RIZAL COMMERCIAL BANKING CORPORATION, PETITIONER, VS. HON. GUARDSON LOOD, JUDGE OF THE COURT OF FIRST IN­STANCE OF RIZAL, RAUL P. GARAY AND MARCELO. B. GARAY, RESPONDENTS.

Rizal Commercial Banking Corporation versus Lood

The Case

This is a petition for certiorari and prohibition, with preliminary injunction, brought by Rizal Commercial Banking Corporation against Judge Guardson Lood of the Court of First Instance of Rizal and against the spouses in obligation, Raul Garay and Marcelo Garay. The bank asks the Supreme Court to annul the trial court's order granting the Garays relief from judgment and reopening a case the bank had already won. The case matters because it draws the boundary of relief from judgment under Rule 38 of the Revised Rules of Court: it is an equitable remedy of last resort, not a substitute for a motion for new trial or an appeal that the losing party already had and already used.

Procedural History

The bank sued the Garays for collection of a sum of money before the Court of First Instance of Rizal. After trial, the court rendered judgment in favor of the bank on April 7, 1975. The Garays filed a motion for extension of time to seek reconsideration or to appeal, and later a pleading styled Reply, Opposition and Motion to Set Aside Decision. On July 1, 1975, the trial court granted the extension but denied the motion to set aside the decision, holding the bank's motion for execution in abeyance. The Garays then filed a petition for relief from judgment dated July 12, 1975. On July 23, 1975, the trial court gave the petition due course. On September 5, 1975, it issued the controverted order setting aside the April 7, 1975 decision to allow the Garays to present evidence. The bank's motions for reconsideration were denied. The bank then came to the Supreme Court on certiorari and prohibition, and the Court issued a temporary restraining order on February 25, 1976, restraining the trial court from further proceeding in the collection case.

Facts

On October 4, 1966, Raul Garay and Marcelo Garay executed two promissory notes in favor of the bank, for 13,000 pesos and 3,000 pesos, payable jointly and severally within one year, with interest at twelve percent and fourteen percent per annum respectively, plus attorney's fees equivalent to ten percent of the total amount due in case of default. Upon maturity, demands were made, and when the promissors failed to pay, the bank filed a collection suit on February 24, 1970.

The case dragged through years of pre-trial and hearings, repeatedly reset, at times upon the respondents' manifestation that they would settle amicably. Their counsel later withdrew with their conformity, and a hearing was set to allow them to secure new counsel. On that date, Raul Garay filed an urgent motion to postpone, which the bank vigorously opposed; the motion was denied, the bank rested its case, and the case was submitted for decision. On April 7, 1975, judgment was rendered ordering the Garays to pay the principal amounts with the stipulated interests and attorney's fees, plus costs.

The Garays sought an extension of thirty days to seek reconsideration or appeal, explaining that Marcelo Garay had been ailing and hospitalized. They later claimed they learned of the decision only in May 1975, and that Marcelo had undergone major surgery and been in intensive care. The trial court ultimately set aside its decision and reopened the case, prompting the bank's petition.

Issues

• Whether or not the remedy of relief from judgment under Rule 38 of the Revised Rules of Court may be availed of by a party who had the opportunity to seek a new trial or to appeal, and who in fact sought and was denied a new trial.
• Whether or not the order granting the petition for relief is defective for lack of notice to the petitioner bank, which was never furnished a copy of the petition.
• Whether or not the private respondents have a real defense that would justify reopening the case.

Applicable Provisions

Section 2 of Rule 38 of the Revised Rules of Court, as discussed in the decision, governs when relief from judgment may be granted:

When a judgment or final order is entered, or any other proceeding is thereafter taken against a party in any court through fraud, accident, mistake, or excusable negligence, he may file a petition in such court and in the same case praying that the judgment, order or proceeding be set aside.

This provision confines relief to exceptional causes, and the Court uses it to show that the remedy is not open to a party who had, and used, the ordinary remedies of new trial and appeal.

Ruling

On the first issue, the Court ruled that there is merit in the petition. The Garays had filed a pleading denominated Reply, Opposition and Motion to Set Aside Decision, which amounts to a motion for new trial under Rule 37, and it was denied. Having availed of that remedy, they could not then resort to relief from judgment under Rule 38. The Court stressed that relief from judgment is of equitable character and is allowed only in exceptional cases where there is no other available or adequate remedy; it is not regarded with favor, and a judgment will not be voided where the complaining party has, or by proper diligence would have had, an adequate remedy at law. Instead of filing a petition for relief, the Garays and their counsel should have appealed from the denial of their motion to set aside the decision.

On the second issue, the Court found that the bank had not been furnished a copy of the petition for relief despite its manifestation in its Supplemental Motion for Execution, and despite the trial court's own order of July 23, 1975 directing that a copy be furnished. The bank was thus deprived of the opportunity to controvert the petition. For lack of notice, the order in question is defective.

On the third issue, the Court read the Garays' allegations of a good defense and found no real defense. They admitted their liability; they merely claimed that their obligation was subject to extension or renewal and that the bank had not given notice that it would no longer extend the period. But demand was made by letter on May 30, 1969, receipt of which Raul Garay acknowledged in his reply dated June 7, 1969, and counsel wrote again reiterating payment before suit was filed. The Court held that where the defendant has no real defense or intends only a technical plea, there would be no justice in reopening the case and subjecting the plaintiff to further delay and expense.

Doctrine

A Bar candidate should retain these rules. First, relief from judgment under Rule 38 is an equitable remedy of last resort, available only in exceptional cases where the party has no other available or adequate remedy; it is not regarded with favor. Second, a party who has availed of a motion for new trial under Rule 37, or who had the opportunity to appeal, cannot later seek relief from judgment under Rule 38 upon denial of that motion; the proper step is to appeal from the denial. Third, an order granting relief from judgment is defective where the adverse party was not furnished a copy of the petition and was deprived of the opportunity to controvert it. Fourth, relief will not be granted where the defendant has no real defense or intends only a technical plea, for that would only subject the plaintiff to further delay and expense.

Disposition

The petition was granted; the orders of the trial court granting relief from judgment and denying reconsideration were annulled and set aside, the respondent judge was directed to issue a writ of execution of the April 7, 1975 decision, the temporary restraining order was made permanent, and costs were taxed against the private respondents.

Remember This

Relief from judgment is a remedy of last resort, not a substitute for a motion for new trial or an appeal that the losing party already had and already used. Examiners use this case to test the hierarchy of remedies after judgment and the requisites of Rule 38 relief.