Arcenas v. Queen City Development Bank
REITERATIONFacts
1. The Antecedents: Spouses Oscar and Dolores Arcenas entered into a contract of lease with Queen City Development Bank. A dispute arose concerning their rights and obligations under this lease agreement. The Spouses Arcenas initially filed an action for declaratory relief to clarify their rights as lessors, which the Regional Trial Court (RTC) dismissed. The respondent bank counterclaimed for rescission of the lease contract and damages. Subsequently, the Spouses Arcenas filed a separate case for breach of the same lease contract. 2. Procedural History: Following the dismissal of the declaratory relief action and the filing of the breach of contract case, the RTC consolidated the proceedings. Despite attempts at settlement and several postponements, the Spouses Arcenas failed to appear at a pre-trial conference on November 11, 2003, leading the RTC to declare them non-suited. Their subsequent motion to lift the non-suit order and their failure to appear at a subsequent hearing on January 8, 2004, resulted in the case being submitted for decision. The RTC denied their motion for reconsideration. The Spouses Arcenas then filed a petition for annulment of the non-suit order with the Court of Appeals (CA), which the CA dismissed for failure to exhaust available remedies. The CA later denied their motion for reconsideration. In the interim, the RTC rendered a decision rescinding the lease contract and awarding damages to the bank, prompting an appeal by the Spouses Arcenas. 3. The Petition: The Spouses Arcenas, through a petition for review on certiorari under Rule 45, assail the CA's dismissal of their petition for annulment of order. They argue that the CA erred in finding that they failed to avail of appropriate remedies, asserting that their inaction was not due to fault or negligence. They also contend that extrinsic fraud was committed by the respondent bank's counsel and question whether they were guilty of forum shopping. The core of their argument is that the CA should have considered their petition for annulment of the non-suit order, given the alleged circumstances surrounding their failure to appear and the purported settlement negotiations.
Issue(s)
Whether the Court of Appeals erred in dismissing the petition for annulment of order on the ground that the petitioners failed to avail of other appropriate remedies without sufficient justification. Whether the Court of Appeals erred in failing to appreciate the existence of extrinsic fraud committed by the adverse party's counsel. Whether the petitioners are guilty of forum shopping.
Ruling
The petition is denied. The Resolutions dated May 18, 2004 and January 20, 2005 of the Court of Appeals are affirmed.
Ratio Decidendi
On the failure to avail of appropriate remedies: The Supreme Court affirmed the CA's dismissal, reiterating that a petition for annulment of judgment or final order under Rule 47 is a remedy of last resort. It is not available if ordinary remedies, such as a motion for new trial, appeal, or petition for relief, are still available and were not seasonably pursued without sufficient justification. The Court noted that the Spouses Arcenas were declared non-suited on November 11, 2003, and despite receiving the order on November 17, 2003, they did not file a motion to lift the order of non-suit. Even after their counsel claimed to have learned of the order on December 4, 2003, no remedial action was taken before the January 8, 2004 hearing. Their subsequent Manifestation and Motion filed on January 14, 2004, praying for reconsideration, was filed beyond the reglementary period for a motion for reconsideration, and the RTC correctly denied it. Therefore, the Spouses Arcenas failed to avail of the appropriate remedies before resorting to a petition for annulment under Rule 47. On the existence of extrinsic fraud: The Court found no merit in the claim of extrinsic fraud. The petitioner's counsel cited 'honest mistake or excusable negligence' as the reason for their failure to appear, stemming from a mistaken belief that settlement negotiations were ongoing and a perceived 'gentleman's agreement.' However, the counsel admitted that the deadline for settlement was indeed November 11, 2003, the same date as the pre-trial conference. The Court emphasized that the Manifestation and Motion did not allude to extrinsic fraud committed by QCDB's counsel. Furthermore, even if extrinsic fraud were present, the Spouses Arcenas could have filed a petition for relief under Rule 38, which they failed to do. Section 2 of Rule 47 explicitly states that extrinsic fraud is not a valid ground for annulment if it could have been availed of in a motion for new trial or a petition for relief. Thus, the claim of extrinsic fraud was effectively barred. On forum shopping: The Court found no forum shopping. It distinguished the petition for annulment of order (Rule 47) from the Notice of Appeal filed in the main cases. The petition for annulment concerned the specific order of non-suit, while the appeal pertained to the RTC's decision on the merits of the civil cases. These remedies address different aspects of the proceedings and do not constitute forum shopping.
Main Doctrine
A petition for annulment of judgment or final order under Rule 47 of the Rules of Court is a remedy of last resort and cannot be availed of if ordinary remedies, such as a motion for new trial, appeal, or petition for relief, were available and not seasonably pursued without sufficient justification. Extrinsic fraud, a ground for annulment under Rule 47, is also barred if it could have been raised in a motion for new trial or a petition for relief.