G.R. No. 190277 - Absolute Management Corp. vs. Metropolitan Bank and Trust Co.

Case Summary (G.R. No. 190277)

Factual Background

Sherwood Holdings Corporation and Spouses Sandy Ang and Arlene Ang filed a collection case against Absolute Management Corporation (AMC) on October 5, 2000 (Civil Case No. Q‑00‑42105). AMC answered and filed a third‑party complaint against Metropolitan Bank and Trust Company (Metrobank). Pre‑trial settings commenced in 2004 but were interrupted by motions, including a motion to admit a fourth‑party complaint. On September 5, 2005, the trial court ordered Metrobank to produce certain bank records. The matter was set for pre‑trial on November 20, 2006.

Procedural History Before the RTC

At the November 20, 2006 pre‑trial, counsel for Metrobank failed to produce a Secretary’s Certificate and a Special Power of Attorney (SPA) authorizing the counsel to represent Metrobank as its representative at pre‑trial. Counsel asserted that such written authority had been submitted at the first pre‑trial in 2004 but could not locate it when asked to inspect the records. On motion by AMC, the RTC declared Metrobank in default and allowed AMC to present evidence ex parte with respect to the third‑party complaint. Metrobank filed a Motion to Lift the Order of Default on December 5, 2006, attaching a Secretary’s Certificate dated July 16, 2006 and an SPA dated December 5, 2006. The RTC denied the motion on May 2, 2007 and denied reconsideration on September 3, 2007.

Court of Appeals Decision

Metrobank petitioned the CA for certiorari, alleging grave abuse of discretion by the RTC. The CA reversed the RTC, holding that the presumption of a lawyer’s authority to appear for a client is strong and that written authorization is not always required. The CA concluded that the RTC gravely abused its discretion in declaring Metrobank in default and ordered that Metrobank be allowed to participate in the proceedings.

Issues Presented to the Supreme Court

Petitioner (Metrobank) assigned errors raising principally whether (1) a SPA must be presented at pre‑trial to authorize counsel to appear as the party’s representative; (2) the CA erred in holding the RTC committed grave abuse of discretion; and (3) the CA improperly applied a liberal presumption of counsel authority to validate the appearance and prevent declaration of default.

Applicable Law and Precedent

Rule 18, Sections 4 and 5 of the 1997 Rules of Civil Procedure are central: Section 4 mandates the duty of parties and counsel to appear at pre‑trial and states that the non‑appearance of a party may be excused only for valid cause or if a representative appears fully authorized in writing to enter into settlement, alternative dispute resolution, and stipulations of facts and documents. Section 5 prescribes dismissal or allowance of ex parte evidence if a party fails to appear. The Court also relied on Development Bank of the Philippines v. Court of Appeals to explain the mandatory, substantive purpose of pre‑trial and the necessity of a “special authority” in writing when a lawyer substitutes for the client in a manner that permits substantive agreements.

Standard for Review: Grave Abuse of Discretion

The Supreme Court reiterated the narrow standard for certiorari relief: grave abuse of discretion exists only when the trial court acts in a capricious or whimsical manner tantamount to a usurpation or lack of jurisdiction. The question was whether the RTC’s declaration of default and allowance of ex parte proof constituted such grave abuse.

Distinction Between Counsel’s Authority and Representative Capacity

The Court emphasized the distinction between a lawyer’s authority to appear as counsel and the separate capacity to act as the client’s representative with authority to enter into substantive pre‑trial agreements. While there exists a strong presumption that an attorney has authority to represent a client as counsel and perform acts in the client’s name, the Rules expressly require written authority when the attorney appears as the party’s representative empowered to settle, submit to ADR, or enter stipulations. The CA conflated these capacities by relying on the general presumption of counsel authority to negate the RTC’s finding.

Evaluation of the Trial Court’s Actions and Metrobank’s Explanations

The Supreme Court found that the RTC did not commit grave abuse. The trial court’s order of default recited that counsel failed to present a Secretary’s Certificate and SPA authorizing representation. When given the opportunity at the hearing to retrieve the purportedly previously filed authority,

Case Syllabus (G.R. No. 190277)

Case Citation and Procedural Posture

Supreme Court, First Division, G.R. No. 190277, July 23, 2014; Decision penned by Justice Villarama, Jr.
Petition for Review on Certiorari from the Decision and Resolution of the Court of Appeals in CA‑G.R. SP No. 101568 dated August 13, 2009 and November 13, 2009, respectively, which had reversed and set aside Orders of the Regional Trial Court (RTC), Quezon City, Branch 80.
RTC Orders under review: May 2, 2007 and September 3, 2007 (denying motion to lift order of default and denying reconsideration).
Relief sought before the Supreme Court: reversal of the Court of Appeals decision and reinstatement and upholding of the RTC Orders; application for issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction was part of the petition.

