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G.R. No.

119879 March 11, 2004

HEIRS OF JUANA GAUDIANE, namely: DATIVA M. PASTOR, MARIA M. ALCORIZA, BEATRIZ M.


PATROCIÑO, SOLOMON I. MARIÑO, BENJAMIN I. MARIÑO, LILI MARIÑO, VERONICA I. MARIÑO,
SEVERINA MARIÑO VDA. DE ISO, ROSITA ISO, AGRIPINO ISO, ELIZABETH ISO, VIRGINIA ISO,
LEOPOLDO ISO, NAPOLEON ISO, petitioners,
vs.
COURT OF APPEALS and THE HEIRS OF FELIX GAUDIANE, namely: ARNULFO GAUDIANE, GEORGE
GAUDIANE, RODOLFO GAUDIANE, RAYMUNDO GAUDIANE, SANDRA GAUDIANE, CEFERINA
GAUDIANE, JONNA GAUDIANE, MILLARD GAUDIANE, GLORIA TORRES-GAUDIANE, WILFREDO
GAUDIANE, ROLANDO GAUDIANE, ANTONIO GAUDIANE, KATHRYN GAUDIANE, PRISCILLA
GAUDIANE, CATALINA PACIOS, DONATELLA PACIOS, REMEDIOS PACIOS, GUALBERTO GAUDIANE,
VICTOR GAUDIANE, LORNA GAUDIANE, DOLORES GAUDIANE, respondents.

DECISION

CORONA, J.:

Before us is a petition for review of the decision1 dated February 24, 1995 of the Court of Appeals2
affirming the decision3 dated March 27, 1991 of the Regional Trial Court of Dumaguete City, Branch
34, ordering the partition of Lot 4389 and directing the petitioners to make an accounting of the
rentals and profits they have obtained from the said lot from the time the case was filed and to remit
to respondents their one-half share thereof.

The facts, as found by the courts a quo, follow.

The lot in controversy is Lot 4389 located at Dumaguete City and covered by Original Certificate of
Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix and Juana Gaudiane. Felix died in 1943
while his sister Juana died in 1939. Herein respondents are the descendants of Felix while petitioners
are the descendants of Juana.

On November 4, 1927, Felix executed a document entitled Escritura de Compra-Venta (Escritura, for
brevity) whereby he sold to his sister Juana his one-half share in Lot No. 4156 covered by Transfer
Certificate of Title No. 3317-A. The Escritura described the lot sold as follows:

A parcel of land (Lot No. 4156 of the Cadastral Survey of Dumaguete), with the improvements
thereon, situated in the Municipality of Dumaguete. Bounded on the NE. and E. by Lot No.
4155; on the SW. by Lots Nos. 4157 and 4158; and on the NW. by Lot No. 4154. Containing an
area of five hundred and fifty-two (552) square meters, more or less.

1
What muddled the otherwise clear contract of sale was a statement in the Escritura that Lot No. 4156
was declared under Tax Declaration No. 18321. However, said tax declaration was for another parcel
of land, Lot 4389 and not Lot 4156.

Petitioners' predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed that the sale by Felix
to their mother Juana in 1927 included not only Lot 4156 but also Lot 4389. In 1974, they filed a
pleading in the trial court seeking to direct the Register of Deeds of Dumaguete City to cancel OCT
2986-A covering Lot 4389 and to issue a new title in favor of the Isos. This was later withdrawn after
respondents' predecessors-in-interest, Procopio Gaudiane and Segundo Gaudiane, opposed it on the
ground that the Isos falsified their copy of the Escritura by erasing "Lot 4156" and intercalating in its
place "Lot 4389."

The Isos again tried their luck to acquire title in their name by filing in 1975 a case for quieting of title
of Lot 4389 but the same was dismissed without prejudice.

The Isos later filed another action for quieting of title, docketed as Civil Case No. 6817, but it was
again dismissed4 on January 10, 1985 by the RTC of Negros Oriental, Branch 35, due to the failure of
the plaintiffs (the Isos) to prosecute and to comply with the orders of the court. When the judgment
became final, respondents sent a letter to Ines Iso asking her to surrender the possession of the one-
half portion of Lot No. 4389 comprising Felix' share. The Isos refused.

On August 20, 1986, the respondents filed the present case for partition of Lot 4389, accounting of
proceeds and damages against herein petitioners.

On March 27, 1991, the trial court rendered a decision in favor of the respondents, the dispositive
portion of which read:

WHEREFORE, judgment is hereby rendered ordering the partition of the land in question, i.e.,
Lot No. 4389 of the Dumaguete Cadastre, covered by Original Certificate of Title No. 2986-A, in
the names of Felix Gaudiane and his sister Juana Gaudiane, consisting of 36,988 square meters,
between the plaintiffs and the defendants in the following proportion: one-half (1/2) share will
go to the heirs of the late Felix Gaudiane, (1/2) share will go to the heirs of the late Juana
Gaudiane, defendants herein.

The defendants who are in possession of the subject property are likewise directed within
thirty (30) days from receipt of this decision to make an accounting of the rents and profits
they may have obtained from the real estate in question, from the time this action was
instituted, and to remit to plaintiffs their proportionate one-half (1/2) share thereof.5

According to the trial court, Felix did not sell to Juana his one-half share in Lot 4389. The Escritura
clearly stated and described that what was sold was Lot 4156, not Lot 4389. Had it been his intention
to include Lot 4389, he would have so identified and described it in the deed of sale. The fact that the
title to Lot 4389 was still in the names of siblings Felix and Juana was proof that the subject lot
continued to be under their co-ownership. The trial court refused to give weight to the tax
2
declarations supposedly evidencing petitioners' exercise of ownership over said lot after discovering
that said declarations did not state the lot number or the certificate of title number.

The trial court also ruled that the dismissal of petitioners' second case for quieting of title due to
failure to prosecute and for failure to comply with court orders had the effect of adjudication on the
merits, pursuant to the Rules of Court. Consequently, petitioners' claim of exclusive ownership over
Lot 4389 was without merit because it was barred by the order of dismissal dated January 10, 1985 in
Civil Case No. 6817.

As to whether the respondents lost by prescription their right to their share in the lot, the trial court
held that a title, once registered, could not be defeated even by adverse, open and notorious
possession. Laches did not also set in because, when petitioners repudiated the respondents' share in
the second case for quieting of title, the latter immediately opposed the move. They were therefore
never negligent in pursuing their rights.

On appeal, the Court of Appeals affirmed the decision of the trial court.6

The appellate court reiterated the reasons of the trial court in holding that Felix never sold his share
in Lot 4389 to Juana. The order of dismissal of the action for quieting of title was not appealed and
therefore the issues raised therein involving the same lot could not be raised in the subject action
anymore. Lastly, according to the Court of Appeals, the doctrine that a titled lot may be acquired by
prescription in certain exceptional circumstances could not apply in the case at bar for the reason that
herein petitioners employed fraud in claiming exclusive ownership over Lot 4389.

Hence, this petition for review based on the following assignment of errors:

The respondent honorable court gravely erred in affirming that what was sold by the late Felix
Gaudiane to his sister Juana Gaudiane was his one-half (1/2) share of another land, Lot No.
4156, covered by Original Certificate of Title No. 2986-A, pursuant to the Escritura de Compra
Venta, Exhibit "A" dated November 4, 1927, disregarding the documentary evidence of the
petitioners as well as the testimonial evidence adduced by the petitioners;

II

That the respondent honorable court gravely erred in finding that the argument of the
petitioners with reference to the second assignment of error to the effect that the dismissal of
the complaint for questing of title, docketed as civil case no. 6817 did not bar them from
interposing as a defense in the case at bar their cause of action in civil case no. 6817;

III

3
That respondent honorable court gravely erred by not giving due course to the claim of
petitioners and legal effect of prescription and laches adverted by defendants-appellants in
their answer and affirmative defenses proven during the hearing by documentary and
testimonial evidence.7

Unconvinced by the rulings of the courts a quo, petitioners reiterate their arguments to support their
claim of exclusive ownership of Lot 4389.

Petitioners insist on their ownership over Felix' share in said lot on the ground that the Escritura
expressly mentioned Tax Declaration No. 18321 representing payment of taxes for Lot 4389. We
disagree. As found by the courts a quo, a thorough reading of the Escritura reveals that Felix intended
to sell his share in Lot 4156 only. In fact, only Lot 4156 was described in the Escritura. Consequently,
the citation of Tax Declaration No. 18321 vis-à-vis Lot 4156 was clearly a mistake. Even the
petitioners' predecessors-in-interest, the Isos, believed that Lot 4389 was not included in the Escritura
because they erased "Lot 4156" and fraudulently replaced it with "Lot 4389" in their prayer to cancel
OCT 2986-A. Had they honestly believed that Lot 4389 was included in the sale, there would have
been no need for them to resort to falsification. Moreover, if Felix had really sold his share in Lot 4389
to Juana, the latter would have had the title to the property transferred to her name alone. But she
never did and the title to Lot 4389 continued to be in the names of both Felix and Juana.

