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PHILIPPINE NATIONAL BANK v. DEANG MARKETING CORPORATION

FACTS:

The respondents, Deang Marketing Corporation and Berlita Deang, filed a complaint against petitioner Philippine National Bank (PNB) for reformation of contract and specific performance. They alleged that a dacion en pago arrangement in a Consolidation and Restructuring Agreement transformed their outstanding loan obligations into a 7-year term loan. Summons was served on PNB on April 20, 2006.

On May 15, 2006, respondents filed a Motion to Declare PNB in Default, while PNB filed a Motion for Extension of Time to File Answer on the same day. The trial court denied the respondents' motion and granted PNB's motion in an Order issued on May 16, 2006. Afterward, respondents' Motion for Reconsideration was denied on August 9, 2006.

Unsatisfied with the trial court's rulings, respondents filed a certiorari petition with the Court of Appeals. The appellate court annulled the trial court's orders and declared PNB in default.

PNB then filed a Petition for Review with the Supreme Court, but it was ultimately denied. The Supreme Court found that PNB's Motion for Extension of Time to File Answer was filed late and contained false information. Additionally, PNB had used an unjustifiable mode of filing the motion. Consequently, the Court of Appeals' ruling was upheld, declaring PNB in default and expunging its Answer from the records of the case.

ISSUES:

  1. Whether the Philippine National Bank (petitioner) should be declared in default for filing its Motion for Extension of Time to File Answer beyond the reglementary period.

RULING:

  1. The Court of Appeals was correct in declaring the petitioner in default and ordering that the Answer filed be expunged from the records. The Motion for Extension was filed late, contravening the basic rule that such motions must be filed before the expiration of the period sought to be extended. There was no justification for the tardiness of the Answer, indicating an intention to delay the case. Moreover, procedural rules must be faithfully followed, except in persuasive circumstances which were absent in this case.

SO ORDERED.

PRINCIPLES:

  1. Timeliness of Motions A motion for extension of time to file a pleading must be filed before the expiration of the period sought to be extended.

  2. Court Discretion The trial court's discretion to grant a motion for extension is conditioned upon the motion's timeliness, after the expiration of which the court loses the power to entertain or grant it.

  3. Good Faith and Excusable Neglect Good faith is central to the concept of "excusable neglect" justifying a failure to answer. An attempt to cover up procedural lapses and obscure technical imperfections negates good faith.

  4. Procedural Rules Procedural rules and deadlines are essential for the orderly and speedy discharge of business and should not be ignored or disdained unless persuasive reasons warrant their relaxation.