Samonte vs. S.F. Naguiat, Inc.

A petition for relief from judgment under Rule 38 cannot substitute for a lost appeal where the petitioner fails to allege fraud, accident, mistake, or excusable negligence, and the petition is neither verified nor accompanied by an affidavit of merit showing a good and substantial defense. The "mistake" contemplated by Rule 38 refers to mistake of fact, not judicial error in the trial, which is correctable by appeal.

Petitioner Romeo Samonte is the President and General Manager of S.B. Commercial Traders, Inc. (SB Traders), a corporation engaged in retailing motor oils and lubricants. SB Traders purchased Mobil products on credit from S.F. Naguiat, Inc., an authorized dealer of Mobil Oil Philippines in Bulacan, under an express agreement to pay within 60 days from date of delivery. The respondent characterized SB Traders as a mere alter ego of Samonte, operating for his sole benefit, and sought to hold both solidarily liable for the unpaid obligation.

Petitioner Romeo Samonte is the President and General Manager of S.B. Commercial Traders, Inc. (SB Traders), a corporation engaged in the business of retailing motor oils and lubricants. SB Traders purchased Mobil products on credit from S.F. Naguiat, Inc., an authorized dealer of Mobil Oil Philippines in Bulacan, under an express agreement to pay within 60 days from date of delivery. On September 4, 2000, the respondent filed a complaint for collection of sum of money against SB Traders and Samonte with RTC, Malolos, Bulacan, Branch 9, alleging that SB Traders incurred an obligation of ₱1,105,143.27 from the sale of Mobil Oil products. The respondent further averred that SB Traders was merely an alter ego of Samonte, operating for his sole benefit, and that both should be held solidarily liable.

Samonte filed an answer denying the material averments of the complaint. As special and affirmative defenses, he claimed that he was acting merely for and in behalf of SB Traders and not in his personal capacity; that SB Traders never denied its obligation but was merely requesting more time to settle its accounts; and that to effect payment, it had already issued postdated checks of ₱25,000.00 per month covering the period from June to December 1999 to the respondent. Despite due notice, Samonte and his counsel failed to appear at the scheduled pre-trial conference on April 20, 2001. Trial ensued with the RTC allowing the ex parte presentation of the respondent's evidence before the Branch Clerk of Court.

On May 25, 2001, the RTC rendered judgment in favor of the respondent, ordering SB Traders and Samonte to pay, jointly and severally, ₱1,105,143.27 with interest at 18% per annum from the filing of the complaint, ₱10,000.00 as exemplary damages, and 20% of the entire amount due as attorney's fees, plus costs. Samonte failed to appeal the decision. On motion by the respondent, the RTC ordered the issuance of a writ of execution on July 30, 2001. On August 22, 2001, Samonte filed a petition for relief from judgment, arguing that the RTC made serious and prejudicial mistakes in appreciating the evidence and that a corporation has a personality separate and distinct from its officers, such that he could not be held solidarily liable for corporate obligations. The RTC denied the petition on December 21, 2001, holding that the grounds raised should have been ventilated via a motion for reconsideration. Samonte's motion for reconsideration was denied on February 12, 2002, for non-compliance with Sections 4 and 5 of Rule 15 and for failure to raise a meritorious issue. Samonte then elevated the matter to the CA via petition for certiorari, which was dismissed on March 26, 2004. His motion for reconsideration was denied on September 28, 2004. The CA found that Samonte never alleged that the RTC decision was entered against him through fraud, accident, mistake, or excusable negligence, offered no reason for his failure to appeal, and did not accompany his petition with an affidavit of merit. The CA also noted that Samonte did not assail the proceedings below but only questioned the validity of the dispositive portion of the decision, and that he opted to dispense with the presentation of evidence in support of his petition for relief during the hearing the RTC graciously allowed.