According to the petitioners, the order dated January 10, 1985 in Civil Case No. 6817 of the RTC of
Negros Oreintal, Branch 35, dismissing their case for quieting of title on the ground of failure to
prosecute and to comply with the lawful orders of the court was erroneously issued, considering that
all the plaintiffs therein (petitioners), except their counsel, failed to attend the supposed hearing. And
assuming arguendo that the order was dismissal with prejudice, petitioners contend that they are not
barred from raising the defense of exclusive ownership in the instant case for partition because their
present defense was not the issue in the case for quieting of title. Also, the effect of said order was
effectively waived when the petitioners were allowed during the trial to present evidence of their
exclusive ownership of Lot 4389 without any objection from the respondents.

Petitioners' arguments are misplaced.

We cannot delve anymore into the legality and validity of the order of dismissal dated January 10,
1985 in Civil Case No. 6817 because it has long become final and executory for failure of the
petitioners to file an appeal. In accordance with Section 3, Rule 17 of the 1997 Rules of Civil
Procedure,8 said order had the effect of judgment on the merits although no trial was conducted
because it did not contain any statement that the case was dismissed without prejudice to the filing
of a similar future action. As such, based on the principle of res judicata,9 the petitioners are barred in
another action (involving the same subject matter, parties and issues) from raising a defense and
from asking for a relief inconsistent with an order dismissing an earlier case with prejudice.

Petitioners argue that res judicata does not apply in the case at bar for the reason that a petition to
quiet title has a cause of action different from a petition for partition.

4
We do not think so.

In Medija vs. Patcho, et al.,10 we ruled that a case for partition and an action for quieting of title have
identical causes of action and can therefore be the subject of res judicata:

Is there identity of cause of action between the first and second actions? The answer is yes.
The fact that Civil Case No. 1884, filed by the appellees against the appellant was for partition
of the hereditary estate with accounting of fruits of several parcels of land, while Civil Case No.
2665, brought by appellant against the appellees, was for quieting of title over two parcels
which are parts of the same properties subject of the previous case, does not remove the
present proceeding from the operation of the principle of bar by former judgment. As
specifically stated in the decision of the Court of Appeals in Civil Case No. 1884, now final and
executory, the right of therein plaintiffs (appellees herein) to partition the several parcels of
land was based on Article 1103 of the Civil Code. The appellees' right to ownership is based on
succession they being heirs of the deceased Lorenzo Morante. What the appellant did is to
institute another action which would preclude the execution of the judgment of the lower
court in Civil Case No. 1884. It must be remembered that a change in the form of action or in
the relief sought does not remove a proper case from the application of res judicata. In other
words, a party cannot, by varying the form of action, or adopting a different method of
presenting his case, escape the operation of the principle that one and the same cause of
action shall not be twice litigated between the same parties (Ramos vs. Pangasinan
Transportation Company, Inc., 79 SCRA 171; Aguila vs. J.M. Tuason & Co., Inc., 22 SCRA 690,
citing Clemente vs. H.E. Heacock Co., G.R. No. L-23212, May 18, 1967; Francisco vs. Blas, 93
Phil. 43).11

Petitioners filed an action to quiet title for the sole purpose of claiming for themselves exclusive
ownership of Lot 4389. On the other hand, in the case for partition filed by respondents, petitioners
set up the defense of sole dominion in order to frustrate the equal division of the property between
the heirs of Felix and Juana. Considering the similarity of petitioners' defense in this case with their
main averment in the case for quieting of title, petitioners are barred by res judicata from claiming
sole ownership of Lot 4389.

We also find that respondents never waived their right to object to petitioners' barred defense of
exclusive ownership. While the petitioners were allowed in the subject case for partition, accounting
and damages to present their evidence of exclusive ownership, the respondents' failure to oppose did
not mean that the latter waived their right to object to the petitioners' evidence. For reasons of public
policy, res judicata cannot be waived by a party because the time and energy of the State and the
taxpayers are wasted by the re-litigation of settled issues. That is the reason why, under Rule 9 of the
1997 Rules of Civil Procedure, a trial court may dismiss a case motu proprio on grounds of res judicata
although it is not raised, and apparently waived, in a motion to dismiss or answer. Conversely, a
plaintiff, or the trial court itself, may invoke res judicata to resist a defense barred by prior judgment
even after trial on the merits.

5
Lastly, petitioners argue that they acquired Felix' share in the lot in question through prescription and
laches. As a general rule, ownership over titled property cannot be lost through prescription.12
Petitioners, however, invoke our ruling in Tambot vs. Court of Appeals13 which held that titled
property may be acquired through prescription by a person who possessed the same for 36 years
without any objection from the registered owner who was obviously guilty of laches.

Petitioners' claim is already rendered moot by our ruling barring petitioners from raising the defense
of exclusive ownership due to res judicata. Even assuming arguendo that petitioners are not so
barred, their contention is erroneous. As correctly observed by the appellate court:

The TAMBOT case is inapplicable. The case of Bicarme vs. Court of Appeals would be more in
point. In the case at bar, appellees' predecessor-in-interest fraudulently denied possession of
one-half of Lot No. 4389 to appellants by misrepresenting the Escritura executed by Felix
Gaudiane included not only Lot No. 4156 but also Lot No. 4389. That of course is not true. As
explained earlier, only Lot No. 4156 was sold. It was through this misrepresentation that
appellees' predecessor-in-interest succeeded in withholding possession of appellees' share in
Lot No. 4389. Appellees cannot, by their own fraudulent act, benefit therefrom by alleging
prescription and laches.14

WHEREFORE, the petition is DENIED. Costs against the petitioners.

SO ORDERED.

G.R. No. 170026 June 20, 2012

SHIMIZU PHILIPPINES CONTRACTORS, INC., Petitioner,


vs.
MRS. LETICIA B. MAGSALIN, doing business under the trade name "KAREN'S TRADING," FGU
INSURANCE CORPORATION, GODOFREDO GARCIA, CONCORDIA GARCIA, and REYNALDO BAETIONG,
Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 filed by Shimizu Philippines Contractors, Inc.
(petitioner) to challenge the twin resolutions of the Court of Appeals (CA)2 in CA-G.R. CV No. 83096
which dismissed the appeal of the petitioner on the ground of lack of jurisdiction3 and denied the
petitioner’s subsequent motion for reconsideration.4 The appeal in CA-G.R. CV No. 83096 had sought
to nullify the December 16, 2003 order5 of the Regional Trial Court (RTC) dismissing the petitioner’s
complaint for sum of money and damages on the ground of non prosequitur.

6
The Antecedents

The antecedent facts of the petition before us are not disputed.

An alleged breach of contract was the initial event that led to the present petition. The petitioner
claims that one Leticia Magsalin, doing business as "Karen’s Trading," had breached their subcontract
agreement for the supply, delivery, installation, and finishing of parquet tiles for certain floors in the
petitioner’s Makati City condominium project called "The Regency at Salcedo." The breach triggered
the agreement’s termination. When Magsalin also refused to return the petitioner’s unliquidated
advance payment and to account for other monetary liabilities despite demand, the petitioner sent a
notice to respondent FGU Insurance Corporation (FGU Insurance) demanding damages pursuant to
the surety and performance bonds the former had issued for the subcontract.

On April 30, 2002, the petitioner filed a complaint docketed as Civil Case No. 02-488 against both
Magsalin and FGU Insurance. It was raffled to Branch 61 of the RTC of Makati City. The complaint
sought Two Million Three Hundred Twenty-Nine Thousand One Hundred Twenty Four Pesos and Sixty
Centavos (₱2,329,124.60) as actual damages for the breach of contract.

FGU Insurance was duly served with summons. With respect to Magsalin, however, the corresponding
officer’s return declared that both she and "Karen’s Trading" could not be located at their given
addresses, and that despite further efforts, their new addresses could not be determined.

In August 2002, FGU Insurance filed a motion to dismiss the complaint. The petitioner filed its
opposition to the motion. The motion to dismiss was denied as well as the ensuing motion for
reconsideration, and FGU Insurance was obliged to file an answer.

In October 2002, in an effort to assist the RTC in acquiring jurisdiction over Magsalin, the petitioner
filed a motion for leave to serve summons on respondent Magsalin by way of publication. In January
2003, the petitioner filed its reply to FGU Insurance’s answer.

In February 2003, FGU Insurance filed a motion for leave of court to file a third-party complaint.
Attached to the motion was the subject complaint,6 with Reynaldo Baetiong, Godofredo Garcia and
Concordia Garcia named as third-party defendants. FGU Insurance claims that the three had executed
counter-guaranties over the surety and performance bonds it executed for the subcontract with
Magsalin and, hence, should be held jointly and severally liable in the event it is held liable in Civil
Case No. 02-488.

The RTC admitted the third-party complaint and denied the motion to serve summons by publication
on the ground that the action against respondent Magsalin was in personam.

In May 2003, the RTC issued a notice setting the case for hearing on June 20, 2003. FGU Insurance
filed a motion to cancel the hearing on the ground that the third-party defendants had not yet filed
their answer. The motion was granted.

