Title
Yutingco vs. Court of Appeals
Case
G.R. No. 137264
Decision Date
Aug 1, 2002
DBP sued Nikon's stockholders for default after Nikon filed for payment suspension. Petitioners' certiorari petition was dismissed for being late; RTC's denial of motion to dismiss upheld, requiring trial on default issue.
certiorari
filing
trial

Case Summary (G.R. No. 137264)

Factual Background of the Underlying Collection and Attachment Case

DBP’s complaint alleged that it granted One Hundred Fifty Million Pesos (P150,000,000) in credit accommodation to Nikon Industrial Corporation (Nikon) under a Credit Line Agreement dated December 11, 1996. DBP claimed that Nikon defaulted on the payment of interest and that the parties’ contractual framework treated certain events as Events of Default. In particular, DBP relied on paragraph 5(c) of the agreement, which identified as an Event of Default “death (in case of natural person), dissolution, bankruptcy, reorganization, winding-up or liquidation or any other proceedings analogous to the foregoing or proceedings for the collection of borrowed money.” DBP further alleged that petitioners, identified as controlling stockholders and part of the EYCO Group of Companies (EYCO), bound themselves as primary obligors upon availment under the credit line agreement and that Nikon executed promissory notes as guarantees.

DBP also pleaded that on September 16, 1997, Nikon and other corporations filed a petition for suspension of payments before the Securities and Exchange Commission (SEC). DBP maintained that this filing constituted another default under the cited contractual provision. Based on these allegations, DBP pursued collection against petitioners through the RTC action for collection and sought preliminary attachment.

RTC Issuance of Writ of Attachment and Denial of Petitioners’ Motion to Dismiss

On January 14, 1998, the RTC granted DBP’s motion and issued a writ of attachment. Petitioners responded by filing, on March 11, 1998, a Motion to Dismiss, asserting that: (1) the complaint failed to state a cause of action; (2) a condition precedent to filing the claim had not been complied with; and (3) the RTC lacked jurisdiction over the subject matter. Petitioners argued that they could not be held liable under the promissory notes and credit line agreement because EYCO had not yet defaulted on its obligations. They further averred that the mere filing of Nikon’s petition for suspension of payments before the SEC did not constitute default. Petitioners also contended that, assuming arguendo that Nikon was in default, DBP had not complied with a requirement of extra-judicial demand, which they treated as a condition precedent to suit.

On May 7, 1998, the RTC denied the motion to dismiss. The RTC reasoned that the “issue of default” raised by the defendants was a factual issue that “must await trial,” and ordered petitioners to file their answer. Petitioners moved for reconsideration, and on June 29, 1998, the RTC denied reconsideration. In that order, the RTC also addressed jurisdiction, stating that it had jurisdiction over the subject matter because the attached properties were in petitioners’ names and petitioners were being sued in their personal capacity as sureties.

Petitioners’ Attempted Certiorari in the Court of Appeals and the Time Bar

Instead of proceeding to trial, petitioners sought appellate intervention through certiorari under Rule 65. They filed a Motion for Extension of Time to File Petition for Certiorari with the Court of Appeals on September 7, 1998, requesting an additional fifteen (15) days, or until September 22, 1998. On September 22, 1998, petitioners filed their Petition for Certiorari with an urgent prayer for a temporary restraining order and preliminary injunction. The Court of Appeals, however, had already denied the extension request in its November 9, 1998 resolution and subsequently dismissed the certiorari petition.

In its November 9, 1998 resolution, the Court of Appeals held that Section 4, Rule 65 of the 1997 Rules of Civil Procedure set a period of sixty (60) days from notice of the questioned order for filing certiorari. It concluded that the petitioners’ motion for extension did not cure the lateness. It found that the period for filing a petition for certiorari had expired on September 7, 1998, while the petition had been filed on September 22, 1998, and accordingly dismissed the petition for having been filed out of time.

Denial of Reconsideration and Issues Raised before the Supreme Court

Petitioners moved for reconsideration, but the Court of Appeals denied the motion in a January 13, 1999 resolution. It emphasized that while substantial justice should not be sacrificed to mere procedural technicalities, every case must still be prosecuted in accordance with prescribed procedure to secure orderly and speedy administration of justice. Petitioners then filed the present petition.

