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SPS. ROLANDO v. SPS. ROGELIO

FACTS:

Spouses Salvador were leasing an apartment on a parcel of land they owned. They introduced their agent, Rosario Gonzales, to the buyers, Spouses Rabaja. They executed a Contract to Sell and Spouses Rabaja made payments to Gonzales. However, Spouses Salvador later claimed they did not receive any payment. Spouses Rabaja suspended further payment and received a notice to vacate for non-payment. Spouses Salvador filed an ejectment case against Spouses Rabaja, while the latter filed a rescission case. The ejectment case was decided in favor of Spouses Salvador. In the rescission case, Spouses Rabaja demanded the return of the amount paid and sought damages. The RTC ruled in favor of Spouses Rabaja and ordered the rescission of the contract and the return of the amount paid. Spouses Salvador and Gonzales appealed to the CA, which affirmed the decision with modifications. Spouses Salvador filed a motion for reconsideration, but it was denied. They filed a petition. Meanwhile, Spouses Salvador failed to attend the pre-trial conference in the ejectment case, resulting in an order of default. Spouses Rabaja and Gonzales were awarded damages and attorney's fees. Spouses Salvador contested the default order and mentioned another case involving the revocation of the special power of attorney granted to Gonzales. Gonzales argued the decision was not yet final, while Spouses Rabaja claimed the present petition was a repetition of previous arguments. Spouses Salvador argued that the findings in the other case should be considered.

ISSUES:

  1. Whether the court abused its discretion in declaring Spouses Salvador in default and in depriving them of the opportunity to cross-examine respondents (Spouses Rabaja) and present evidence in their behalf.

  2. Whether the trial court erred in giving credence to the testimony of respondent Gonzales regarding the payment receipts.

  3. Whether the trial court erred in rescinding the Contract to Sell based on the claim that no valid contract existed.

  4. Whether the trial court erred in ordering the return of the amount of P593,400.00 garnished from Spouses Rabaja’s bank account as back rentals.

  5. Whether the trial court erred in awarding damages to Spouses Rabaja.

  6. Whether the trial court erred in awarding attorney's fees to Gonzales.

RULING:

  1. Declaratory Default: The Supreme Court ruled that Spouses Salvador’s failure to attend the pre-trial conference due to their counsel’s failure to update the calendar amounted to inexcusable negligence. Therefore, the trial court correctly declared them in default, allowing Spouses Rabaja to present evidence ex parte.

  2. Credence to Testimony: The Court found no compelling reason to disturb the findings of the lower courts regarding the credibility of Gonzales’ testimony and the improvised receipts.

  3. Validity of Contract: The Court held that Gonzales acted within the scope of her authority as shown by a valid SPA, making the Contract to Sell binding between the parties.

  4. Return of Garnished Amount: The Supreme Court modified the CA decision, ruling that the amount of P593,400.00 garnished in a separate ejectment case should not be returned as the decision in that case is final and executory.

  5. Award of Damages: The Court ruled that there was no sufficient basis to award moral and exemplary damages to Spouses Rabaja, as there was no sufficient evidence of fraud or bad faith on the part of Spouses Salvador.

  6. Attorney's Fees to Gonzales: The award of attorney's fees to Gonzales was deleted as she, being an agent, should have expected litigation in connection with her fiduciary duties.

PRINCIPLES:

  1. Pre-Trial Consequences: Failure to attend a pre-trial conference allows the opposite party to present evidence ex parte and undermines the absent party’s opportunity to present counter-evidence.

  2. Scope of Authority in Agency: Acts conducted within the scope of the agent’s authority as written in the power of attorney are binding upon the principal, and third parties may rely on such authority.

  3. Finality of Judgments: Once a judgment becomes final and executory, it cannot be altered or modified regardless of perceived errors, embodying the principle of immutability of final judgments.

  4. Award of Damages: To award moral damages for breach of contract, there must be evidence of fraud or bad faith. Exemplary damages can only be awarded if compensatory damages are proven.

  5. Litigation Consequences for Agents: Agents must anticipate litigation risks arising from their fiduciary duties and are not automatically entitled to attorney’s fees unless supported by compelling reasons or evidence of bad faith by the principal.

SO ORDERED.