7
In June 2003, Baetiong filed his answer to the third-party complaint. He denied any personal
knowledge about the surety and performance bonds for the subcontract with Magsalin.7 Of the three
(3) persons named as third-party defendants, only Baetiong filed an answer to the third-party
complaint; the officer’s returns on the summons to the Garcias state that both could not be located at
their given addresses. Incidentally, the petitioner claims, and Baetiong does not dispute, that it was
not served with a copy of Baetiong’s answer. The petitioner now argues before us that FGU Insurance,
which is the plaintiff in the third-party complaint, had failed to exert efforts to serve summons on the
Garcias. It suggests that a motion to serve summons by publication should have been filed for this
purpose. The petitioner also asserts that the RTC should have scheduled a hearing to determine the
status of the summons to the third-party defendants.8

The Order Of Dismissal

With the above procedural events presented by both parties as the only backdrop, on December 16,
2003 the RTC issued a tersely worded order9 dismissing Civil Case No. 02-488. For clarity, we quote
the dismissal order in full:

ORDER

For failure of [petitioner] to prosecute, the case is hereby DISMISSED.

SO ORDERED.

The RTC denied the petitioner’s motion for reconsideration,10 prompting the latter to elevate its case
to the CA via a Rule 41 petition for review.11

The Ruling of the Appellate Court

FGU Insurance moved for the dismissal of the appeal on the ground of lack of jurisdiction. It argued
that the appeal raised a pure question of law as it did not dispute the proceedings before the issuance
of the December 16, 2003 dismissal order.

The petitioner, on the other hand, insisted that it had raised questions of fact in the appeal.12 Thus -

While, the instant appeal does not involve the merits of the case, the same involves questions of fact
based on the records of the case. It must be emphasized that the lower court’s dismissal of the case
based on alleged failure to prosecute on the part of plaintiff-appellant was too sudden and
precipitate. This being the case, the facts [sic] to be determined is whether based on the records of
the case, was there a definite inaction on the part of plaintiff-appellant? A careful examination of all
pleadings filed as well as the orders of the lower court vis-à-vis the rules should now be made in order
to determine whether there was indeed a "failure to prosecute" on the part of plaintiff-appellant[.]13
(emphases supplied)

8
The CA agreed with FGU Insurance and dismissed the appeal, and denied as well the subsequent
motion for reconsideration.14 The petitioner thus filed the present petition for review on certiorari.

The Present Petition

The petitioner pleads five (5) grounds to reverse the CA’s resolutions and to reinstate Civil Case No.
02-488. In an effort perhaps to make sense of the dismissal of the case (considering that the trial
court had not stated the facts that justify it), the petitioner draws this Court’s attention to certain
facts and issues that we find to be of little materiality to the disposition of this petition:

Grounds/ Statement of Matters Involved

I. The Appellate Court has jurisdiction to determine the merits of the Appeal as the matters
therein involve both questions of law and fact.

II. The lower court erred in declaring that petitioner failed to prosecute the case despite the
fact that petitioner never received a copy of the Answer of Third-party defendant-respondent
Reynaldo Baetiong.

III. The lower court erred in declaring that petitioner failed to prosecute the case despite the
fact that there is no joinder of indispensable parties and issues yet because defendant-
respondent Leticia B. Magsalin as well as third-party defendant-respondents Godofredo and
Concordia Garcia’s whereabouts were unknown, hence no service yet on them of the copy of
the summons and complaint with annexes[.]

IV. The lower court erred in declaring that Petitioner failed to prosecute the case despite the
fact that it was party respondent FGU which caused the cancellation of the hearing.

V. It is evident that the lower court’s dismissal of the case is a clear denial of due process.15

In our Resolution dated February 13, 2006,16 we required the respondents to comment. FGU
Insurance’s comment17 alleges that the present petition is "fatally defective" for being
unaccompanied by material portions of the record. It reiterates that the appeal in CA-G.R. CV No.
83096 was improperly filed under Rule 41 and should have been filed directly with this Court under
Rule 45 of the Rules of Court. Baetiong, in his comment,18 asserts that the dismissal of the appeal
was in accord with existing laws and applicable jurisprudence.

The Ruling Of The Court

Preliminarily, we resolve the claim that the petition violates Rule 45 of the Rules of Court on the
attachment of material portions of the record. We note that FGU Insurance fails to discharge its
burden of proving this claim by not specifying the material portions of the record the petitioner
should have attached to the petition. At any rate, after a careful perusal of the petition and its

9
attachments, the Court finds the petition to be sufficient. In other words, we can judiciously assess
and resolve the present petition on the basis of its allegations and attachments.

After due consideration, we resolve to grant the petition on the ground that the December 16, 2003
dismissal order is null and void for violation of due process. We are also convinced that the appeal to
challenge the dismissal order was properly filed under Rule 41 of the Rules of Court. We further find
that the dismissal of Civil Case No. 02-488 for failure to prosecute is not supported by facts, as shown
by the records of the case.

The Dismissal Order is Void

The nullity of the dismissal order is patent on its face. It simply states its conclusion that the case
should be dismissed for non prosequitur, a legal conclusion, but does not state the facts on which this
conclusion is based.

Dismissals of actions for failure of the plaintiff to prosecute is authorized under Section 3, Rule 17 of
the Rules of Court. A plain examination of the December 16, 2003 dismissal order shows that it is an
unqualified order and, as such, is deemed to be a dismissal with prejudice. "Dismissals of actions
(under Section 3) which do not expressly state whether they are with or without prejudice are held to
be with prejudice[.]"19 As a prejudicial dismissal, the December 16, 2003 dismissal order is also
deemed to be a judgment on the merits so that the petitioner’s complaint in Civil Case No. 02-488 can
no longer be refiled on the principle of res judicata. Procedurally, when a complaint is dismissed for
failure to prosecute and the dismissal is unqualified, the dismissal has the effect of an adjudication on
the merits.20

As an adjudication on the merits, it is imperative that the dismissal order conform with Section 1, Rule
36 of the Rules of Court on the writing of valid judgments and final orders. The rule states:

RULE 36
Judgments, Final Orders and Entry Thereof

Section 1. Rendition of judgments and final orders. — A judgment or final order determining the
merits of the case shall be in writing personally and directly prepared by the judge, stating clearly and
distinctly the facts and the law on which it is based, signed by him, and filed with the clerk of the
court.

The December 16, 2003 dismissal order clearly violates this rule for its failure to disclose how and why
the petitioner failed to prosecute its complaint. Thus, neither the petitioner nor the reviewing court is
able to know the particular facts that had prompted the prejudicial dismissal. Had the petitioner
perhaps failed to appear at a scheduled trial date? Had it failed to take appropriate actions for the
active prosecution of its complaint for an unreasonable length of time? Had it failed to comply with
the rules or any order of the trial court? The December 16, 2003 dismissal order does not say.

10
We have in the past admonished trial courts against issuing dismissal orders similar to that appealed
in CA-G.R. CV No. 83096. A trial court should always specify the reasons for a complaint’s dismissal so
that on appeal, the reviewing court can readily determine the prima facie justification for the
dismissal.21 A decision that does not clearly and distinctly state the facts and the law on which it is
based leaves the parties in the dark and is especially prejudicial to the losing party who is unable to
point the assigned error in seeking a review by a higher tribunal.22

We thus agree with the petitioner that the dismissal of Civil Case No. 02-488 constituted a denial of
due process. Elementary due process demands that the parties to a litigation be given information on
how the case was decided, as well as an explanation of the factual and legal reasons that led to the
conclusions of the court.23 Where the reasons are absent, a decision (such as the December 16, 2003
dismissal order) has absolutely nothing to support it and is thus a nullity.24

For this same reason, we are not moved by respondent FGU Insurance’s statement that the
disposition of the present petition must be limited to the issue of whether the CA had correctly
dismissed the appeal in CA-G.R. CV No. 83096.25 This statement implies that we cannot properly look
into the validity of the December 16, 2003 dismissal order in this Rule 45 petition. A void decision,
however, is open to collateral attack. While we note that the validity of the dismissal order with
respect to Section 1, Rule 36 of the Rules of Court was never raised by the petitioner as an issue in the
present petition, the Supreme Court is vested with ample authority to review an unassigned error if it
finds that consideration and resolution are indispensable or necessary in arriving at a just decision in
an appeal.26 In this case, the interests of substantial justice warrant the review of an obviously void
dismissal order.

The appeal was properly filed


under Rule 41 of the Rules of Court

While the nullity of the December 16, 2003 dismissal order constitutes the ratio decidendi for this
petition, we nevertheless rule on the contention that the appeal was erroneously filed.27

In dismissing the appeal, the CA relied on the premise that since the facts presented in the
petitioner’s appeal were admitted and not disputed, the appeal must thereby raise a pure question of
law proscribed in an ordinary appeal. This premise was effectively the legal principle articulated in the
case of Joaquin v. Navarro,28 cited by the CA in its April 8, 2005 resolution. Respondent FGU
Insurance thus contends that the proper remedy to assail the dismissal of Civil Case No. 02-488 was
an appeal filed under Rule 45 of the Rules of Court.

The reliance on Joaquin is misplaced as it is based on the conclusion the appellate court made in its
April 8, 2005 resolution — i.e., that the pleading of undisputed facts is equivalent to a prohibited
appeal. The reliance is inattentive to both the averments of the subject appeal and to the text of the
cited case. The operative legal principle in Joaquin is this: "[W]here a case is submitted upon an
agreement of facts, or where all the facts are stated in the judgment and the issue is the correctness
of the conclusions drawn therefrom, the question is one of law which [is properly subject to the
review of this Court.]"29 In this case, as already pointed out above, the facts supposedly supporting
11
the trial court’s conclusion of non prosequitur were not stated in the judgment. This defeats the
application of Joaquin.

