TEODORO C. BORLONGAN, PETITIONER, VS. RAFAEL B. BUENAVENTURA AND NORBERTO C. NAZARENO, RESPONDENTS.

Borlongan versus Buenaventura

The Case

This is a petition for review brought by Teodoro C. Borlongan, the former president of Urban Bank, against Rafael B. Buenaventura, then Governor of the Bangko Sentral ng Pilipinas, and Norberto C. Nazareno, then President of the Philippine Deposit Insurance Corporation. Borlongan asked the Supreme Court to reverse the Court of Appeals, which had refused to disturb the Ombudsman's dismissal of his administrative complaint. The case matters for two reasons a reviewee should hold onto: it is a clean illustration of how an appeal is perfected, and of what happens to a pending case when the client dies before the petition is filed; and it applies the doctrine of conclusiveness of judgment, also called collateral estoppel, to bar an administrative complaint whose factual core had already been rejected in an earlier probable cause proceeding.

Procedural History

Borlongan filed a complaint-affidavit with the Office of the Ombudsman, and it spawned two proceedings: a criminal probable cause proceeding, and the administrative case now before us. In the administrative case, the Ombudsman first found Nazareno guilty of conduct prejudicial to the best interest of the service and suspended him, while dismissing the complaint against Buenaventura. The Ombudsman then modified that order, finding Nazareno guilty only of simple misconduct. On motion for reconsideration, the Ombudsman dismissed the administrative complaint against Nazareno altogether, adopting its ruling in the probable cause proceeding. Borlongan went up to the Court of Appeals on certiorari, which denied the petition for absence of grave abuse of discretion, and later denied his motion for reconsideration. Borlongan then sought an extension of time to file a petition for review on certiorari and paid the docket and other lawful fees. He died before the petition was actually filed, and his counsel filed it afterward, with notice to the Court of his client's death. The case thus reached the Supreme Court by petition for review.

Facts

Urban Bank had existing inter-bank lendings from the Land Bank of the Philippines, part of which was secured by an assignment of National Food Authority promissory notes. On the twenty-sixth of April, 2000, the Monetary Board of the Bangko Sentral issued a resolution ordering the closure of Urban Bank and appointing the Philippine Deposit Insurance Corporation as its receiver.

Borlongan alleged that instead of administering the bank's assets for the benefit of all creditors, the respondents gave undue preference to Land Bank by allowing it to enforce collection on the National Food Authority notes in the amount of 562,500,000 pesos, in violation of the New Central Bank Act. He relied on a document titled Confirmation of Outright Purchase of Government Securities dated the twenty-fifth of April, 2000, showing that Land Bank had purchased from Urban Bank all its rights over those notes.

The Ombudsman, however, found that the assignment of the notes to Land Bank had been completed on the twenty-ninth of March, 2000, before the closure of Urban Bank, by a Deed of Assignment notarized on that date. The right of Land Bank to collect therefore arose from that deed, not from the later confirmation. The Ombudsman dismissed the probable cause proceeding for lack of probable cause, and the Supreme Court sustained that dismissal. Borlongan then died on the eleventh of April, 2005, before his counsel could file the petition for review.

Issues

• Whether or not the petitioner's counsel was able to perfect an appeal by way of petition for review.
• Whether or not the administrative complaint is barred by the doctrine of conclusiveness of judgment in light of the earlier ruling finding no probable cause against the respondents.

Applicable Provisions

Section 1 of Rule 45 of the Rules of Court provides:

SECTION 1. Filing of petition with the Supreme Court. A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.

This fixes the mode of appeal and requires a verified petition, which matters because the verification here was made by counsel after the client had died.

Section 2 of Rule 45 provides:

SECTION 2. Time for filing; extension. The petition shall be filed within fifteen (15) days from notice of the judgment or final order or resolution appealed from, or of the denial of the petitioner's motion for new trial or reconsideration filed in due time after notice of the judgment. On motion duly filed and served, with full payment of the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the Supreme Court may for justifiable reasons grant an extension of thirty (30) days only within which to file the petition.

