counsel, filed a petition for relief from judgment under Rule 38.
The RTC denied the petition.
The RTC ruled that YEES’s petition did not meet the timeliness requirements under Rule 38, specifically that it was:

not filed within sixty (60) days from when petitioners learned of the judgment; and
filed beyond the sixty-day period.

The RTC considered that counsel’s receipt on 3 March 1995 triggered the sixty-day period and that the petition filed on 15 May 1995 was filed twelve (12) days after the 60-day deadline.
The RTC noted that the petition was filed within six (6) months from issuance on 28 February 1995 but held that both requirements must concur.
The RTC also ruled that failure of counsel to inform the client still bound the client.
The RTC further reasoned that YEES failed to exhaust agreed contractual remedies, because the parties had not availed of the arbitration procedure in the lease contract prior to resorting to court.
The RTC dismissed the petition and also stated it did not consider negligence on counsel’s part as sufficient to justify relief.
YEES’s motion for reconsideration was likewise denied.

YEES appealed the RTC order denying relief and the Court of Appeals granted YEES’s petition.
The Court of Appeals set aside the RTC orders and the February 28, 1995 decision, and remanded the case to the RTC for further proceedings.
The Court of Appeals ruled that the general rule that notice to counsel is notice to the client did not apply.
The Court of Appeals concluded that the inaction of YEES’s counsel—specifically failure to inform YEES—resulted in the lapse of the period to appeal and forced YEES to file relief through another lawyer.
The Court of Appeals also faulted YEES’s counsel for not pointing out an alleged erroneous finding by the trial court on ownership, which the trial court later corrected.
The Court of Appeals reasoned that counsel’s gross negligence justified departure from the established notice-to-counsel doctrine, invoking equitable considerations and due process.
The Court of Appeals used the view that late filing of t...(Subscriber-Only)

Whether the Court of Appeals erred in refusing to apply the rule that notice to counsel is notice to the client for purposes of Rule 38.
Whether the Court of Appeals erred in disregarding the rule that a party-litigant is generally bound by the mistakes or negligence of counsel.
Whether the Court of Appeals erred in computing the sixty-day period for filing a petition for relief from the date YEES allegedly learned of the decision (24 March 1995) rather than from the date their counsel received the decision (3 March 1995).
Whether the Court of Appeals departed from the usual course of judicial proceedings by deciding the merits of YEES’s petition for relief notwithstanding that the only matter that should have been considered in the certiorari petition was whether the RTC gravely abused discretion in dismiss...(Subscriber-Only)