JERRY ONG, PETITIONER, VS. PHILIPPINE DEPOSIT INSURANCE CORP., RESPONDENT.

Ong versus Philippine Deposit Insurance Corporation

The Case

This is a petition for review on certiorari brought by Jerry Ong against the Philippine Deposit Insurance Corporation, the liquidator of the Rural Bank of Olongapo. Ong had obtained a real estate mortgage over two parcels of land registered in the bank's name to secure a money market obligation owed to him by a finance company, foreclosed the mortgage, and then filed a claim as a secured creditor in the bank's liquidation proceedings. When the trial court ultimately rejected his claim, his appeal was dismissed because he failed to file a record on appeal. The case matters because it settles, with unusual clarity, that a petition for the liquidation of an insolvent corporation is a special proceeding, that an appeal from it requires both a notice of appeal and a record on appeal, and that failure to perfect an appeal in the manner and within the period fixed by the Rules is not a mere technicality but a jurisdictional defect.

Procedural History

The claim was litigated inside the liquidation proceedings before Branch 73 of the Regional Trial Court of Olongapo City. On June 25, 2001, the trial court, through Acting Presiding Judge Philbert Iturralde, issued an Order declaring Ong's claim valid and legitimate and awarding him the two parcels of land. On motion for reconsideration, the trial court, through Judge Renato Dilag, reversed itself in a Resolution dated June 27, 2002. It declared the real estate mortgage null and void, declared the extrajudicial foreclosure proceedings and the sheriff's certificate of sale null and void, and denied Ong's claim for failure to substantiate it. Ong's motion for reconsideration was denied, and he received a copy of the denial on June 16, 2003.

On June 17, 2003, Ong filed a notice of appeal, which the trial court initially gave due course. On the respondent's motion for reconsideration, however, the trial court reconsidered and set aside that order on May 31, 2005, dismissing the appeal as taken out of time because no record on appeal had been filed. Ong's motion for reconsideration was denied on December 7, 2005.

Ong then filed with the Court of Appeals a petition for certiorari with a prayer for a writ of preliminary injunction, assailing the two trial court orders for grave abuse of discretion. The Court of Appeals dismissed the petition on July 31, 2006, holding that a record on appeal was necessary because the liquidation proceeding was a special proceeding in which multiple appeals are allowed, that the failure to file it was not excusable neglect, and that certiorari could not substitute for a lost appeal. Ong's motion for reconsideration was denied on October 5, 2006. He then came to the Supreme Court by petition for review on certiorari.

Facts

Sometime in 1982 and 1983, Jerry Ong made money market placements with Omnibus Finance Incorporated. The finance company later suffered serious financial difficulties, and when the placements matured, the checks it issued in payment were dishonored by the drawee bank. Omnibus Finance sought the assistance of its sister companies, among them the Rural Bank of Olongapo.

On December 29, 1983, Jose Ma. Carballo, president of Omnibus Finance, and Cynthia Gonzales, chairperson of the bank's board of directors, executed in Ong's favor a deed of real estate mortgage over two parcels of land in Tagaytay City registered in the bank's name, as collateral for the finance company's money market obligations to Ong. Gonzales acted by virtue of a secretary's certificate issued by the bank's alleged assistant corporate secretary. The mortgage was annotated on the certificates of title on January 13, 1984. When the obligation went unpaid, Ong foreclosed the mortgage on March 18, 1984, and a certificate of sale was issued and registered on July 16, 1985.

The bank, through its corporate secretary and acting manager, sued to annul the mortgage and the foreclosure, but that case was suspended because of the finance company's pending application for rehabilitation, and was later consolidated with the bank's liquidation proceedings. The Central Bank, later substituted by the Philippine Deposit Insurance Corporation, had in the meantime petitioned for assistance in the liquidation of the bank. Ong's claim as a secured creditor and as purchaser at the foreclosure sale was eventually filed in those liquidation proceedings, and it is from the denial of that claim that all the subsequent proceedings flowed.

Issues

• Whether or not a petition for review on certiorari under Rule 45 is the proper remedy to assail the final decision and resolution of the Court of Appeals.
• Whether or not the Court of Appeals erred in holding that Ong's appeal was not perfected because he failed to file a record on appeal within the reglementary period.
• Whether or not Ong's counsel's mistaken belief that the case involved an ordinary action, and not a special proceeding, constitutes excusable neglect justifying a relaxation of the rules.
• Whether or not the Court of Appeals erred in refusing to pass upon the admissibility of the respondent's witnesses' testimonies in a petition for certiorari.

Applicable Provisions

Section 2, paragraph (a) of Rule 41 of the Rules of Court, on the modes of appeal, provides:

Section 2. Modes of Appeal. — (a) Ordinary appeal. — The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a notice of appeal with the court which rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party. No record on appeal shall be required except in special proceedings and other cases of multiple or separate appeals where the law or these Rules so require. In such cases, the record on appeal shall be filed and served in like manner.

