Insular Life Savings and Trust Company v. Runes
REITERATIONFacts
The Antecedents: Respondents, Spouses Felix Mateo Runes, Jr. and Trinidad Runes, obtained a P800,000 loan from Home Savings Bank and Trust Company (now Insular Life Savings and Trust Company, the petitioner) in 1986, secured by a real estate mortgage. P300,000 was withheld as advance interest. Upon default, the mortgaged property was foreclosed and sold at public auction to the bank for P2,688,000. Subsequently, in June 1994, the parties entered into a contract to sell for P3,200,000, with the title to remain with the petitioner until full payment. The respondents paid the last installment in May 1999, totaling P4,446,000, but the petitioner refused to release the title, claiming an outstanding balance of P1,685,144.56. This led the respondents to file a case for declaration of nullity of contract and sum of money. Procedural History: The Regional Trial Court (RTC), Branch 36 of Manila, ruled in favor of the respondents on July 26, 2000, declaring the contract to sell null and void as a pactum commissorium and ordering the petitioner to reimburse P1,758,000 with interest, plus damages, attorney's fees, and costs, and to surrender the owner's duplicate of TCT No. 169914. The RTC denied the petitioner's motion for reconsideration. The petitioner's Notice of Appeal was denied by the RTC for being filed out of time and for failure to pay appellate court fees. A writ of execution was issued. The petitioner then filed a petition for relief from judgment under Rule 38, alleging excusable negligence due to the death of its counsel's father, which the RTC denied. The petitioner filed a petition for certiorari with the Court of Appeals (CA), which was initially dismissed due to a defective form. A second petition for certiorari was filed with the CA, which affirmed the RTC's denial of the petition for relief, holding that the negligence of counsel was not excusable and that a petition for relief is not a substitute for a lost appeal. The Petition: The petitioner filed a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse the CA's decision and resolution. The petitioner argues that the CA erred in upholding the RTC's denial of the petition for relief from judgment, contending that technicalities should yield to the interest of justice. It asserts a meritorious defense, disputing the RTC's characterization of the contract to sell as a pactum commissorium and claiming the contract was a valid agreement for conventional redemption. The petitioner also maintains that its failure to file the appeal on time was due to the excusable negligence of its counsel, Atty. Rodriguez-Ganitano, who was grieving her father's death, and that the petitioner should not be bound by this omission. The Supreme Court, however, found the petition to be without merit, noting the prior dismissal of a similar petition by the CA and reiterating that the negligence of counsel, especially when the law firm was involved, was not excusable, and that the perfection of an appeal and payment of fees are jurisdictional.
Issue(s)
Whether the Court of Appeals committed reversible error in holding that there was no grave abuse of discretion on the part of the Regional Trial Court in denying the petition for relief from judgment. Whether the failure to file the notice of appeal within the reglementary period, due to the death of the father of an associate counsel, constitutes excusable negligence under Rule 38 of the Rules of Court. Whether the contract to sell, which involved the bank selling the foreclosed property back to the mortgagors, constitutes a pactum commissorium.
Ruling
The petition is denied for lack of merit. The Decision dated November 21, 2001, and Resolution dated March 8, 2002, of the Court of Appeals in CA-G.R. SP No. 63319 are affirmed in toto.
Ratio Decidendi
On the denial of the petition for relief from judgment and the alleged grave abuse of discretion: The Supreme Court affirmed the CA's finding that the RTC did not commit grave abuse of discretion in denying the petition for relief from judgment. The Court reiterated that a petition for relief under Rule 38 is an equitable remedy allowed only in exceptional cases when no other adequate remedy is available. It is not a substitute for a lost appeal, especially when the loss is due to the party's own negligence or the inexcusable negligence of its counsel. The Court emphasized that the perfection of an appeal within the prescribed period and the payment of docket fees are jurisdictional requirements. Failure to comply renders the judgment final and executory. The Court found that the petitioner's counsel's failure to file the notice of appeal and pay the docket fees on time was not excusable negligence. The Court noted that the petitioner was represented by Bihis Law Offices, and if one associate was indisposed, other members of the firm should have acted. The negligence of counsel binds the client. The Court stressed that the right to appeal is a statutory privilege, not a natural right, and must be exercised in accordance with law. The failure to appeal does not constitute a denial of due process, as the party was not denied their day in court but merely lost their right to appeal due to procedural lapses. On excusable negligence: The Court held that the negligence of Atty. Rodriguez-Ganitano, an associate of the petitioner's counsel, in failing to file the notice of appeal and pay the docket fees on time, was not excusable. While acknowledging the grief over her father's death, the Court stated that such circumstances, especially when the client is represented by a law firm, do not meet the standard of "excusable negligence" which must be one that ordinary diligence and prudence could not have guarded against. The Court reiterated the established principle that clients are bound by the mistakes, negligence, and omissions of their counsel. The Court found no exceptional circumstances to warrant an exception to this rule in the present case. The Court also pointed out that the petitioner's counsel of record was the law firm, Bihis Law Offices, and not solely Atty. Rodriguez-Ganitano. Therefore, the firm had a duty to be vigilant and ensure timely compliance with procedural requirements, even if one associate was indisposed. On the characterization of the contract to sell as pactum commissorium: Although the primary issue revolved around the procedural aspect of the appeal, the Court implicitly upheld the RTC's finding that the contract to sell was void ab initio by not disturbing the RTC's order to reimburse the respondents and surrender the title. The RTC had characterized the contract to sell as a pactum commissorium, which is proscribed by Article 2088 of the Civil Code. This article prohibits a creditor from appropriating the mortgaged property or disposing of it. By entering into a contract to sell the foreclosed property back to the mortgagors while retaining title, and by claiming an outstanding balance after the mortgagors had paid significantly more than the original loan amount, the petitioner's actions were deemed contrary to law. The RTC's reasoning was that the petitioner, by executing the contract to sell, effectively treated itself as the owner and seller, and the respondents as buyers on installment, thereby divesting the respondents of ownership without awaiting the expiration of the redemption period and consolidation of ownership by court order. This action was considered contrary to law and the nature of mortgage contracts.
Main Doctrine
The failure to file a notice of appeal within the reglementary period and to pay the appellate docket and other lawful fees within the same period renders the judgment final and executory. Such failure, even if attributed to counsel's negligence, is generally not considered excusable unless it meets the stringent requirements of Rule 38 of the Rules of Court, which requires diligence and prudence that could not have guarded against the omission. A petition for relief from judgment is an equitable remedy and not a substitute for a lost appeal due to negligence.