• Error in Dismissing the Petition: Petitioner argued that the CA committed an irreversible error in dismissing his petition for certiorari and in denying his motion for reconsideration for lack of merit.
• Strict Application of Rules vs. Substantial Justice: Petitioner maintained that the CA gravely erred in strictly applying the rules of procedure at the expense of substantial justice.
• Failure to Rule on the Merits: Petitioner argued that the CA committed an irreversible error in not ruling on the merits of the case.
• Affidavit of Merit Not Required: Petitioner contended that Section 1, Rule 38 does not require that he state the reason why he did not avail of the remedy of appeal.
• Counsel's Negligence: Petitioner argued that his former counsel had implied authority to determine procedural steps and that he, being not knowledgeable of the laws, ought not to be blamed for the incompetence, ignorance, and inexperience of his counsel; rules of procedure should give way to liberal construction if they hinder substantial justice.

• Propriety of Petition for Relief: Whether the CA erred in ruling that no grave abuse of discretion was committed by the RTC in dismissing the petition for relief from judgment.
• Mistake Under Rule 38: Whether the "mistake" contemplated by Rule 38 includes judicial errors in the appreciation of evidence correctable by appeal.
• Affidavit of Merit Requirement: Whether an affidavit of merit is an essential requirement for filing a petition for relief from judgment.
• Counsel's Negligence: Whether a client may be excused from the negligence of counsel so as to warrant equitable relief under Rule 38.
• Strict Application vs. Substantial Justice: Whether the rules of procedure should yield to liberal construction in favor of substantial justice under the circumstances.

• Propriety of Petition for Relief: No. The CA correctly ruled that the RTC did not commit grave abuse of discretion in dismissing the petition for relief, because petitioner failed to appeal the RTC decision and never alleged fraud, accident, mistake, or excusable negligence as required by Rule 38.
• Mistake Under Rule 38: No. The "mistake" contemplated by Rule 38 pertains to mistake of fact, not judicial error in the trial; such error is correctable by appeal, not by petition for relief.
• Affidavit of Merit Requirement: Yes. Section 3, Rule 38 requires the petition to be accompanied by affidavits showing the fraud, accident, mistake, or excusable negligence relied upon and the facts constituting a good and substantial defense; while a verified petition may substitute for a separate affidavit of merit, petitioner's petition was not even verified.
• Counsel's Negligence: No. A client is bound by the conduct, negligence, and mistake of counsel in handling the case; petitioner failed to show that his counsel's negligence was so gross and palpable as to call for the exercise of equity jurisdiction.
• Strict Application vs. Substantial Justice: No. While rules of procedure are not cast in stone, strict compliance is indispensable for the prevention of needless delays and the orderly administration of justice; meritorious defenses alone cannot be considered absent excusable or gross negligence amounting to a denial of due process.

• Propriety of Petition for Relief: A petition for relief from judgment under Rule 38 is an equitable remedy allowed only in exceptional cases where there is no other available or adequate remedy. When a party has another remedy available — such as a motion for new trial or an appeal — and was not prevented by fraud, accident, mistake, or excusable negligence from availing of it, relief under Rule 38 cannot be granted. Petitioner failed to appeal the RTC decision, causing it to become final and executory. He offered no reason for his failure to appeal and never alleged that the decision was entered against him through fraud, accident, mistake, or excusable negligence. The grounds he raised — corporate separate personality and lack of solidary liability — were issues he could and should have raised in a motion for reconsideration or on appeal. The RTC correctly observed that petitioner did not assail the proceedings but only questioned the validity of the dispositive portion. Allowing the petition for relief would be tantamount to reviving a lost right of appeal.

• Mistake Under Rule 38: The "mistake" contemplated by Rule 38 pertains generally to mistake of fact, not of law, which relates to the case. It does not apply to judicial error committed by the court in the trial; such error may be corrected by appeal. Petitioner's arguments — that the RTC made serious and prejudicial mistakes in appreciating the evidence and that he could not be held solidarily liable for corporate obligations — constitute alleged errors of judgment, not the type of mistake that Rule 38 addresses. These were proper subjects of a motion for reconsideration or appeal, neither of which petitioner pursued.

• Affidavit of Merit Requirement: Section 3, Rule 38 requires that the petition be verified and accompanied by affidavits showing the fraud, accident, mistake, or excusable negligence relied upon and the facts constituting the petitioner's good and substantial defense. While a petition for relief without a separate affidavit of merit may be sufficient where the facts constituting the substantial defense are alleged in a verified petition — since the oath elevates the petition to the same category as a separate affidavit — petitioner's petition was not even verified. The CA therefore did not err in declining to consider the merits of the case.

