SPS. WILLIAM G. FRIEND AND MARIA RENEE FRIEND AND JOHN DOE VS.

UNION BANK OF THE PHILIPPINES [G.R. NO. 165767] PROMULGATED 29 NOVEMBER 2005 FACTS: Spouses Friend entered acquired a loan from Union Bank in the amount of P818,136.00. The money was used to purchase a Hyundai Starex Van in January 1999. The Spouses Friend executed a promissory note, with a chattel mortgage on the said Hyundai Starex Van. The monthly payments of such loan to the bank was facilitated by the owner and manager of Drive Motors Incorporated (Drive Motors), Aimee Dumaran, However, the Spouses defaulted in the payment of their obligation and did not comply with the demands to fulfil the obligation. Union Bank then filed an action for collection of sum of money with prayer for the issuance of a writ of replevin. However, the sheriff was not able to implement said writ because the vehicle is not at the residence of Spouses Friend. William G. Friend admitted to the sheriff that he had returned the vehicle to the dealer, Drive Motors, Inc. The Spouses Friend also failed to file their answer within the reglementary period. On May 18, 2001, Union Bank filed a motion to declare the Spouses Friend in default, which was granted by the RTC on July 11, 2001. ISSUE:o 1. Whether or not the Honorable Court of Appeals gravely erred in ruling that petitioners were not denied due process for being declared as in default and for being denied the opportunity to present evidence. Corollarily, whether or not petitioners are bound by the negligence of their counsel. 2. Whether or not the Honorable Court of Appeals gravely erred in ruling that petitioners Sps. Friend are liable under the loan-agreement.

HELD: 1. No. The general rule is that the negligence of counsel binds the client. If not, a suit could not be put into end since a new counsel of one of the parties could simply allege and show that the prior counsel had not been sufficiently diligent, experienced, or learned. This case also does not fall under any of the exceptions to said rule. Also, although Spouses Friend former counsel failed to file an answer to the complaint, he was able to file a notice of appeal from the decision of the trial court. Under the Rules of Court, the assignment of errors on any question of law and fact raised in the court below and which is within the issues framed by the parties, may be raised in ordinary appealed cases. Hence, the Spouses were still able to raise their defense and were afforded due process. 2. No. The Spouses Friend are obliged to pay the bank, and not Drive Motors or Dumaran who merely acted as an intermediary. Their unqualified reliance on Dumaran, who said she will settle the problem, could not exonerate them from it. The Court also held that prudence dictates that petitioners should have talked directly with a representative of Union Bank to check on the status of their car loan. Therefore, Spouses Friend, as signatories to a valid and subsisting promissory note, are directly liable to Union Bank for the amount of the loan, regardless of their possession or ownership of the subject vehicle. RELEVANT OBLICON PROVISIONS: Arts. 1159, 1311 PREPARED BY: NGO, Perpetua Calliope