SPECIAL

THIRD DIVISION

NATIONAL COMMERCIAL G.R. No. 124267

BANK OF SAUDI ARABIA,
Petitioner, Present:

PUNO, J., Chairman,

- versus - PANGANIBAN,*
SANDOVAL-
GUTIERREZ,**
CORONA, and
COURT OF APPEALS andPHILIPPINE BAN
CARPIO
KING CORPORATION, MORALES, JJ.
Respondents.
Promulgated:

August 18, 2004

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R E S O L U T I O N

CARPIO MORALES, J.:

By Decision of January 31, 2003, this Court, finding no persuasive reason for the
relaxation of the rules of procedure, declared the motion for reconsideration filed by
private respondent Philippine Banking Corporation (PBC) before the trial court, which
lacked the requisite notice of hearing, a mere scrap of paper and of no legal effect. PBC
now seeks a reconsideration of the Decision.

The antecedents of the case are as follows:

Petitioner National Commercial Bank of Saudi Arabia (NCBSA) filed on December 4,

1985 a case against PBC before the Regional Trial Court (RTC) of Makati to recover the
duplication in the payment of the proceeds of a letter of credit [NCBSA] ha[d] issued . . .
brought about by the fact that both the head office and the Makati branch of [PBC, the
negotiating bank,] collected the proceeds of the letter of credit. [1]

On August 24, 1993, Branch 134 of the RTC of Makati rendered a decision in favor
of NCBSA, a copy of which was received by PBC on September 3, 1993. On the 12thday of
the 15-day period to appeal or on September 15, 1993, PBC filed a Motion for
Reconsideration[2] of the decision which, however, did not contain a notice of hearing.[3]

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 On September 27, 1993, or twenty four days from its receipt of the decision and
nine days after the period to file appeal had expired, PBC filed a Motion to Set Motion for
Reconsideration for Hearing[4] alleging as follows:

xxx

2. The Motion for Reconsideration raised both questions of facts and law arising from the
erroneous findings made by the Honorable Court in the said Decision.

3. In order that defendant can fully amplify and expound on the issues raised on the said
motions, there is a need to set the Motion for Hearing. [5]

The trial court, by Order[6] of February 1, 1994, declared PBCs Motion for
Reconsideration a useless piece of paper for failure to observe the 3-day notice rule, and
the same was struck from the records of the case.[7] PBC filed a Motion for
Reconsideration[8] of said order, this time alleging that PBCs failure to comply with the 3-
day notice rule was essentially an honest mistake or oversight of counsel. [9] The motion
was likewise denied by a Resolution[10] of March 2, 1994 for want of any compelling
reason to warrant a liberal construction of the rules of Motions. [11] PBC then assailed the
trial courts March 2, 1994 Order before the Court of Appeals via Petition for Certiorari.

The Court of Appeals dismissed PBCs Petition for Certiorari by Decision[12] of

February 27, 1995. On PBCs Motion for Reconsideration, however, the appellate court, by
Amended Decision[13] of March 8, 1996, set aside its February 27, 1995 Decision and
directed the trial court to resolve PBCs Motion for Reconsideration (of the trial courts
August 24, 1993 Decision) on the following justification:

. . . [T]o deny petitioners motion for reconsideration on the ground of failure to contain a
notice of hearing is too harsh an application of procedural rules especially so when petitioner has
filed a motion to set the motion for reconsideration for hearing and had furnished private
respondent a copy of the motion, a fact which is not denied by the latter. [14] (Underscoring
supplied)

NCBSA thus filed a Petition for Review [15] before this Court raising as sole error the
following:

The Court of Appeals erred in reversing its original decision and in not ruling that
the decision of the Regional Trial Court of Makati had become final, since the Motion for
Reconsideration Respondent Bank filed did not contain any notice of hearing.[16]

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 NCBSA maintained that (1) since the Motion for Reconsideration of PBC did not
contain a notice of hearing, it is a worthless scrap of paper, (2) the fatal defect of the
Motion for Reconsideration was not cured by the filing of a Motion to Set the Motion for
Reconsideration for Hearing, and (3) the finality of the decision of the trial court cannot be
set aside on the basis of a plea for liberality.

