G.R. No. 169131-32 - Ko vs. Philippine National Bank, Laoag Branch

Case Summary (G.R. No. 169131-32)

Factual Background

Petitioners alleged in their complaint that the assailed mortgage and the ensuing foreclosure proceedings were null and void because the written consent of petitioners, as beneficiaries of the mortgaged property, was not secured. Petitioners thereby anchored their attack on the mortgage’s validity and the legitimacy of the foreclosure and subsequent transfers reflected in TCT Nos. T-21064 and T-21065.

Respondent bank denied petitioners’ allegations. It maintained that petitioners in fact gave their consent in the execution of the mortgage. As the case progressed in the trial court, petitioners and their counsel failed to attend a scheduled trial. Respondent bank moved for dismissal on account of petitioners’ failure to prosecute.

Trial Court Proceedings

When the case was called for trial, petitioners’ counsel did not appear despite proper notice, and no plaintiff appeared. The trial court noted that counsel for respondent bank appeared through counsel who manifested that there were numerous prior occasions when petitioners and their counsel failed to attend. The bank’s counsel pointed out an apparent lack of interest on the part of plaintiff to prosecute the action.

On April 27, 2005, the trial court dismissed the complaint. Petitioners later filed a motion for reconsideration, asserting that they had been continuously pursuing negotiations with respondent bank to purchase back the property and that they had obtained positive results. Respondent bank countered that approximately three years had elapsed from the filing of the complaint, yet petitioners failed to prosecute, which, according to the bank, demonstrated lack of interest in an early resolution.

On July 28, 2005, the trial court denied the motion for reconsideration. Petitioners then elevated the matter to the Supreme Court through the present petition for review on certiorari.

The Parties’ Contentions on Review

Petitioners raised two principal grounds. First, they argued that the trial court erred in dismissing the complaint due to petitioners’ failure to appear at the scheduled hearing, while allegedly disregarding that respondent bank was “equally guilty” of similar non-appearances. Second, they contended that the dismissal should have yielded to considerations of the significant importance and value of the property to petitioners, and that the Court should favor a judgment on the merits over procedural technicalities.

Respondent bank opposed the petition, and the Supreme Court examined both the procedural correctness of the petition and, independently, the substantive sufficiency of petitioners’ explanation for their failure to prosecute.

Procedural Issue: Wrong Mode of Review

The Supreme Court ruled that petitioners committed a decisive procedural error. Petitioners filed a petition for review on certiorari under Rule 45, instead of filing an appeal with the Court of Appeals. The Court invoked Section 3, Rule 17 of the Rules of Court, which provides for dismissal due to fault of plaintiff when, without justifiable cause, the plaintiff fails to appear or to prosecute for an unreasonable length of time, or otherwise fails to comply with rules or court orders.

Crucially, the Court emphasized that under Rule 17, Section 3, such dismissal has the effect of an adjudication on the merits, unless otherwise declared by the court. Consequently, because the order dismissing the complaint had the character of an adjudication on the merits, petitioners should have filed a notice of appeal to the appellate court within the reglementary period.

Instead, petitioners resorted to Rule 45, which the Court deemed improper. The proper remedy was an ordinary appeal under Rule 41, which requires the filing of a notice of appeal with the trial court that rendered the judgment or final order appealed from, and service of a copy upon the adverse party. The Court observed that petitioners’ counsel should have filed a pro forma notice of appeal but failed to do so within the remaining period.

Treatment of Petitioners’ Excuses and the Merits of Their Cause

Even assuming the petition’s procedural defect did not dispose of the case, the Supreme Court held that petitioners’ cause still failed on the merits. The trial court had dismissed the complaint because petitioners and their counsel displayed apparent lack of interest in prosecuting the case.

Petitioners attempted to justify their repeated failure to attend by citing conflicts in counsel’s schedule and counsel’s claimed lack of knowledge of the trial dates. They also argued that respondent bank and its counsel were likewise guilty of similar shortcomings. Petitioners further asserted that they had informed the court about ongoing negotiations for repurchase of the foreclosed property.

The Supreme Court was not persuaded. It stressed that the plaintiff is duty-bound to prosecute the action with utmost diligence and reasonable dispatch. This duty serves not only to secure relief but also to minimize docket congestion. The Court analogized the defendant’s interest by noting that the defendant has a right to the speedy disposition of the action, since delay prolongs anxiety and wastes valuable time.

The Court noted that three years had passed from the filing of the complaint on May 3, 2002 to the dismissal order on April 27, 2005. The Court treated petitioners’ failure to prosecute and proceed to trial during that period as indicating either that petitioners had no genuine interest in an early termination or that petitioners’ case lacked merit from inception. Under either formulation, the dismissal stood.