• Counsel's Negligence: It is settled that a client is bound by counsel's conduct, negligence, and mistake in handling the case. To allow a party to disown counsel's conduct would render proceedings indefinite, tentative, and subject to reopening by the mere subterfuge of replacing counsel. Petitioner failed to demonstrate that his counsel's negligence was so gross and palpable as to warrant the exercise of equity jurisdiction. While rules of procedure are not cast in stone, strict compliance is indispensable for the prevention of needless delays and the orderly and expeditious dispatch of judicial business.

• Strict Application vs. Substantial Justice: In petitions for relief from judgment, relief from denial of appeals, or annulment of judgments, meritorious defenses must accompany the grounds cited — whether fraud, accident, mistake, excusable negligence, extrinsic fraud, or lack of jurisdiction. Where there is neither excusable nor gross negligence amounting to a denial of due process, meritorious defenses alone cannot be considered. To allow the reopening of the case after such indifference to the requirements of the Rules would put a strain on the orderly administration of justice.

• Petition for Relief from Judgment as Equitable Remedy — A petition for relief from judgment under Rule 38 is a remedy of equitable character, allowed only in exceptional cases where there is no other available or adequate remedy. It is available when a judgment or final order is entered against a party through fraud, accident, mistake, or excusable negligence. Relief will not be granted to a party who seeks avoidance from the effects of judgment when the loss of the remedy at law was due to his own negligence or a mistaken mode of procedure; otherwise, the petition becomes tantamount to reviving a lost right of appeal. The Court applied this doctrine to deny relief because petitioner had the remedy of appeal available, failed to avail of it, and never alleged any of the grounds required by Rule 38.

• Mistake Under Rule 38 — The "mistake" contemplated by Rule 38 pertains generally to mistake of fact, not of law, which relates to the case. It does not apply to judicial error committed by the court in the trial; such error is correctable by appeal. The Court found that petitioner's complaints about the RTC's appreciation of evidence and its ruling on solidary liability constituted judicial errors, not the type of mistake contemplated by Rule 38.

• Binding Effect of Counsel's Negligence on Client — A client is bound by the conduct, negligence, and mistake of counsel in handling the case. To allow a party to disown counsel's conduct would render proceedings indefinite, tentative, and subject to reopening by the mere subterfuge of replacing counsel. The Court applied this doctrine in rejecting petitioner's argument that he should not be blamed for his counsel's incompetence, finding no gross or palpable negligence that would warrant equity jurisdiction.

• Requirement of Affidavit of Merit or Verification in Petitions for Relief — Section 3, Rule 38 requires the petition to be verified and accompanied by affidavits showing the fraud, accident, mistake, or excusable negligence relied upon and the facts constituting a good and substantial defense. While a verified petition may substitute for a separate affidavit of merit, an unverified petition without an affidavit of merit is fatally deficient. The Court found that petitioner's petition was not verified, justifying the CA's refusal to consider the merits.

• "The mistake contemplated by Rule 38 of the Rules of Court pertains generally to mistake of fact, not of law, which relates to the case. The word 'mistake' which grants relief from judgment, does not apply and was never intended to apply to a judicial error which the court might have committed in the trial. Such error may be corrected by means of an appeal." — This passage defines the scope of "mistake" under Rule 38 and distinguishes it from judicial error correctable by appeal, a distinction central to the Court's ruling that petitioner's grounds were improper for a petition for relief.

• "There is no rule more settled than that a client is bound by his counsel's conduct, negligence and mistake in handling the case. To allow a party to disown his counsel's conduct would render proceedings indefinite, tentative, and subject to reopening by the mere subterfuge of replacing counsel." — This is the canonical formulation of the doctrine binding a client to counsel's acts, applied here to reject petitioner's claim that he should not suffer for his counsel's procedural missteps.

• "While it is true that rules of procedure are not cast in stone, it is equally true that strict compliance with the Rules is indispensable for the prevention of needless delays and for the orderly and expeditious dispatch of judicial business." — This passage articulates the balance between liberal construction and strict compliance, frequently cited in subsequent procedural rulings.