In its Comment,[17] PBC countered that a liberal interpretation of the rules is in order
because there are several issues which warrant a second hard look by the trial court,to wit,
(1) prescription of cause of action, (2) estoppel by laches, and (3) absence of double
payment.[18]

Finding for NCBSA, this Court, by Decision of January 31, 2003, now the subject of
the present Motion for Reconsideration, set aside the Amended Decision of the Court of
Appeals and declared the Motion for Reconsideration of PBC filed before the RTC as pro
forma on two grounds: (1) the absence of a notice of hearing and (2) the issues raised
therein were mere reiteration of reasons and arguments raised before the trial court which
were already passed upon on the merits. Ruled this Court:

The requirement of notice under Sections 4 and 5, Rule 15 in connection with Section 2,
Rule 37 of the Revised Rules of Court is mandatory. The absence of a notice of hearing is fatal.x x x

In an attempt to cure the defect, PBC filed a Motion to Set the Motion for Reconsideration
for Hearing on September 27, 1993, or 9 days after the period for filing the Notice of Appeal had
elapsed.

The motion for reconsideration, however, being fatally defective for lack of notice of
hearing, cannot be cured by a belated filing of a notice of hearing. More so in the case at bar
where the Motion to Set the Motion for Reconsideration was filed after the expiration of the
period for filing an appeal.

NCBSA thus calls for a strict application of our rules of procedure to avoid further delays in
the disposition of the case which has remained pending for more than 17 years.

PBC, on the other hand, invokes a just and fair determination of the case.

PBCs appeal for justice and fairness does not lie, however, there being nothing on record
to show that it has been a victim of injustice or unfairness. On the contrary, as found by the Court
of Appeals in its original decision, PBC had the opportunity to participate in the trial and present
its defense and had actually made full use of the remedies under our rules of procedure.More
importantly, there was no oppressive exercise of judicial authority that would call for the
annulment of the trial courts resolutions.
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 The finality of the decision of the trial court cannot be set aside purely on the basis of
liberality for while it is true that a litigation is not a game of technicalities, this does not mean that
the Rules of Court may be ignored at will and at random. Only for the most persuasive of reasons
should the court allow a relaxation of its procedural rules.[19] (Emphasis in the original;
underscoring supplied)

PBC now moves for a reconsideration of this Courts decision on the following
grounds:

The finality and execution of the Trial Courts Decision shall result in manifest
injustice to Private Respondent.[20]

The 31 January 2003 Decisions discussion, en passant, of the merits of the case,
with all due deference, is contrary to existing and latest jurisprudence on the matter.[21]

The resolution of PBCs motion hinges on the issue of whether there exists a
persuasive reason to justify the relaxation of the Rules of Procedure.

For the first time, PBC raises the correctness of the trial courts ruling that the
interest on the principal amount of $971,919.75 will run from 1975[22] when the double
payment was allegedly received,[23] which is at least 9 years earlier than NCBSAs earliest
demand for payment made in October 1985.[24]

While PBC had previously raised the issue of interest, it limited its argument to the
propriety of imposing a 12% interest rate per annum, laying, as the only basis for its
impropriety, the banking practice of imposing a maximum of 6% for dollar or foreign
currency denominated obligations.[25] It had not, until the filing of the instant motion for
reconsideration, raised the propriety of imposing the 12% interest rate over the 9-year
period when no demand had yet been made by NCBSA. Ordinarily, the issue would have
been deemed waived based on our rule on omnibus motions.[26]

Considering, however, the vital government interest in the banking industry,[27] the
seeming error of the trial court and the amount involved, this Court is inclined to, as it
does, grant PBCs Motion for Reconsideration.[28]