At any rate, we believe that the filing of the appeal in CA-G.R. CV No. 83096 under Rule 41 of the
Rules of Court was proper as it necessarily involved questions of fact.

An authority material to this case is the case of Olave v. Mistas.30 Directly addressed in Olave was the
CA’s jurisdiction over an ordinary appeal supported by undisputed facts and seeking the review of a
prejudicial order of dismissal. In this case, a complaint was filed before the RTC in Lipa City to nullify
an instrument titled "Affidavit of Adjudication By The Heirs of the Estate of Deceased Persons With
Sale." The RTC dismissed the complaint, with prejudice, after the plaintiffs had moved to set the case
for pre-trial only after more than three (3) months had lapsed from the service and filing of the last
pleading in the case. The plaintiffs thereafter went to the CA on a Rule 41 petition, contending,
among others, that the trial court had erred and abused its discretion. As in the present case, the
defendants moved to dismiss the appeal on the ground that the issues therein were legal; they
pointed out that the circumstances on record were admitted.31 They argued that the proper remedy
was a petition for review on certiorari under Rule 45 of the Rules of Court.

The CA denied the motion and entertained the appeal. It rendered a decision reinstating the
complaint on the ground that there was no evidence on record that the plaintiffs had deliberately
failed to prosecute their complaint.

When the case was elevated to this court on a Rule 45 petition, we squarely addressed the propriety
of the plaintiffs’ appeal. Though mindful that the circumstances pleaded in the appeal were all
admitted, we categorically held in Olave that the appeal was correctly filed. We observed that despite
undisputed records, the CA, in its review, still had to respond to factual questions such as the length
of time between the plaintiffs’ receipt of the last pleading filed up to the time they moved to set the
case for pre-trial, whether there had been any manifest intention on the plaintiffs’ part not to comply
with the Rules of Court, and whether the plaintiffs’ counsel was negligent.

Significantly, in Olave, we agreed with the plaintiffs that among the critical factual questions was
whether, based on the records, there had been factual basis for the dismissal of the subject
complaint. This same question is particularly significant in the present case given that the order
appealed from in CA-G.R. CV No. 83096 does not even indicate the factual basis for the dismissal of
Civil Case No. 02-488. Due to the absence of any stated factual basis, and despite the admissions of
the parties, the CA, in CA-G.R. CV No. 83096, still had to delve into the records to check whether facts
to justify the prejudicial dismissal even exist. Since the dismissal of Civil Case No. 02-488 appears to
have been rendered motu proprio (as the December 16, 2003 dismissal order does not state if it was
issued upon the respondents’ or the trial court’s motion), the facts to be determined by the CA should
include the grounds specified under Section 3, Rule 17 of the Rules of Court. A court could only issue a
motu proprio dismissal pursuant to the grounds mentioned in this rule and for lack of jurisdiction over
the subject matter.32 These grounds are matters of facts. Thus, given that the dismissal order does
not disclose its factual basis, we are thus persuaded that the petitioner had properly filed its appeal
from the dismissal order under Rule 41 of the Rules of Court.
12
The Dismissal of Civil Case No. 02-488 is not Supported by the Facts of the Case

We also find that the dismissal of Civil Case No. 02-488 is not warranted. Based on available records
and on the averments of the parties, the following events were chronologically proximate to the
dismissal of Civil Case No. 02-488: (a) on March 24, 2003, the court admitted FGU Insurance’s third-
party complaint; (b) the trial court cancelled the June 20, 2003 hearing upon FGU Insurance’s motion;
and (c) on June 16, 2003, Baetiong filed his Answer to the third-party complaint but did not serve it
upon the petitioner.

None of these events square with the grounds specified by Section 3, Rule 17 of the Rules of Court for
the motu proprio dismissal of a case for failure to prosecute. These grounds are as follows:

(a) Failure of the plaintiff, without justifiable reasons, to appear on the date of the
presentation of his evidence in chief;

(b) Failure of the plaintiff to prosecute his action for an unreasonable length of time;

(c) Failure of the plaintiff to comply with the Rules of Court; or

(d) Failure of the plaintiff to obey any order of the court.

In our view, the developments in the present case do not satisfy the stringent standards set in law
and jurisprudence for a non prosequitur.33 The fundamental test for non prosequitur is whether,
under the circumstances, the plaintiff is chargeable with want of due diligence in failing to proceed
with reasonable promptitude.34 There must be unwillingness on the part of the plaintiff to
prosecute.35

In this case, the parties’ own narrations of facts demonstrate the petitioner’s willingness to prosecute
its complaint.1âwphi1 Indeed, neither respondents FGU Insurance nor Baetiong was able to point to
any specific act committed by the petitioner to justify the dismissal of their case.

While it is discretionary on the trial court to dismiss cases, dismissals of actions should be made with
care. The repressive or restraining effect of the rule amounting to adjudication upon the merits may
cut short a case even before it is fully litigated; a ruling of dismissal may forever bar a litigant from
pursuing judicial relief under the same cause of action. Hence, sound discretion demands vigilance in
duly recognizing the circumstances surrounding the case to the end that technicality shall not prevail
over substantial justice.36

This court is thus of the opinion that the dismissal of Civil Case No. 02-488 is not warranted. Neither
facts, law or jurisprudence supports the RTC’s finding of failure to prosecute on the part of the
petitioner.

Wherefore, premises considered, the instant petition is Granted. The resolutions of the Court of
Appeals dated April 8, 2005 and October 4, 2005 are REVERSED and SET ASIDE. The order dated

13
December 16, 2003 of the Regional Trial Court, Branch 61, Makati City, in Civil Case No. 02-488 is
declared NULL and VOID, and the petitioner’s complaint therein is ordered REINSTATED for further
proceedings. No costs.

SO ORDERED.

G.R. No. 192716 June 13, 2012

ELOISA MERCHANDISING, INC. and TREBEL INTERNATIONAL, INC., Petitioners,


vs.
BANCO DE ORO UNIVERSAL BANK and ENGRACIO M. ESCASINAS, JR., in his capacity as Ex-Officio
Sheriff of the RTC of Makati City, Respondents.

DECISION

VILLARAMA, JR., J.:

Assailed in this petition for review on certiorari under Rule 45 are the Decision1 dated March 30, 2010
and Resolution2 dated June 15, 2010 of the Court of Appeals (CA) in CA-G.R. CV No. 89779. The CA
affirmed the trial court’s dismissal of petitioners’ complaint on the ground of failure to prosecute.

On November 11, 1993, petitioner Eloisa Merchandising, Inc. (EMI) executed in favor of respondent
Banco de Oro Universal Bank (BDO) a real estate mortgage (REM) over its properties located at No.
129 Neptune St., Bel-Air Village II, Makati City, Metro Manila and covered by Transfer Certificate of
Title Nos. 157092 and 157093. The REM was further amended on May 16, 1996, December 23, 1996,
September 16, 1998 and July 2, 1999 to secure the principal obligation totalling Twenty-Nine Million
Nine Hundred Thousand Pesos (₱29,900,000.00) drawn from the Credit Line Agreement of EMI and
Term Loan Agreement of Trebel International, Inc. (Trebel). EMI likewise executed a Continuing
Suretyship in favor of BDO to secure the credit accommodation extended by BDO to petitioner’s
affiliate, Trebel.3

On January 10, 2002, BDO initiated foreclosure proceedings by filing an application for extrajudicial
foreclosure before the Office of the Ex-Officio Sheriff of the Regional Trial Court (RTC) of Makati City.4
Accordingly, respondent Engracio M. Escasinas, Jr. issued a notice setting the auction sale of the
mortgaged property on March 7, 2002.

On March 1, 2002, petitioners filed a Complaint5 for "annulment of Real Estate Mortgage, Injunction
& Damages With Prayer for Issuance of a Writ of Preliminary Injunction and/or Temporary Restraining
Order," docketed as Civil Case No. 02-245 of the RTC of Makati City, Branch 59. Petitioners alleged the
following as grounds for nullity of the REM: (1) the contract is in the nature of a third-party mortgage
to secure the loans of Trebel despite the fact that EMI is not in the suretyship business; (2) after
maturity of the loans, BDO granted Trebel extensions of time to pay without notice to EMI, thus

14
extinguishing the corporate guaranty or suretyship and REM, pursuant to Art. 2079 of the Civil Code;
(3) under the promissory notes, BDO unilaterally fixed an adjustable, "floating" interest rate on each
interest period as may be favorable to it, a potestative condition which is null and void under Art.
1308 of the Civil Code; and (4) the penalty of 3% per month or 36% per annum is exorbitant and
excessive. Petitioners further claimed that BDO acted with malice and evident bad faith in initiating
the extrajudicial foreclosure proceedings.

BDO filed a motion to dismiss6 on the ground of lack of cause of action which can be determined from
the facts alleged in the complaint and considering all annexes, motions and evidence on record.

On May 7, 2002, petitioners filed an amended complaint7 which impleaded the Register of Deeds and
alleged that the mortgaged property was sold at a public auction on March 7, 2002.

On July 18, 2002, petitioners filed a "Motion for Leave to File and to Admit Second Amended
Complaint,"8 which averred that the Register of Deeds of Makati City has consolidated the titles over
the foreclosed properties and issued new titles in the name of BDO.

On November 28, 2002, the trial court issued an order9 granting the motion to admit second
amended complaint and denying the motion to dismiss. BDO was directed to file a responsive
pleading.