• "Where, as here, there is neither excusable nor gross negligence amounting to a denial of due process, meritorious defenses cannot alone be considered." — This quotation, drawn from Saint Louis University vs. Cordero, encapsulates the principle that meritorious defenses must be accompanied by the grounds required by Rule 38; they cannot independently justify relief.

• Ibabao vs. Intermediate Appellate Court, G.R. No. L-74848, May 20, 1987, 150 SCRA 76 — Cited for the doctrine that petition for relief is an equitable remedy allowed only in exceptional cases where there is no other available or adequate remedy, and that relief will not be granted where the loss of remedy at law was due to the party's own negligence or mistaken mode of procedure.

• Agan vs. Heirs of Sps. Andres Nueva and Diosdada Nueva, G.R. No. 155018, December 11, 2003, 418 SCRA 421 — Cited for the proposition that the "mistake" contemplated by Rule 38 pertains to mistake of fact, not of law, and does not apply to judicial error committed in the trial.

• Guevarra vs. Tuason & Co., 1 Phil 27 (1901) — Cited as the original source of the principle that the word "mistake" in Rule 38 was never intended to apply to judicial error correctable by appeal.

• Mago vs. Court of Appeals, 363 Phil. 225 (1999) — Cited for the rule that a petition for relief without a separate affidavit of merit is sufficient where the facts constituting the substantial defense are alleged in a verified petition, since the oath elevates the petition to the same category as a separate affidavit.

• Heirs of the Late Cruz Barredo vs. Asis, G.R. No. 153306, August 27, 2004, 437 SCRA 196 — Cited for the settled doctrine that a client is bound by counsel's conduct, negligence, and mistake in handling the case.

• Gomez vs. Montalban, G.R. No. 174414, March 14, 2008, 548 SCRA 693 — Cited for the principle that allowing a party to disown counsel's conduct would render proceedings indefinite, tentative, and subject to reopening by the mere subterfuge of replacing counsel.

• Lynx Industries Contractor, Inc. vs. Tala, G.R. No. 164333, August 24, 2007, 531 SCRA 169 — Cited for the principle that strict compliance with the Rules of Court is indispensable for the prevention of needless delays and the orderly and expeditious dispatch of judicial business.

• Saint Louis University vs. Cordero, G.R. No. 144118, July 21, 2004, 434 SCRA 575 — Cited for the rule that in petitions for relief from judgment, meritorious defenses must accompany the grounds cited (fraud, accident, mistake, excusable negligence, extrinsic fraud, or lack of jurisdiction), and where there is neither excusable nor gross negligence amounting to a denial of due process, meritorious defenses alone cannot be considered.

• Insular Life Savings and Trust Company vs. Runes, Jr., G.R. No. 152530, August 12, 2004, 436 SCRA 317 — Cited for the principle that petition for relief is an equitable remedy allowed only in exceptional cases where there is no other available or adequate remedy.

• Section 1, Rule 38, Rules of Court — Provides that when a judgment or final order is entered against a party through fraud, accident, mistake, or excusable negligence, he may file a petition in the same court and case praying that the judgment, order, or proceeding be set aside. The Court applied this provision to determine that petitioner never alleged any of these grounds, rendering his petition for relief improper.

• Section 3, Rule 38, Rules of Court — Requires that the petition be verified, filed within 60 days after the petitioner learns of the judgment and not more than six months after entry, and accompanied by affidavits showing the fraud, accident, mistake, or excusable negligence relied upon and the facts constituting the petitioner's good and substantial cause of action or defense. The Court found that petitioner's petition was not verified and was not accompanied by the required affidavits, justifying the CA's refusal to consider the merits.

• Sections 4 and 5, Rule 15, 1997 Rules of Civil Procedure — Govern the requirements for motions, including notice and hearing. The RTC denied petitioner's motion for reconsideration for failure to comply with these mandatory requirements.

Consuelo Ynares-Santiago (Chairperson), Minita V. Chico-Nazario, Presbitero J. Velasco, Jr., and Antonio Eduardo B. Nachura.