Before the Supreme Court, petitioners argued two main points: first, that substantial justice should prevail over technical rules of procedure; and second, that their certiorari petition was meritorious because it supposedly raised lack of jurisdiction on the part of the RTC in denying their motion to dismiss. The Supreme Court framed the issues as: (1) whether the Court of Appeals should have admitted the certiorari petition in the name of substantial justice; and (2) if admission were proper, whether the petition had merit.

The Parties’ Procedural Posture: Interlocutory Character of the RTC Order and Ongoing Proceedings

The Supreme Court noted a procedural backdrop beyond the certiorari filing: although petitioners filed a Rule 65 petition with the Court of Appeals, proceedings before the RTC continued. Petitioners filed a Motion to Take Judicial Notice of an SEC order dated December 18, 1998 in a separate SEC case, and moved to cancel pre-trial. The RTC rescheduled pre-trial for March 12, 1999 after granting the cancellation. Further pleadings were filed, including replies and rejoinders, and the incident remained pending before the RTC at the time the Supreme Court resolved the issues.

Legal Standards on Timing under Rule 65 and Strict Compliance with the Sixty-Day Period

On the first issue, the Court reiterated the general rule that procedural rules must be faithfully complied with and should not be disregarded for the mere expediency of claiming substantial merit. The Court acknowledged, however, that the rule is not absolute and that under exceptional circumstances, delay may be excused on grounds of justice and equity.

The Supreme Court applied Section 4, Rule 65 of the 1997 Rules, stating that the sixty-day period was reasonable and sufficient for a party to prepare a petition alleging grave abuse of discretion. It also emphasized that the period served to avoid unreasonable delay that could violate the constitutional right to a speedy disposition of cases. For these reasons, the Court treated the sixty-day period as inextendible.

The Court further underscored that motions for extension of time to file pleadings are addressed to the court’s sound discretion and are allowed only for good and sufficient reason, and crucially, only when filed before the expiration of the time sought to be extended. Petitioners’ previous counsel filed the certiorari petition on September 22, 1998, believing that the Court of Appeals would grant the extension for fifteen days. Petitioners attributed the assumption of leniency to the “heavy workload” of counsel. The Supreme Court held that heavy workload, being relative and often self-serving, did not constitute a sufficiently compelling justification. It stated that more substantial reasons, such as illness of counsel or other emergencies substantiated by affidavits of merit, would have been required. Standing alone, the heavy workload argument could not justify deviation from the sixty-day rule.

Given these findings, the Supreme Court held that the Court of Appeals did not err in dismissing the certiorari petition as filed late.

Rule Against Certiorari from Interlocutory Orders Denying a Motion to Dismiss

The Supreme Court also addressed petitioners’ attempt to avoid procedural consequences by invoking “substantial justice.” Petitioners contended that the certiorari petition questioned the RTC’s denial of their motion to dismiss, which they treated as a matter that should not be insulated from extraordinary review on procedural grounds. The Supreme Court rejected that proposition in principle. It reiterated the general rule that an order denying a motion to dismiss is interlocutory, and thus cannot be the subject of an extraordinary petition for certiorari or mandamus. The Court described the proper procedural recourse: petitioners should file their answer, raise their defenses, proceed to trial, and, if adverse, elevate the entire case through appeal in due course.

The Court recognized exceptions to this general rule. It identified three categories: (a) when the trial court issued the order without or in excess of jurisdiction; (b) when there is patent grave abuse of discretion by the trial court; or (c) when appeal would not be a speedy and adequate remedy, as when an erroneous order would not promptly relieve a defendant from injurious effects, would compel needless protracted trial, and would clog court dockets with a futile case.

Application of Exceptions and Disposition of the Merits

Applying these standards to the case, the Supreme Court observed that the RTC denied the motion to dismiss because it perceived the “issue of default” as a factual matter that required trial. The Court concluded that petitioners’ situation did not fa

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