Due Process Considerations

Petitioners also claimed that they were deprived of due process. The Supreme Court rejected that argument. It acknowledged that due process safeguards the opportunity to be heard and to submit evidence in support of a claim or defense. It clarified, however, that there is no denial of due process where the party had the chance to be heard through pleadings or verbal arguments and could “present its side” or defend its “interest in due course.” The law proscribes the absence of an opportunity to be heard, not the mere occurrence of procedural adverse consequences.

In this case, the Court held that petitioners had the opportunity to present their case and claim the relief sought. Their failure to attend and lack of circumspection led the trial court to dismiss the complaint. Having been afforded the opportunity to litigate and having chosen not to prosecute with adequate diligence, petitioners could not convert their procedural default into a due process violation. The dismissal order therefore became final and executory.

Disposition of the Supreme Court

The Supreme Court denied the petition. It affirmed the trial court’s April 27, 2005 Order dismissing the complaint and the July 28, 2005 Resolution denying reconsideration in Civil Case No. 12523-14. The Court’s ruling left the dismissal immutable, and it underscored that procedural rules are not to be disregarded merely by invoking “substantial justice.” The Court also applied its precedent that procedural rules must be followed except for persuasive reasons, coupled with a party’s responsibility to explain non-compliance and to litigate with diligence and reasonable dispatch.

Legal Basis and Reasoning

The Supreme Court’s resolution rested on two interlocking grounds. First, it found that the petition was procedurally defective because a dismissal for failure to

Case Syllabus (G.R. No. 169131-32)

Parties and Procedural Posture

Petitioners Lullete S. Ko and Arlette Simpliciano Basilio filed a complaint in the Regional Trial Court of Laoag City, Branch 14 as plaintiffs.
Respondents were Philippine National Bank, Laoag Branch and the Register of Deeds of Ilocos Norte.
The trial court dismissed petitioners’ complaint in Civil Case No. 12523-14 through an April 27, 2005 Order.
The trial court denied petitioners’ motion for reconsideration through a July 28, 2005 Resolution.
Petitioners sought relief by filing a petition for review on certiorari under Rule 45 of the Rules of Court.
The case reached the Supreme Court for review, and the petition was denied, with the assailed orders affirmed.

Key Factual Allegations

Petitioners sought annulment of mortgage, annulment of extra-judicial foreclosure sale, annulment of Transfer Certificate of Title Nos. T-21064 and T-21065, and annulment of deed of sale.
Petitioners also prayed for preliminary injunction and restraining order.
Petitioners alleged that the assailed mortgage and the foreclosure proceedings were null and void because the written consent of petitioners, as beneficiaries of the mortgaged property, was not secured.
Respondent bank denied the allegation and asserted that petitioners in fact gave their consent when the mortgage was executed.
During the trial proceedings, petitioners and their counsel failed to attend a scheduled trial.
Upon motion of respondent bank, the trial court dismissed the complaint due to the failure to prosecute.

Trial Court Reasoning

The trial court found that, when the case was called, petitioners’ counsel did not appear despite proper notice.
The trial court also noted that no plaintiff appeared.
The trial court relied on the manifestation that there had been numerous prior occasions when petitioners and their counsel failed to attend.
The trial court treated the repeated non-appearance as demonstrating an apparent lack of interest to prosecute.
The April 27, 2005 Order concluded that the complaint was subject to dismissal on that ground.
The trial court later denied petitioners’ motion for reconsideration, leaving the dismissal in place.

Motion for Reconsideration Arguments

Petitioners argued that they had been continuously pursuing negotiations with respondent bank to purchase back the property.
Petitioners claimed that they had gained “positive results” from those negotiations.
Respondent bank countered that, from the filing of the complaint, about three years had already elapsed.
Respondent bank asserted that petitioners’ failure to prosecute during that time showed lack of interest in an early resolution of the case.

Supreme Court Issues

The Court addressed whether the trial court erred in dismissing the complaint due to petitioners’ and counsel’s failure to appear at the scheduled hearing.
The Court also addressed whether petitioners’ arguments warranted liberality based on the alleged importance of the property and the preference for resolution on the merits.
The Court likewise considered the procedural propriety of petitioners’ resort to Rule 45 instead of the correct appellate remedy.

Applicable Procedural Rules

The Court cited Section 3, Rule 17 of the Rules of Court on dismissal due to fault of plaintiff.
Rule 17, Sec. 3 provided that if the plaintiff fails to appear or to prosecute for an unreasonable length of time, the complaint may be dismissed on defendant’s motion or by the court.
The Court emphasized that such dismissal has the effect of an adjudication on the merits, unless the court declares otherwise.
The Court held that after a dismissal for failure to prosecute with the effect of a merits adjudication, the proper remedy required an appeal within the reglementary period.
The Court identified the proper mode as an ordi