Khonghun v. United Coconut Planters Bank
REITERATIONFacts
The Antecedents: Spouses Jeffrey and Josephine Khonghun obtained loans from United Coconut Planters Bank (UCPB) between October 1984 and February 2000, with the principal amount ballooning to P4,428,041.47. The spouses executed promissory notes for these loans but failed to pay. UCPB subsequently filed a case for a sum of money with preliminary attachment against the Khonghuns before the Regional Trial Court (RTC) of Makati City. Procedural History: In their answer, the Khonghuns admitted the loan obligations and the execution of the promissory notes, though they disputed the stipulated interest rates. At the pre-trial conference, neither the spouses nor their counsel appeared, nor did they submit a pre-trial brief. Consequently, the RTC allowed UCPB to present its evidence ex parte and rendered judgment in favor of the bank. The Khonghuns' motion for reconsideration, citing the interment of their counsel's wife and Mr. Khonghun's illness, was denied. Their subsequent notice of appeal was also denied by the RTC for being filed out of time. The Khonghuns then filed a petition for certiorari with the Court of Appeals (CA), arguing grave abuse of discretion by the RTC. The CA dismissed their petition, citing their resort to certiorari instead of appeal, forum-shopping, and the RTC judge's correct actions. The Petition: The spouses Jeffrey and Josephine Khonghun filed this appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeking to set aside the decision and resolution of the Court of Appeals. They contend that the CA erred in affirming the RTC's decision, arguing that the trial court should have excused their absence at the pre-trial due to valid causes and that the RTC improperly decided the case based solely on ex-parte evidence without allowing them to cross-examine witnesses or present their own evidence. They also challenge the CA's affirmation of the interest rates imposed by the bank.
Issue(s)
Whether the RTC committed grave abuse of discretion in conducting the trial ex parte and denying the notice of appeal. Whether the RTC erred in deciding the case based solely on ex parte evidence. Whether the interest rates imposed by UCPB were valid.
Ruling
The petition is DENIED. Costs against petitioners.
Ratio Decidendi
On the issue of grave abuse of discretion and the ex parte trial: The Court held that the RTC did not commit grave abuse of discretion. The failure of petitioners and their counsel to appear at the pre-trial without prior notice to the court or a motion for postponement, and their failure to file a pre-trial brief, justified the RTC's action under Rule 18, Sections 5 and 6 of the Rules of Civil Procedure. These provisions clearly state that the failure of a defendant to appear at pre-trial allows the plaintiff to present evidence ex parte, and failure to file a pre-trial brief has the same effect as failure to appear. The Court emphasized that what constitutes a valid ground to excuse absence is subject to the sound discretion of the judge, and petitioners failed to show that this discretion was exercised whimsically or capriciously. Their subsequent filing of a motion for reconsideration did not cure the procedural defect of failing to appear and notify the court of their reasons beforehand. On the issue of deciding based on ex parte evidence: The Court reiterated that Rule 18, Section 5 of the Rules mandates that in case of a defendant's failure to attend pre-trial, the court shall render judgment based on the evidence presented ex parte by the plaintiff. Furthermore, the Court noted that petitioners had admitted the material allegations in UCPB's complaint and had not controverted the genuineness and due execution of the promissory notes. Therefore, cross-examining UCPB's witnesses and presenting their own evidence would have been an exercise in futility and would only serve to delay the proceedings, as there was no longer any issue regarding their unpaid loans. On the issue of interest rates: The Court found no issue with the interest imposed by UCPB. It quoted the RTC's disquisition, which was affirmed by the CA, noting that petitioners admitted in their answer that they signed disclosure statements in blank, implying they did not stipulate on the interest rate. Crucially, during the hearing on the motion for reconsideration, petitioner Jeffrey Khonghun admitted that the agreed interest rate was 32%, which was the rate appearing on the promissory notes. This judicial admission was considered conclusive on the petitioners, rendering their claim that they never agreed to the interest rate untenable.
Main Doctrine
The failure of a defendant to appear at the pre-trial conference without prior notice to the court or a motion for postponement, coupled with the failure to file a pre-trial brief, justifies the trial court in allowing the plaintiff to present evidence ex parte and rendering judgment based on such evidence. Such actions do not constitute grave abuse of discretion.