This is the provision that makes the record on appeal indispensable in Ong's case, because his appeal came from a special proceeding.

Section 3 of Rule 41, on the period of ordinary appeal, provides:

Section 3. Period of ordinary appeal. — The appeal shall be taken within fifteen (15) days from the notice of the judgment or final order appealed from. Where a record on appeal is required, the appellant shall file a notice of appeal and a record on appeal within thirty (30) days from the notice of judgment or final order. The period to appeal shall be interrupted by a timely motion for new trial or reconsideration. No motion for extension of time to file a motion for new trial or reconsideration shall be allowed.

This fixes the thirty-day period within which Ong had to file both his notice of appeal and his record on appeal.

Section 13 of Rule 41, on the dismissal of appeal, provides:

Section 13. Dismissal of appeal. — Prior to the transmittal of the original record or the record on appeal to the appellate court, the trial court may motu propio or on motion dismiss the appeal for having been taken out of time.

This is the express authority under which the trial court dismissed Ong's appeal.

Ruling

On the first issue, the Court held that the petition for review on certiorari was the proper remedy. The Court of Appeals decision and resolution were final dispositions on the merits, and Rule 45 allows an appeal by certiorari from the judgments or final orders or resolutions of the appellate court by verified petition for review on certiorari. The Court also found that Ong did not merely allege abuse of discretion, but imputed grave error in the appellate court's finding that his appeal was not perfected.

On the second issue, the Court held that the appeal was indeed not perfected. A petition for liquidation of an insolvent corporation is classified as a special proceeding, a point already settled in the Pacific Banking Corporation Employees Organization case decided in 1995. Because the decision Ong sought to appeal was rendered in that special proceeding, the Rules required both a notice of appeal and a record on appeal within thirty days from notice of the judgment or final order. Ong filed only a notice of appeal. The trial court therefore acted correctly, and without grave abuse of discretion, in dismissing the appeal, and the Court of Appeals committed no error in sustaining that dismissal. The Court stressed that the dismissal was expressly allowed by Section 13 of Rule 41.

On the third issue, the Court refused to relax the rules. Perfection of an appeal in the manner and within the period laid down by law is not only mandatory but also jurisdictional, and failure to perfect it defeats the right to appeal and precludes the appellate court from acquiring jurisdiction. The right to appeal is not a natural right nor part of due process; it is a statutory privilege that may be exercised only in the manner and in accordance with the law. The Court held that counsel's erroneous assumption that the claim and the annulment case were ordinary actions could not excuse compliance, because Ong was fully aware that the proceeding was a liquidation petition, having filed his claim there, participated in the trial at every step, and filed his notice of appeal under the title of that case. An erroneous application of the law or rules is not excusable error, and to accept the excuse would put a premium on counsel's ignorance of the Rules. The cases of Gregorio and Gonzales-Orense were distinguished: Gregorio concerned a late appellant's brief, which is not jurisdictional, while Gonzales-Orense involved a genuine question of first impression, an honest if mistaken interpretation, and a respondent who had not moved to dismiss the appeal.

On the fourth issue, the Court held that the admissibility of the respondent's witnesses' testimonies was a question of fact and evaluation of evidence, beyond the jurisdictional parameter of a special civil action for certiorari. The sole office of the writ of certiorari is the correction of errors of jurisdiction, and questions of fact are generally not permitted.

Doctrine

A petition for the liquidation of an insolvent corporation is a special proceeding, not an ordinary action. Because multiple appeals are allowed in such proceedings, an appeal from a decision rendered therein requires both a notice of appeal and a record on appeal, filed within thirty days from notice of the judgment or final order, as Section 2, paragraph (a) and Section 3 of Rule 41 command. The filing of a notice of appeal alone does not perfect the appeal.

Perfection of an appeal in the manner and within the period fixed by law is mandatory and jurisdictional. Failure to perfect it renders the judgment final and executory, deprives the appellate court of jurisdiction, and cannot be cured by certiorari, which is not a substitute for a lost appeal. The right to appeal is a statutory privilege, not a natural right nor part of due process, and the winning party has a correlative right to enjoy the finality of the decision.

The rules may be relaxed only for persuasive reasons, and the party invoking liberality must adequately explain his failure to comply. Counsel's mistaken belief that the case is an ordinary action rather than a special proceeding is not excusable neglect, especially where the party knew the nature of the proceeding, and an erroneous application of the law or rules is not excusable error. A client is bound by the mistake of his counsel.

Disposition

The petition was denied, and the decision and resolution of the Court of Appeals were affirmed; Ong lost, and his claim was never reached on the merits.

Remember This

Memorize this line: a petition for the liquidation of an insolvent corporation is a special proceeding, so an appeal from it requires a record on appeal, and failure to perfect the appeal in the manner and within the period fixed by the Rules is jurisdictional and cannot be rescued by certiorari. Examiners use this case to test the modes and periods of appeal under Rule 41, the distinction between ordinary actions and special proceedings, and the limits of liberal construction and of the writ of certiorari.