On January 17, 2003, BDO filed its Answer10 traversing the allegations of the complaint and asserting
that: (1) there was only forbearance on BDO’s part before filing the extrajudicial foreclosure due to
insistent request of petitioners who repeatedly promised to settle their obligations, and for
humanitarian reasons; (2) the loan documents clearly stated that no prior demand is necessary before
the entire obligation becomes due and demandable; (3) on June 22, 1999, Trebel obtained a "Term
Loan Agreement" in addition to the previously granted ₱5,000,000.00 Credit/Trust Receipts Line
granted by BDO, from which Trebel availed of ₱19,900,000.00, part of which was used to pay off
EMI’s loans; in consideration thereof, EMI executed a Continuing Suretyship and the Fourth Amended
REM to the extent of ₱29,900,000.00 in favor of BDO; (4) Trebel subsequently made several drawings
from its own credit lines in the total amount of ₱29,880,000.00 under Promissory Notes (PNs)
executed on various dates; (5) because Trebel failed to satisfy its loan obligations under the aforesaid
PNs, BDO was compelled to file an application for extrajudicial foreclosure of the REM on January 10,
2002, and BDO won as the highest bidder during the public auction sale; (6) EMI was not a third-party
mortgagor considering that it secured its own obligations and Trebel has assumed its obligations in
full; the veil of corporate fiction maybe pierced in this case, and EMI is already estopped from raising
the issue of ultra vires act after Trebel had defaulted on its obligations; (7) with the execution of the
Continuing Suretyship, EMI bound itself solidarily with the principal debtor, Trebel, and the right of
BDO to proceed against EMI as surety exists independently of its right to proceed against Trebel; EMI
as surety is not even entitled to a notice of the principal’s default; (8) the Conforme Letter dated June
14, 1999 sent by BDO to EMI showed the consent of Mr. Roberto L. Del Rosario (President) and Ms.
Emma M. Del Rosario (Finance Manager) who both signed the said letter which provides for a floating
interest rate based on the 364-day Treasury Bill Rates plus 4% or the BDO Reference Rate plus 7.5%;
T-Bill Rates are one of the most objective and generally used standard for interest rates; and (9) the
15
liquidated penalty was part of the parties’ agreement, which will not accrue until Trebel defaults on
its obligations with BDO.

In the Notice of Pre-Trial11 dated January 22, 2003, the trial court set the pre-trial conference on
February 27, 2003. In compliance with the trial court’s directive, the parties submitted their
respective pre-trial briefs.

On March 13, 2003, petitioners filed a "Motion to Admit Supplemental Complaint" which further
alleged that BDO’s petition for issuance of a writ of possession was granted by the RTC of Makati City,
Branch 143 in a Decision dated February 18, 2003. EMI reiterated that its rights as surety-mortgagor
were violated in the railroaded ex parte proceedings implementing the writ of possession even as
EMI’s pending motion for reconsideration was still unresolved by Branch 143.12

In its Order13 dated June 19, 2003, the trial court denied the motion to admit supplemental
complaint on the ground that the matters raised in the supplemental complaint were improper as
they pertain to issuances by another branch in a separate petition for writ of possession.

At the scheduled pre-trial conference on June 26, 2003, on motion of petitioners, they were allowed
to present evidence exparte in view of the absence of BDO which was non-suited. In its motion for
reconsideration, BDO’s counsel cited extraordinary and non-moving traffic as reason for his failure to
arrive on time for the pre-trial conference. The trial court, in an Order dated August 27, 2003, granted
the said motion, reinstated the case and set the case again for pre-trial conference on September 26,
2003, later moved to November 10, 2003, and finally rescheduled to January 12, 2004 by agreement
of the parties.14

On July 16, 2003, petitioners filed a motion for reconsideration of the June 19, 2003 Order denying
their motion to admit supplemental complaint; BDO filed its opposition to the said motion.

For failure of the petitioners to appear despite due notice at the scheduled pre-trial conference on
January 12, 2004, the case was ordered dismissed.15 In their motion for reconsideration, petitioners’
counsel claimed that his failure to attend was due to his accidental falling on the stairs of his house in
the morning of January 12, 2004, due to which he had to be attended by a "hilot". In an Order dated
May 7, 2004, the trial court reconsidered the dismissal and scheduled anew the pre-trial conference
on June 29, 2004, which date was subsequently reset to August 3, 2004 for lack of proof of service
upon petitioners’ counsel.16

Since petitioners again failed to appear on the re-scheduled pre-trial conference on August 3, 2004,
the trial court issued the following Order:

When this case was called for pre-trial conference, only counsel for the defendants appeared. There
was no appearance on the part of the plaintiffs, despite the fact that as early as June 29, 2004, they
were notified for today’s hearing. The Court, however, is in receipt of a Motion to Reset filed by
counsel for the plaintiff, alleging among others, that he is to appear at the MTC of San Jose, Batangas,
which was set earlier than the hearing of this case. The Court finds the ground not meritorious
16
because counsel of plaintiffs in open Court on June 29, 2004 signed the notification for the hearing of
this case. Counsel could have objected to the chosen date if indeed he was not available. Likewise, the
records will show that on January 12, 2004, this case was also dismissed for failure of the plaintiffs to
appear for pre-trial conference. This should have served as a warning to herein plaintiffs.

In view hereof, upon motion of the herein defendants, the above-entitled case is hereby ordered
dismissed pursuant to Section 5, Rule 18 of the Rules of Court.

SO ORDERED.17 (Italics supplied.)

Petitioners moved to reconsider the above order, their counsel alleging that he had misplaced or lost
his calendar book and could not have ascertained the availability of his schedule. Stressing that he
had no intention to ignore the hearing as in fact he filed a motion to reset the same six days prior to
the scheduled hearing, petitioners’ counsel pleaded for the kind indulgence of the court.

On December 29, 2004, the trial court issued an Order18 granting petitioners’ motion for
reconsideration "in the interest of justice" and reinstating the case. The trial court, however directed
petitioners to be "more circumspect in attending to this case."

In its Order19 dated September 20, 2005, the trial court dismissed the case for failure of petitioners
to prosecute their case. Citing the two previous dismissals on account of petitioners’ non-appearance
at the pre-trial conference, the trial court said that "[f]rom the date of its second reconsideration of
the order of dismissal on December 29, 2004 until today, plaintiffs did not do anything to prosecute
the instant case."

Petitioners filed a motion for reconsideration in which they averred that:

1. After the reconsideration of the Order of dismissal on December 29, 2004, the plaintiffs
counsel, Atty. Anselmo A. Marqueda, on several occasion, passed by the court and diligently
followed-up the hearing of this case. He was assured by an officer of the court to just wait for
the notice of hearing that they will issue in the instant case.

2. While waiting for the notice of hearing from this court, the respective counsels of the parties
negotiated in earnest for an amicable settlement of the case. During the last telephone
conversation with Atty. Roy P.R. Talao, the defendant’s bank counsel, and the undersigned
agree on some proposals for settlement which are however subject to final confirmation of
their respective clients. The plaintiff believe that the parties are very close to agree and enter
into an amicable settlement of this case.

3. Apart from the reliance of the undersigned counsel on the statement of the court officer to
just wait for the notice of hearing, the undersigned counsel suffered a handicap in making a
personal follow-up of this case because of his numerous travels and lengthy sojourn in the
province due to family conflict and death of a member of the family.

17
x x x x20

In its Order21 dated April 10, 2006, the trial court denied petitioners’ motion for reconsideration, as
follows:

x x x Records show that this case has been dismissed thrice (January 12, 2004; August 3, 2004 and
September 20, 2005). The first two dismissals were due to the failure of the plaintiffs to appear during
the pre-trial conference despite notice. In both cases plaintiffs were admonished to be more
circumspect in attending to this case. This time the instant case was dismissed due to inaction of
herein plaintiffs for unreasonable length of time.

The Court has been lenient for quite sometime however, plaintiffs seemed inclined to abuse the
Court’s leniency. Finding no compelling reason to reconsider the assailed order, motion is hereby
DENIED.

SO ORDERED.

Aggrieved, petitioners appealed to the CA arguing that the trial court erred in dismissing the case for
failure to prosecute considering that (1) the trial court has not yet resolved petitioners’ motion for
reconsideration of the order denying their motion to admit supplemental complaint; (2) petitioners
are very much interested to prosecute this case to protect their rights in the premises; (3) petitioners
have valid and meritorious causes of action; (4) petitioners may not be deprived of their day in court
by the negligence of their counsel; and (5) non-suit or default judgment is not encouraged as it
violates due process.22

By Decision dated March 30, 2010, the CA affirmed the trial court’s dismissal of the case. The CA said
that petitioners cannot justify their prolonged inaction by belatedly raising as issue the pending
motion for reconsideration from the trial court’s denial of their motion to admit the supplemental
complaint, when all along they were aware that the case was at the pre-trial stage as in fact the case
was twice dismissed for their failure to attend the pre-trial conference. Under the circumstances
stated in its September 20, 2005 Order, the CA held that the trial court cannot be faulted for
dismissing the case on the ground of petitioners’ failure to prosecute their action, citing this Court’s
ruling in Olave v. Mistas.23

The CA also denied the motion for reconsideration filed by the petitioners.

