G.R. No. 187640 and G.R. No. 187687, June 15, 2011
PHILIPPINE NATIONAL BANK, Petitioner, vs. THE SPS. ANGELITO PEREZ and JOCELYN PEREZ, Respondents.

SPS. ANGELITO PEREZ and JOCELYN PEREZ, Petitioners, vs. PHILIPPINE NATIONAL BANK, Respondent.

FACTS

In 1988, spouses Angelito and Jocelyn Perez obtained a revolving credit line from Philippine National Bank (PNB), secured by chattel and real estate mortgages. In 2001, they defaulted, prompting PNB to initiate extra-judicial foreclosure. On November 26, 2001, the spouses filed an Amended Complaint (Civil Case No. 20-1155) for various reliefs, including annulment of the sheriff’s notice of sale and injunction. They failed to appear at the hearing for a preliminary injunction on April 19, 2002, resulting in its denial. They also failed to appear at the pre-trial conference on September 19, 2002. The trial court denied their motion for postponement and dismissed the case. Their motions for reconsideration were denied. Their notice of appeal was denied for being filed out of time. Their subsequent motion for reconsideration of that denial was heard after several postponements and was ultimately denied. The spouses appealed to the Court of Appeals (CA-G.R. SP No. 85491). On January 25, 2005, the CA denied their petition, upholding the trial court’s dismissal for trifling with the mandatory pre-trial. However, on April 14, 2005, the CA issued an Amended Decision granting the spouses’ motion for reconsideration, setting aside its prior decision, annulling the trial court’s orders of dismissal and denial of appeal, and reinstating Civil Case No. 20-1155 for pre-trial and trial on the merits. The case was remanded to the trial court.

ISSUE

The core issue, as consolidated from both petitions, is whether the Court of Appeals committed reversible error in issuing its Amended Decision which reinstated Civil Case No. 20-1155.

RULING

The Supreme Court DENIED both petitions. It AFFIRMED the Amended Decision of the Court of Appeals dated April 14, 2005. The Court held that the CA did not commit reversible error. The CA’s reversal of its own decision was justified in the higher interest of substantial justice. The Court emphasized that while the rules on pre-trial are mandatory, their strict application may be relaxed to prevent a manifest miscarriage of justice. The dismissal of the complaint for failure to attend pre-trial was too severe a penalty where the substantive merits of the case involving the foreclosure of mortgages remained unresolved. The proper course was to remand the case for pre-trial and trial on the merits to allow a full hearing on the parties’ claims and defenses. The CA’s Amended Decision correctly prioritized substantive justice over procedural technicalities.