This sets the period within which the petition must actually be filed, which the petitioner failed to meet.

Section 3 of Rule 45 provides:

SECTION 3. Docket and other lawful fees; proof of service of petition. Unless he has theretofore done so, the petitioner shall pay the corresponding docket and other lawful fees to the clerk of court of the Supreme Court and deposit the amount of P500.00 for costs at the time of the filing of the petition. Proof of service of a copy thereof on the lower court concerned and on the adverse party shall be submitted together with the petition.

This identifies payment of fees as one of the two requisites of perfection, the other being the timely filing of the verified petition.

Section 16 of Republic Act Number 7653, the New Central Bank Act, provides:

Section 16. Responsibility. Members of the Monetary Board, officials, examiners, and employees of the Bangko Sentral who willfully violate this Act or who are guilty of negligence, abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary diligence in the performance of his duties shall be held liable for any loss or injury suffered by the Bangko Sentral or other banking institutions as a result of such violation, negligence, abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary diligence.

Borlongan invoked this to hold Buenaventura liable as a member of the Monetary Board, but the Court noted it requires a willful violation, which was not shown.

Section 30 of the same law, in its pertinent portion, provides:

The receiver shall immediately gather and take charge of all assets and liabilities of the institution, administer the same for the benefit of its creditors, and exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution.

This is the prohibition on disposing of assets that Borlongan claimed was violated by the alleged undue preference to Land Bank.

Ruling

On the first issue, the Court held that the appeal was not perfected. The right to appeal is neither a natural right nor a part of due process; it is a statutory privilege to be exercised only in the manner and within the period fixed by law, and perfection is mandatory and jurisdictional. Perfection requires two things: payment of the required docket and other lawful fees, and the filing of the verified petition within the period. Borlongan paid the fees, but he died before the petition was filed. The petition, verified by counsel, was a mere scrap of paper, because the attorney-client relationship is terminated upon the client's death, and a dead client has no personality and cannot be represented by an attorney.

On the second issue, the Court held that even if the appeal had been perfected, it would not prosper under the doctrine of conclusiveness of judgment, also known as preclusion of issues or collateral estoppel, under which issues actually and directly resolved in a former suit cannot again be raised in a future case between the same parties involving a different cause of action. The factual core of the administrative complaint, the alleged violation of Section 30 by giving undue preference to Land Bank, had already been passed upon in the earlier probable cause case, where the Court sustained the finding that the assignment of the notes was completed on the twenty-ninth of March, 2000, before the closure of Urban Bank, and that no undue preference was given. Both proceedings require the same quantum of evidence, substantial evidence, and the factual backdrop is the same.

Doctrine

First, the right to appeal is a statutory privilege, not a natural right or part of due process, and it must be exercised strictly in the manner and within the period set by the Rules; non-compliance results in the loss of the right, and failure to perfect renders the judgment final and executory. Second, an appeal by petition for review is perfected only upon the timely filing of the verified petition and payment of docket and other lawful fees. Third, the attorney-client relationship is terminated upon the death of the client, and a petition verified and filed by counsel after the client's death is a mere scrap of paper. Fourth, under the doctrine of conclusiveness of judgment, issues actually and directly resolved in a former suit cannot again be raised in a future case between the same parties involving a different cause of action, especially where both proceedings rest on the same quantum of substantial evidence.

Disposition

The petition was denied, and the decision of the Court of Appeals was affirmed.

Remember This

Memorize this line: the right to appeal is a statutory privilege, perfected only by the timely filing of the verified petition and payment of fees, and it dies with the client. Examiners use this case for the requisites of perfection of an appeal under Rule 45 and for the application of conclusiveness of judgment to bar a later administrative complaint after a prior finding of no probable cause.