Petitioners contend that the only reason for the trial court’s dismissal of the case was the failure of
their counsel to move to set the case for pre-trial. However, Section 1, Rule 18 of the 1997 Rules of
Civil Procedure, as amended, imposing upon the plaintiff the duty to promptly move to set the case
for pre-trial, had been repealed and amended by A.M. No. 03-1-09-SC which took effect on August 16,
2004. This amendment to the rule on pre-trial now imposes on the clerk of court the duty to issue a
notice of pre-trial if the plaintiff fails to file a motion to set the case for pre-trial conference.

18
Petitioners point out that the case was not yet ripe for pre-trial because of the unresolved pending
motion for reconsideration of the trial court’s denial of the motion to admit supplemental complaint.
In any event, petitioners assert that they are very much interested to prosecute the case as they have
presented evidence in their application for the issuance of TRO and writ of preliminary injunction,
amended the complaint several times, their representatives have always been attending as notified
by their lawyers, and their counsel was following up the case but the Clerk of Court could not set the
case for pre-trial because of the pending motion. As to the prior dismissals of the case, these should
not be taken as badges of failure to prosecute because these had been set aside on meritorious
grounds. The circumstances that respondent BDO itself had been declared in default for failure to
appear at the pre-trial on June 26, 2003 and has asked repeatedly for extensions of time from the
court, the ongoing negotiations with BDO for amicable settlement even at the appeal stage, and
petitioners’ meritorious causes of action, justify a liberal application of the rules so that petitioners
will be given their day in court.

Respondent BDO, on the other hand, asserts that the failure of petitioners to move for the setting of
the case for pre-trial conference, coupled with their repeated violations of the Rules which prompted
the trial court to dismiss their complaint twice, are sufficient grounds for the trial court to finally
dismiss the complaint. A.M. No. 03-1-09-SC did not remove plaintiff’s obligation to set the case for
pre-trial. Petitioners’ claim that they relied on a supposed assurance by a court personnel to set the
case for pre-trial is doubtful, aside from being contradictory to the admission of petitioners’ counsel
that he "suffered a handicap in making a personal follow-up of this case because of [his] numerous
travels and lengthy sojourn in the province due to family conflict and death of a member of the
family."

As to the alleged negotiations for an amicable settlement, respondent admitted there were talks
during court hearings and telephone calls but these were casual and at best, exploratory. No serious
offer was made by petitioners, much less concretized. At any rate, even if true, such talks is not a
ground to tarry and delay the prosecution of the case which had been pending with the trial court for
more than three years and had not even left the pre-trial stage. If indeed petitioners were sincere in
their desire to settle, they should have promptly moved for the setting of pre-trial so that the case
can be referred for mandatory mediation proceedings.

The petition has no merit.

Under Section 3,24 Rule 17 of the 1997 Rules of Civil Procedure, as amended, the failure on the part
of the plaintiff, without any justifiable cause, to comply with any order of the court or the Rules, or to
prosecute his action for an unreasonable length of time, may result in the dismissal of the complaint
either motu proprio or on motion by the defendant. The failure of a plaintiff to prosecute the action
without any justifiable cause within a reasonable period of time will give rise to the presumption that
he is no longer interested to obtain from the court the relief prayed for in his complaint; hence, the
court is authorized to order the dismissal of the complaint on its own motion or on motion of the
defendants. The presumption is not, by any means, conclusive because the plaintiff, on a motion for
reconsideration of the order of dismissal, may allege and establish a justifiable cause for such

19
failure.25 The burden to show that there are compelling reasons that would make a dismissal of the
case unjustified is on the petitioners.26

Under Section 1, Rule 18 of the 1997 Rules of Civil Procedure, as amended, it is the duty of the
plaintiff, after the last pleading has been served and filed, to promptly move ex parte that the case be
set for pre-trial. On August 16, 2004, A.M. No. 03-1-09-SC (Re: Proposed Rule on Guidelines to be
Observed by Trial Court Judges and Clerks of Court in the Conduct of Pre-Trial and Use of Deposition-
Discovery Measures) took effect, which provides that:

Within five (5) days from date of filing of the reply, the plaintiff must promptly move ex parte that the
case be set for pre-trial conference. If the plaintiff fails to file said motion within the given period, the
Branch COC shall issue a notice of pre-trial.

We note that when the above guidelines took effect, the case was already at the pre-trial stage and it
was the failure of petitioners to set the case anew for pre-trial conference which prompted the trial
court to dismiss their complaint.

In Olave v. Mistas,27 this Court said that even if the plaintiff fails to promptly move for pre-trial
without any justifiable cause for such delay, the extreme sanction of dismissal of the complaint might
not be warranted if no substantial prejudice would be caused to the defendant, and there are special
and compelling reasons which would make the strict application of the rule clearly unjustified. In the
more recent case of Espiritu v. Lazaro,28 this Court affirmed the dismissal of a case for failure to
prosecute, the plaintiff having failed to take the initiative to set the case for pre-trial for almost one
year from their receipt of the Answer. Although said case was decided prior to the effectivity of A.M.
No. 03-1-09-SC, the Court considered the circumstances showing petitioners’ and their counsel’s lack
of interest and laxity in prosecuting their case.

In this case, while there was no substantial prejudice caused to herein respondent, who has already
consolidated the ownership of petitioners’ properties, secured new titles in its name and successfully
implemented a writ of possession issued by another branch, there was neither patent abuse in the
trial court’s dismissal of the complaint for the third time, the earlier two dismissals having been
precipitated by petitioners’ non-appearance at the pre-trial conference. Contrary to petitioners’
assertion, the trial court did not find their offered excuses as meritorious or justifiable; the trial court
in the exercise of discretion simply reinstated the case "in the interest of justice" but explicitly warned
petitioners to be more circumspect in attending to the case.

However, despite the trial court’s leniency and admonition, petitioners continued to exhibit laxity and
inattention in attending to their case. Assuming domestic problems had beset petitioners’ counsel in
the interregnum, with greater reason should he make proper coordination with the trial court to
ensure his availability on the date to be chosen by the trial court for the long-delayed conduct of a
pre-trial conference. Petitioners themselves did nothing to get the case moving for nine months and
set the case anew for pre-trial even as BDO was already seeking their judicial ejectment with the
implementation of the writ of possession issued by Branch 143. Such circumstance also belies their
pretense that the parties were then still negotiating for a settlement. We have held that a party
20
cannot blame his counsel when he himself was guilty of neglect; and that the laws aid the vigilant, not
those who slumber on their rights. Vigilantibus sed non dormientibus jura subveniunt.29

We also agree with the CA that petitioners are belatedly raising as issue the unresolved motion for
reconsideration of the denial of petitioners’ motion to admit supplemental complaint. Petitioners did
not even file a motion to resolve the said pending incident which, in any event, could have been
brought to the trial court’s attention had petitioners acted promptly to have the case set anew for
pre-trial conference soon after or within a reasonable time from the reinstatement of the case on
December 29, 2004.

While under the present Rules, it is now the duty of the clerk of court to set the case for pre-trial if
the plaintiff fails to do so within the prescribed period, this does not relieve the plaintiff of his own
duty to prosecute the case diligently. This case had been at the pre-trial stage for more than two
years and petitioners have not shown special circumstances or compelling reasons to convince us that
the dismissal of their complaint for failure to prosecute was unjustified.

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated March 30, 2010 and
Resolution dated June 15, 2010 of the Court of Appeals in CA-G.R. CV No. 89779 are hereby
AFFIRMED and UPHELD.

Costs against the petitioners.

SO ORDERED.

G.R. No. 170354 June 30, 2006

EDGARDO PINGA, Petitioner,


vs.
THE HEIRS OF GERMAN, SANTIAGO represented by FERNANDO SANTIAGO, Respondents.

DECISION

TINGA, J.:

The constitutional faculty of the Court to promulgate rules of practice and procedure 1 necessarily
carries the power to overturn judicial precedents on points of remedial law through the amendment
of the Rules of Court. One of the notable changes introduced in the 1997 Rules of Civil Procedure is
the explicit proviso that if a complaint is dismissed due to fault of the plaintiff, such dismissal is
"without prejudice to the right of the defendant to prosecute his counterclaim in the same or in a
separate action."2 The innovation was instituted in spite of previous jurisprudence holding that the
fact of the dismissal of the complaint was sufficient to justify the dismissal as well of the compulsory
counterclaim.3

21
In granting this petition, the Court recognizes that the former jurisprudential rule can no longer stand
in light of Section 3, Rule 17 of the 1997 Rules of Civil Procedure.

The relevant facts are simple enough. Petitioner Eduardo Pinga was named as one of two defendants
in a complaint for injunction4 filed with Branch 29 of the Regional Trial Court (RTC)5 of San Miguel,
Zamboanga del Sur, by respondent Heirs of German Santiago, represented by Fernando Santiago. The
Complaint6 dated 28 May 1998 alleged in essence that petitioner and co-defendant Vicente Saavedra
had been unlawfully entering the coco lands of the respondent, cutting wood and bamboos and
harvesting the fruits of the coconut trees therein. Respondents prayed that petitioner and Saavedra
be enjoined from committing "acts of depredation" on their properties, and ordered to pay damages.