In Eastern Shipping Lines, Inc. v. Court of Appeals,[29] this Court formulated the
rules on the imposition of the proper interest on amounts due, and at no instance was
interest to run until demand has been made absent any agreement between the parties. The
formulation is in accordance with Article 1169 of the Civil Code which provides:

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 Art. 1169. Those obliged to deliver or to do something incur in delay from the time
the obligee judicially or extrajudicially demands from them the fulfillment of their
obligation.
x x x (Underscoring supplied)

The dispositive portion of the trial courts decision reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff, National

Commercial Bank of Saudi Arabia and against defendant Philippine Banking Corporation
ordering the said defendant:

1. To pay plaintiff the sum [of] $971,919.75 United States Currency, with legal
rate of interest at 12% per annum from 1975 until defendant returns the entire
amount of duplicate payments;

2. To pay plaintiff attorneys fees the amount of $62,911.77, United States Currency
and expenses of litigation in the amount of P236,628.66;

3. Costs of suit.

SO ORDERED.[30] (Emphasis supplied.)

Without looking into the factual findings of the trial court, it has thus become apparent
that the trial court committed an error in imposing interest over the period when no
demand for payment had yet been made by NCBSA, in direct contravention of the rules
laid down in Eastern Shipping.

Unquestionably, if there was indeed an erroneous imposition of interest, private

respondent would be held liable for more than one million U.S. Dollars even greater than
the US$971,919.75 principal definitely not picayune.

The rule of course that only for the most persuasive of reasons should a relaxation of its
procedural rules be allowed bears reiterating.[31]

The following have been cited by this Court as persuasive reasons which allow a liberal
construction of the requirement of notice of hearing in motions:

. . . (1) where a rigid application will result in manifest failure or miscarriage of

justice; especially if a party successfully shows that the alleged defect in the questioned
judgment is not apparent on its face from the recitals contained therein; (2) where the
interest of substantial justice will be served; (3) where the resolution of the motion is
addressed solely to the sound discretion of the court; and (4) where the injustice to the
adverse party is not commensurate with the degree of his thoughtlessness in not complying
with the procedure prescribed.[32]

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 The present case involves parties belonging to an industry over which, as priorly
stated, the government has a vital interest. Private respondent faces severe prejudice in the
amount of at least one million U.S. Dollars in interest alone if the date of reckoning
payment thereof turns out to be erroneous. The negligence in complying with the
requirement of notice and hearing is thus not commensurate to the prejudice likely to be
suffered by private respondent.

The power of this Court to except a particular case from its rules whenever the purposes
of justice require it cannot be questioned, even to relax procedural rules of the most
mandatory character.[33]

Considering that this case has been pending for the past nineteen years and that the
records on hand show that the trial court had received all the evidence intended to be
presented by both parties,[34] this Court will dispense with the regular procedure of
remanding the case to the trial court in order to avoid further delays in the resolution of
the case.[35]

WHEREFORE, respondent Philippine Banking Corporations Motion for Reconsideration is

given DUE COURSE. The Regional Trial Court of Makati and the Court of Appeals are
hereby ORDERED to elevate all the records of the case to this Court for the final
resolution of the case.

In the meantime, the parties are hereby directed to file, within thirty (30) days from
notice, their respective memoranda in support of their positions.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

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 WE CONCUR:

REYNATO S. PUNO
Chairman
Associate Justice

(ON OFFICIAL LEAVE) (o (ON LEAVE)

ARTEMIO V. PANGANIBAN ANGELINA SANDOVAL-GUTIERREZ
Associate Justice Associate Justice

RENATO C. CORONA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Resolution were reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.

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REYNATO S. PUNO
Associate Justice
Chairman

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairmans
Attestation, it is hereby certified that the conclusions in the above Resolution were
reached in consultation before the case was assigned to the writer of the opinion of the
Court.

HILARIO G. DAVIDE, JR.

Chief Justice

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