Title
Real Bank, Inc. vs. Samsung Mabuhay Corp.
Case
G.R. No. 175862
Decision Date
Oct 13, 2010
Samsung sued Real Bank for negligence in handling checks diverted by an employee. Mediation notice sent to withdrawn counsel led to case dismissal, reversed by CA, upheld by SC due to improper notice.
mistaken credit
postdated checks
wrong account

Case Summary (G.R. No. 175862)

Factual Background

On 27 November 1997, Samsung Mabuhay Corporation filed Civil Case No. 97-86265 against Real Bank, Inc. for damages arising from the alleged wrongful negotiation and deposit of three postdated UCPB checks totalling P1,563,750.00. The complaint recited that five checks issued by Conpinco Trading payable to Mabuhay Electronics Corporation were picked up by Reynaldo Senson, Samsung’s former collection supervisor, but that Senson, using the alias Edgardo Bacea, opened an account in the name of a sole proprietorship called Mabuhay Electronics Company at Real Bank and deposited three of the checks there. Two checks were remitted and cleared to Samsung’s account; the three checks credited to Mabuhay Electronics Company were withdrawn, and Samsung alleged negligence by Real Bank in endorsing, presenting for clearing, and crediting the proceeds to an entity that was neither the payee nor an authorized indorsee.

Trial Court Proceedings

The case underwent multiple pre-trial settings and interlocutory motions, including Real Bank’s Motion to Admit Third Party Complaint against Reynaldo Senson and the trial court’s grant of service by publication on third-party defendant Senson. Original counsel for Samsung, V.E. Del Rosario and Partners, filed a Notice of Withdrawal with the client’s conformity on 19 October 2000. The trial court issued an order dated 17 March 2001 referring the case for mediation and set a mediation conference. Mediator Tammy Ann C. Reyes reported on 3 April 2001 that no action was taken because the plaintiff failed to appear. A new counsel for Samsung filed an appearance on 4 June 2001 (received 6 June 2001). Upon re-raffle to RTC, Branch 20, Judge Marivic Balisi-Umali dismissed the complaint by Order dated 5 June 2002 for non-appearance at the mediation conference and denied reconsideration on 2 August 2002.

Petition to the Court of Appeals

Samsung Mabuhay Corporation petitioned the Court of Appeals by way of certiorari under Rule 65, Rules of Court contesting the dismissal and the denial of reconsideration. The Court of Appeals granted the petition on 18 August 2006, reversed and set aside the RTC Orders of 5 June 2002 and 2 August 2002, and found that the trial judge committed grave abuse of discretion by dismissing the case without verifying that the prior counsel to whom the notice was sent had already withdrawn and that new counsel had entered an appearance before the dismissal.

Issues Presented to the Supreme Court

Real Bank, Inc. framed the issues as whether the Court of Appeals erred in setting aside the RTC’s dismissal for non-appearance at mediation; whether Samsung was properly notified of the mediation; whether the withdrawal of Samsung’s original counsel without court approval was sufficient; and whether Samsung was guilty of negligence in failing to inquire into its case status and engage new counsel for almost eight months. The Supreme Court entertained the appeal under Rule 45, Rules of Court.

Parties’ Contentions

Real Bank, Inc. contended that dismissal under Rule 18, Sec. 5, Rules of Court was proper because mediation is part of pre-trial and failure of the plaintiff to appear justifies dismissal, citing Senarlo v. Judge Paderanga and the sanctioning provisions of A.M. No. 01-10-5-SC-PHILJA. Samsung Mabuhay Corporation maintained that it was not notified of the mediation because the notice was sent to counsel who had validly withdrawn with the client’s conformity on 19 October 2000, and that a new counsel had entered appearance before the dismissal; thus its absence was excusable.

Court of Appeals’ Ruling

The Court of Appeals concluded that the trial judge did not verify the record before dismissing the case and thereby committed grave abuse of discretion. The appellate court observed that notice of the mediation was sent to former counsel who had withdrawn and that new counsel had already entered an appearance; the dismissal was therefore improper. The Court of Appeals granted the petition and set aside the trial court’s Orders.

Supreme Court’s Ruling

The Supreme Court denied Real Bank’s petition for lack of merit and affirmed the Decision of the Court of Appeals dated 18 August 2006 and its Resolution dated 13 December 2006. The Supreme Court remanded the case to the RTC, Branch 20, Manila for continuation of proceedings with utmost dispatch.

Legal Basis and Reasoning

The Supreme Court grounded its ruling on the operative provisions of Rule 138, Sec. 26, Rules of Court, which provides that an attorney may withdraw with the written consent of the client by filing the consent in court, and that in such case no further court approval is required beyond docket entry and notice to the adverse party. The Court found that the withdrawal of Samsung’s original counsel on 19 October 2000 was with the client’s conformity and effective upon filing; consequently, service of the notice of the court’s order to the former counsel was ineffectual. The Court further recognized that mediation is part of pre-trial but emphasized the discretionary nature of dismissal sanctions under Rule 18 and A.M. No. 01-10-5-SC-PHILJA, citing precedents including Calalang v. Court of Appeals, Bank of the Philippine Islands v. Court of Appeals, and Anson Trade Center, Inc. v. Pacific Banking Corporation. The Court held that dismissal is a drastic sanction that should be imposed only where conduct is so negligent, contumacious, or dilatory as to warrant such penalty. The records showed that Samsung had been dil

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