In their Amended Answer with Counterclaim,7 petitioner and his co-defendant disputed respondents’
ownership of the properties in question, asserting that petitioner’s father, Edmundo Pinga, from
whom defendants derived their interest in the properties, had been in possession thereof since the
1930s.8 They alleged that as far back as 1968, respondents had already been ordered ejected from the
properties after a complaint for forcible entry was filed by the heirs of Edmundo Pinga. It was further
claimed that respondents’ application for free patent over the properties was rejected by the Office
of the President in 1971. Defendants in turn prayed that owing to respondents’ forcible re-entry in
the properties and the irresponsible and reckless filing of the case, they be awarded various types of
damages instead in amounts totaling P2,100,000 plus costs of suit.9

By July of 2005, the trial of the case had not yet been completed. Moreover, respondents, as
plaintiffs, had failed to present their evidence. It appears that on 25 October 2004, the RTC already
ordered the dismissal of the complaint after respondents’ counsel had sought the postponement of
the hearing scheduled then.10 However, the order of dismissal was subsequently reconsidered by the
RTC in an Order dated 9 June 2005, which took into account the assurance of respondents’ counsel
that he would give priority to that case.11

At the hearing of 27 July 2005, plaintiffs’ counsel on record failed to appear, sending in his stead a
representative who sought the postponement of the hearing. Counsel for defendants (who include
herein petitioner) opposed the move for postponement and moved instead for the dismissal of the
case. The RTC noted that it was obvious that respondents had failed to prosecute the case for an
unreasonable length of time, in fact not having presented their evidence yet. On that ground, the
complaint was dismissed. At the same time, the RTC allowed defendants "to present their evidence
ex-parte."12

Respondents filed a Motion for Reconsideration13 of the order issued in open court on 27 July 2005,
opting however not to seek that their complaint be reinstated, but praying instead that the entire
action be dismissed and petitioner be disallowed from presenting evidence ex-parte. Respondents
claimed that the order of the RTC allowing petitioner to present evidence ex-parte was not in accord
with established jurisprudence. They cited cases, particularly City of Manila v. Ruymann14 and
Domingo v. Santos,15 which noted those instances in which a counterclaim could not remain pending
for independent adjudication.

22
On 9 August 2005, the RTC promulgated an order granting respondents’ Motion for Reconsideration
and dismissing the counterclaim, citing as the only ground therefor that "there is no opposition to the
Motion for Reconsideration of the [respondents]."16 Petitioner filed a Motion for Reconsideration, but
the same was denied by the RTC in an Order dated 10 October 2005.17 Notably, respondents filed an
Opposition to Defendants’ Urgent Motion for Reconsideration, wherein they argued that the
prevailing jurisprudential rule18 is that "compulsory counterclaims cannot be adjudicated
independently of plaintiff’s cause of action," and "a conversu, the dismissal of the complaint carries
with it the dismissal of the compulsory counterclaims."19

The matter was elevated to this Court directly by way of a Petition for Review under Rule 45 on a pure
question of law, the most relevant being whether the dismissal of the complaint necessarily carries
the dismissal of the compulsory counterclaim.

We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Procedure, the dismissal of the
complaint due to the fault of plaintiff does not necessarily carry with it the dismissal of the
counterclaim, compulsory or otherwise. In fact, the dismissal of the complaint is without prejudice to
the right of defendants to prosecute the counterclaim.

On a prefatory note, the RTC, in dismissing the counterclaim, did not expressly adopt respondents’
argument that the dismissal of their complaint extended as well to the counterclaim. Instead, the RTC
justified the dismissal of the counterclaim on the ground that "there is no opposition to [plaintiff’s]
Motion for Reconsideration [seeking the dismissal of the counterclaim]."20 This explanation is hollow,
considering that there is no mandatory rule requiring that an opposition be filed to a motion for
reconsideration without need for a court order to that effect; and, as posited by petitioner, the
"failure to file an opposition to the Plaintiff’s Motion for Reconsideration is definitely not one among
the established grounds for dismissal [of the counterclaim]."21 Still, the dismissal of the counterclaim
by the RTC betrays at very least a tacit recognition of respondents’ argument that the counterclaim
did not survive the dismissal of the complaint. At most, the dismissal of the counterclaim over the
objection of the defendant (herein petitioner) on grounds other than the merits of the counterclaim,
despite the provisions under Rule 17 of the 1997 Rules of Civil Procedure, constitutes a debatable
question of law, presently meriting justiciability through the instant action. Indeed, in reviewing the
assailed orders of the RTC, it is inevitable that the Court consider whether the dismissal of the
complaint, upon motion of the defendant, on the ground of the failure to prosecute on plaintiff’s part
precipitates or carries with it the dismissal of the pending counterclaims.

Our core discussion begins with Section 3, Rule 17 of the 1997 Rules of Civil Procedure, which states:

SEC. 3. Dismissal due to fault of plaintiff.—If, for no justifiable cause, the plaintiff fails to appear on
the date of the presentation of his evidence in chief on the complaint, or to prosecute his action for
an unreasonable length of time, or to comply with these Rules or any order of the court, the
complaint may be dismissed upon motion of defendant or upon the court's own motion, without
prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate
action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise
declared by the court.
23
The express qualification in the provision that the dismissal of the complaint due to the plaintiff’s
fault, as in the case for failure to prosecute, is without prejudice to the right of the defendant to
prosecute his counterclaim in the same or separate action. This stands in marked contrast to the
provisions under Rule 17 of the 1964 Rules of Court which were superseded by the 1997
amendments. In the 1964 Rules, dismissals due to failure to prosecute were governed by Section 3,
Rule 17, to wit:

SEC. 3. Failure to prosecute. — If plaintiff fails to appear at the time of the trial, or to prosecute his
action for an unreasonable length of time, or to comply with these rules or any order of the court, the
action may be dismissed upon motion of the defendant or upon the court’s own motion. This
dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by court.

Evidently, the old rule was silent on the effect of such dismissal due to failure to prosecute on the
pending counterclaims. As a result, there arose what one authority on remedial law characterized as
"the nagging question of whether or not the dismissal of the complaint carries with it the dismissal of
the counterclaim."22 Jurisprudence construing the previous Rules was hardly silent on the matter.

In their arguments before the RTC on the dismissal of the counterclaim, respondents cited in support
City of Manila v.

Ruymann,23 Domingo v. Santos,24 Belleza v. Huntington,25 and Froilan v. Pan Oriental Shipping Co.,26 all
of which were decided more than five decades ago. Notably though, none of the complaints in these
four cases were dismissed either due to the fault of the plaintiff or upon the instance of the
defendant.27

The distinction is relevant, for under the previous and current incarnations of the Rules of Civil
Procedure, it is Section 3, Rule 17 that governs the dismissals due to the failure of the plaintiff to
prosecute the complaint, as had happened in the case at bar. Otherwise, it is Section 2, Rule 17, which
then, and still is now, covered dismissals ordered by the trial court upon the instance of the plaintiff. 28
Yet, as will be seen in the foregoing discussion, a discussion of Section 2 cannot be avoided as the
postulate behind that provision was eventually extended as well in cases that should have properly
been governed by Section 3.

Even though the cases cited by respondents involved different factual antecedents, there exists more
appropriate precedents which they could have cited in support of their claim that the counterclaim
should have been dismissed even if the dismissal of the complaint was upon the defendants’ motion
and was predicated on the plaintiff’s fault. BA Finance Corp. v. Co29 particularly stands out in that
regard, although that ruling is itself grounded on other precedents as well. Elucidation of these cases
is in order.

On the general effect of the dismissal of a complaint, regardless of cause, on the pending
counterclaims, previous jurisprudence laid emphasis on whether the counterclaim was compulsory or
permissive in character. The necessity of such distinction was provided in the 1964 Rules itself,
particularly Section 2, Rule 17, which stated that in instances wherein the plaintiff seeks the dismissal
24
of the complaint, "if a counterclaim has been pleaded by a defendant prior to the service upon him of
the plaintiff’s motion to dismiss, the action shall not be dismissed against the defendant’s objection
unless the counterclaim can remain pending for independent adjudication by the court."30 The

vaunted commentaries of Chief Justice Moran, remarking on Section 2, Rule 17, noted that "[t]here
are instances in which a counterclaim cannot remain pending for independent adjudication, as, where
it arises out of, or is necessarily connected with, the transaction or occurrence which is the subject
matter of the opposing party’s claim."31

This view expressed in Moran’s Commentaries was adopted by the Court in cases where the
application of Section 2, Rule 17 of the 1964 Rules of Court was called for, such as in Lim Tanhu v.
Ramolete,32 and Dalman v. City Court of Dipolog City.33 The latter case warrants brief elaboration.
Therein, the plaintiff in a civil case for damages moved for the withdrawal of her own case on the
ground that the dispute had not been referred to the barangay council as required by law. Over the
objection of the defendant, who feared that her own counterclaim would be prejudiced by the
dismissal, plaintiff’s motion was granted, the complaint and the counterclaim accordingly dismissed
by the trial court. The Court refused to reinstate the counterclaim, opining without elaboration, "[i]f
the civil case is dismissed, so also is the counterclaim filed therein."34 The broad nature of that
statement gave rise to the notion that the mandatory

dismissal of the counterclaim upon dismissal of the complaint applied regardless of the cause of the
complaint’s dismissal.35

Notably, the qualification concerning compulsory counterclaims was provided in Section 2, Rule 17 of
the 1964 Rules, the provision governing dismissals by order of the court, and not Section 3, Rule 17.
As stated earlier, Section 3, which covered dismissals for failure to prosecute upon motion of the
defendant or upon motu proprio action of the trial court, was silent on the effect on the counterclaim
of dismissals of such nature.