Parties and Nature of Action

Plaintiffs: Sherwood Holdings Corporation and Spouses Sandy Ang and Arlene Ang.
Defendant and Third‑Party Plaintiff: Absolute Management Corporation (private respondent in Supreme Court caption but originally defendant in RTC case).
Third‑Party Defendant: Metropolitan Bank and Trust Company (petitioner in the instant Supreme Court petition).
Underlying action: Civil case for sum of money filed on October 5, 2000, docketed as Civil Case No. Q‑00‑42105 before the RTC of Quezon City, Branch 80; Absolute Management Corporation pleaded answer and lodged a third‑party complaint against Metropolitan Bank and Trust Company.

Factual Background (as stated by the Court of Appeals and RTC record)

Original pre‑trial was set on February 7, 2004, per RTC Order of January 30, 2004, but was cancelled due to petitioner’s filing of a motion to admit a fourth‑party complaint against the Estate of Jose L. Chua.
On September 5, 2005, RTC ordered petitioner to produce and allow private respondent to copy/microfilm specified checks and bank ledgers for Current Account Nos. 00719‑250162‑4 and 00700‑250691‑9.
On November 20, 2006, the case was set for pre‑trial. When counsel were asked to produce authorizations to appear, counsel for petitioner (Metropolitan Bank) manifested that authority had already been submitted at the first pre‑trial in 2004.
Petitioner’s counsel was allowed to inspect the records to locate the Secretary’s Certificate allegedly submitted in 2004 but failed to show any written authority; on motion of private respondent, the RTC declared petitioner in default and allowed private respondent to present evidence ex parte.
Petitioner filed, on December 5, 2006, a Motion to Lift Order of Default attaching an Affidavit of Merit, a Secretary’s Certificate dated July 16, 2006, and a Special Power of Attorney (SPA) dated December 5, 2006.
RTC denied the Motion to Lift Order of Default on May 2, 2007 and denied reconsideration on September 3, 2007.
Petitioner (Metropolitan Bank) sought relief by filing a petition for certiorari with the Court of Appeals, alleging grave abuse of discretion by the RTC; the CA reversed the RTC, concluding counsel’s authority to appear was presumed and the declaration of default lacked merit.

Assignments of Error Raised by Petitioner (Metropolitan Bank) to the Supreme Court

The Court of Appeals erred in holding that a Special Power of Attorney need not be presented at pre‑trial because a lawyer’s authority to appear is presumed.
- Subpoint A: Non‑appearance of a party in pre‑trial may be excused only for valid cause or if a fully authorized representative appears in writing.
- Subpoint B: The CA’s reliance on Land Bank of the Philippines v. Pamintuan Development Co. and Cebu Stevedoring Co. v. Ramolete is inapplicable to the instant case.
The CA erred in finding grave abuse of discretion by the RTC where the RTC properly applied the law requiring presentation of SPA during pre‑trial.
The CA erred in applying a liberal construction of the rules in favor of the respondent.
The CA erred in ordering respondent to participate in trial because such participation would only delay resolution, citing the alleged failure to present a valid defense in respondent’s answer.

Court of Appeals’ Rationale (as described in the record)

The CA reversed the RTC on the ground that respondent’s counsel’s authority to represent respondent was presumed from counsel’s entry of appearance and prior participation in the case.
The CA emphasized the strong presumption in favor of counsel’s authority to appear for a client and noted that a lawyer is not required to present written authorization; absence of formal notice of entry of appearance does not invalidate acts performed by counsel in client’s name.
The CA cautioned that the court may, on its own initiative or motion of another party, require proof of authorization but found that such a requirement was not justified in the circumstances and that the RTC gravely abused its discretion.
The CA also invoked the principle that courts should avoid rigid application of rules where such rigidity would frustrate the just, speedy, and inexpensive determination of controversies.

Applicable Rules and Precedent Cited by the Supreme Court

Rule 18, Sections 4 and 5 of the 1997 Rules of Civil Procedure (as amended):
- Sec. 4: Duty of parties and counsel to appear at pre‑trial; non‑appearance excused only for valid cause or where a representative fully authorized in writing appears to enter into settlement, ADR, or stipulations/admissions.
- Sec. 5: Effec