G.R. No. 180817 - Multi-Trans Agency Phils., Inc. vs. Oriental Assurance Corp.

On July 22, 1997, Oriental Assurance Corporation (respondent) initiated a complaint for a sum of money before the Regional Trial Court (RTC) of Manila, Branch 13.
The complaint arose from a shipment handled by Imrex Enterprises (respondent’s predecessor-in-interest) involving various colors of Opacolor imported from England.
The shipment, consisting of 72 boxes and one pallet/box (1 pal/box) weighing 500 kilos, was transported in a container van from Southampton to Manila on the vessel "Tokyo Bay."
The cargo was transshipped from Singapore onto the vessel "M/V Neptune Beryl," which later docked at the Manila International Port on August 29, 1996.
The shipment was insured by Oriental for Php1,078,012.16 under Marine Insurance Policy No. OAC-M-96/688.
Upon arrival at the Manila North Harbor, the container van was unloaded and stripped at an open container yard, where only 72 boxes were found; the one pallet/box was either undelivered or shortlanded, as shown by a Good Order Cargo Receipt.
Oriental alleged that the non-delivery or shortlanding was due to negligence on the part of petitioner Multi-Trans Agency Phils., Inc. (Multi-Trans) and Neptune Orient Lines, Ltd., holding them liable for breaching their contract of carriage.

Neptune filed its Answer with a compulsory counterclaim asserting it was merely a commercial agent, disclaiming detailed knowledge of the cargo and invoking several defenses—such as the shipment being carried on a "Shipper’s Load and Count" basis and alleging that any loss was attributable to inherent vices, pre-shipment issues, or perils of the sea.
Petitioner Multi-Trans, through its counsel Atty. Jose Ma. Q. Austria, filed a Motion to Dismiss based on the complaint’s failure to state a cause of action, contending that it was misidentified as the operator/ship agent of the vessel "Tokyo Bay" in the Bill of Lading.
On October 25, 1997, the RTC denied the Motion to Dismiss.
Subsequent orders and notifications, including an order on February 20, 1998, concerning the transmission of orders to counsel, resulted in confusion over the actual commencement of the period for filing an Answer, leading ultimately to default proceedings.
On March 27, 1999, petitioner Multi-Trans was declared in default after the RTC received certification that its counsel had been served a copy of the order denying the Motion to Dismiss, yet no timely Answer was filed.
The trial court scheduled a pre-trial; Oriental presented its evidence on June 17, 1999, and on August 30, 1999, the RTC rendered a decision holding both Multi-Trans and Neptune solidarily liable for damages amounting to Php256,937.03, plus legal interest, attorney’s fees, and costs.

After the trial decision, petitioner’s counsel, Atty. Austria, withdrew his appearance on September 10, 1999. New counsel, Melgar Tria & Associates, subsequently entered on September 27, 1999.
The new counsel filed a Motion for New Trial and to Admit the Answer, arguing that the negligence and inaction of the former counsel—failing to file an Answer, not notifying the client of the default, and misrepresenting the status of pleadings—amounted to gross negligence, thus depriving petitioner of its right to be heard.
The trial court denied the motion for new trial on November 29, 1999.
Neptune concurrently filed a Motion for Reconsideration, which was denied on December 1, 1999.
Petitioner and Neptune both appealed; the RTC forwarded the records to the Court of Appeals.
On December 4, 2006, the Court of Appeals promulgated its decision, affirming with modification the RTC ruling. It held petitioner solely liable, thus excluding Neptune from joint and several liability.
Both parties filed motions for reconsideration of the Court of Appeals’ decision. On December 10, 2007, the Court of Appeals denied both motions.
Petitioner then elevated the case to the Supreme Court through a petition for review on the basis of counsel’s gross negligence and misrepresentation, as well as the incorrect characterization of petitioner’s role as the agent/ship agent of the vessel "Tokyo Bay."

Petitioner contended that its former counsel’s actions (or lack thereof) deprived it of its day in court. The alleged acts included:

Failure to file an Answer despite receipt of the court’s order denying the Motion to Dismiss.
Failure to notify petitioner of the default and the adverse court orders.
Misrepresentation that a Motion to Lift the Order of Default had been filed.

Petitioner argued these acts constituted gross negligence, thus warranting a new trial so it could present evidence in defense of its contention that it was merely a freight forwarding firm, not the proper agent (operator/ship agent) of "Tokyo Bay."
Additionally, petitioner challenged the Court of Appeals’ ruling which imposed liability on it despite evidence suggesting an inconsistency between the complaint’s allegation and the documentary evidence provided in the Bill of Lading.

Whether the negligence of petitioner’s former counsel, amounting to gross negligence, deprived the petitioner of due process and the opportunity to defend itself.

Did the counsel’s failure to file an Answer and to promptly notify the petitioner justify the grant of a new trial?
Should the doctrine that binds a client to the acts of its counsel be relaxed in instances of gross negligence?

Whether petitioner is rightly characterized as the operator/ship agent of the vessel "Tokyo Bay" and held liable for the alleged loss, or whether it was merely a freight forwarding agent.

Is there a discrepancy between the party’s role as described in the complaint and the evidentiary support provided in the Bill of Lading?
What is the proper interpretation of the agency relationship in the context of the carriage of goods and allocation of liability?

Whether the Court of Appeals erred in confining liability solely to petitioner, thereby excluding Neptune from joint and several liability, given the factual backdrop and defenses raised by Neptune.