Spouses Sta. Maria, Jr. v. Court of Appeals,36 decided in 1972, ostensibly supplied the gap on the
effect on the counterclaim of complaints dismissed under Section 3. The defendants therein
successfully moved before the trial court for the dismissal of the complaint without prejudice and
their declaration in default on the counterclaim after plaintiffs therein failed to attend the pre-trial.
After favorable judgment was rendered on the counterclaim, plaintiffs interposed an appeal, citing
among other grounds, that the counterclaim could no longer have been heard after the dismissal of
the complaint. While the Court noted that the adjudication of the counterclaim in question "does not
depend upon the adjudication of the claims made in the complaint since they were virtually
abandoned by the non-appearance of the plaintiffs themselves," it was also added that "[t]he
doctrine invoked is not available to plaintiffs like the petitioners, who prevent or delay the hearing of
their own claims and allegations."37 The Court, through Justice JBL Reyes, noted:

The doctrine that the complaint may not be dismissed if the counterclaim cannot be independently
adjudicated is not available to, and was not intended for the benefit of, a plaintiff who prevents or
delays the prosecution of his own complaint. Otherwise, the trial of counterclaims would be made to
25
depend upon the maneuvers of the plaintiff, and the rule would offer a premium to vexing or delaying
tactics to the prejudice of the counterclaimants. It is in the same spirit that we have ruled that a
complaint may not be withdrawn over the opposition of the defendant where the counterclaim is one
that arises from, or is necessarily connected with, the plaintiff’s action and cannot remain pending for
independent adjudication.38

There is no doubt that under the 1964 Rules, the dismissal of a complaint due to the failure of the
plaintiff to appear during pre-trial, as what had happened in Sta. Maria, fell within the coverage of
Section 3, Rule 17. On the other hand, Section 2 was clearly limited in scope to those dismissals
sustained at the instance of the plaintiff.39 Nonetheless, by the early 1990s, jurisprudence was settling
on a rule that compulsory counterclaims were necessarily terminated upon the dismissal of the
complaint not only if such dismissal was upon motion of the plaintiff, but at the instance of the
defendant as well. Two decisions from that period stand out in this regard, Metals Engineering
Resources Corp. v. Court of Appeals40 and International Container Terminal Services v. Court of
Appeals.41

In Metals, the complaint was expunged from the record after the defendant had filed a motion for
reconsideration of a trial court order allowing the filing of an amended complaint that corrected a
jurisdictional error in the original complaint pertaining to the specification of the amount of damages
sought. When the defendant was nonetheless allowed to present evidence on the counterclaim, the
plaintiff assailed such allowance on the ground that the counterclaim was compulsory and could no
longer remain pending for independent adjudication. The Court, in finding for the plaintiff, noted that
the counterclaim was indeed compulsory in nature, and as such, was auxiliary to the proceeding in
the original suit and derived its jurisdictional support therefrom.42 It was further explained that the
doctrine was in consonance with the primary objective of a counterclaim, which was to avoid and
prevent circuitry of action by allowing the entire controversy between the parties to be litigated and
finally determined in one action, and to discourage multiplicity of suits.43 Also, the Court noted that
since the complaint was dismissed for lack of jurisdiction, it was as if no claim was filed against the
defendant, and there was thus no more leg for the complaint to stand on.44

In International Container, the defendant filed a motion to dismiss which was granted by the trial
court. The defendant’s counterclaim was dismissed as well. The Court summarized the key question
as "what is the effect of the dismissal of a complaint ordered at the instance of the defendant upon a
compulsory counterclaim duly raised in its answer."45 Then it ruled that the counterclaim did not
survive such dismissal. After classifying the counterclaim therein as compulsory, the Court noted that
"[i]t is obvious from the very nature of the counterclaim that it could not remain pending for
independent adjudication, that is, without adjudication by the court of the complaint itself on which
the counterclaim was based."46

Then in 1993, a divided Court ruled in BA Finance that the dismissal of the complaint for
nonappearance of plaintiff at the pre-trial, upon motion of the defendants, carried with it the
dismissal of their compulsory counterclaim.47 The Court reiterated the rule that "a compulsory
counterclaim cannot remain pending for independent adjudication by the court… as it is auxiliary to
the proceeding in the original suit and merely derives its jurisdictional support therefrom." 48 Express
26
reliance was made on Metals, International Container, and even Dalman in support of the majority’s
thesis. BA Finance likewise advised that the proper remedy for defendants desirous that their
counterclaims not be dismissed along with the main complaint was for them to move to declare the
plaintiffs to be "non-suited" on their complaint and "as in default" on their compulsory counterclaim,
instead of moving for the dismissal of the complaint.49

Justice Regalado, joined by Chief Justice Narvasa, registered a strong objection to the theory of the
majority. They agreed that the trial court could no longer hear the counterclaim, but only on the
ground that defendant’s motion to be allowed to present evidence on the counterclaim was filed
after the order dismissing the complaint had already become final. They disagreed however that the
compulsory counterclaim was necessarily dismissed along with the main complaint, pointing out that
a situation wherein the dismissal of the complaint was occasioned by plaintiff’s failure to appear
during pre-trial was governed under Section 3, Rule 17, and not Section 2 of the same rule. Justice
Regalado, who ironically penned the decision in Metals cited by the majority, explained:

Turning back to Rule 17, it is readily apparent that Sections 2 and 3 thereof envisage different factual
and adjective situations. The dismissal of the complaint under Section 2 is at the instance of plaintiff,
for whatever reason he is minded to move for such dismissal, and, as a matter of procedure, is
without prejudice unless otherwise stated in the order of the court or, for that matter, in plaintiff's
motion to dismiss his own complaint. By reason thereof, to curb any dubious or frivolous strategy of
plaintiff for his benefit or to obviate possible prejudice to defendant, the former may not dismiss his
complaint over the defendant's objection if the latter has a compulsory counterclaim since said
counterclaim would necessarily be divested of juridical basis and defendant would be deprived of
possible recovery thereon in that same judicial proceeding.

Section 3, on the other hand, contemplates a dismissal not procured by plaintiff, albeit justified by
causes imputable to him and which, in the present case, was petitioner's failure to appear at the pre-
trial. This situation is also covered by Section 3, as extended by judicial interpretation, and is ordered
upon motion of defendant or motu proprio by the court. Here, the issue of whether defendant has a
pending counterclaim, permissive or compulsory, is not of determinative significance. The dismissal of
plaintiff's complaint is evidently a confirmation of the failure of evidence to prove his cause of action
outlined therein, hence the dismissal is considered, as a matter of evidence, an adjudication on the
merits. This does not, however, mean that there is likewise such absence of evidence to prove
defendant's counterclaim although the same arises out of the subject matter of the complaint which
was merely terminated for lack of proof. To hold otherwise would not only work injustice to
defendant but would be reading a further provision into Section 3 and wresting a meaning therefrom
although neither exists even by mere implication. Thus understood, the complaint can accordingly be
dismissed, but relief can nevertheless be granted as a matter of course to defendant on his
counterclaim as alleged and proved, with or without any reservation therefor on his part, unless from
his conduct, express or implied, he has virtually consented to the concomitant dismissal of his
counterclaim.50

Justice Regalado also adverted to Sta. Maria and noted that the objections raised and rejected by the
Court therein were the same as those now relied upon by the plaintiff. He pointed out that Dalman
27
and International Container, both relied upon by the majority, involved the application of Section 2,
Rule 17 and not Section 3, which he insisted as the applicable provision in the case at bar. 51

The partial dissent of Justice Regalado in BA Finance proved opportune, as he happened then to be a
member of the Rules of Court Revision Committee tasked with the revision of the 1964 Rules of
Court. Just a few months after BA Finance was decided, Justice Regalado proposed before the
Committee an amendment to Section 3, Rule 17 that would explicitly provide that the dismissal of the
complaint due to the fault of the plaintiff shall be "without prejudice to the right of the defendant to
prosecute his counterclaim in the same or in a separate action." The amendment, which was
approved by the Committee, is reflected in the minutes of the meeting of the Committee held on 12
October 1993:

[Justice Regalado] then proposed that after the words "upon the court’s own motion" in the 6th line
of the draft in Sec. 3 of Rule 17, the following provision be inserted: "without prejudice to the right of
the defendant to prosecute his counterclaim in the same or in a separate action." The Committee
agreed with the proposed amendment of Justice Regalado.

Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not the action that is dismissed but
the complaint. He asked whether there is any distinction between "complaint" and "action." Justice
Regalado opined that the action of the plaintiff is initiated by his complaint.

Justice Feria then suggested that the dismissal be limited to the complaint[.] Thus, in the 1st line of
Sec. 1, the words "An action" will be changed to "a complaint"; in the 2nd line of Sec. 2, the words
"an action" will be changed to "a complaint" and in Sec. 3, the word "action" on the 5th line of the
draft will be changed to "complaint." The Committee agreed with Justice Feria’s suggested
amendments.

CA Paño believed that there is a need to clarify the counterclaim that the defendant will prosecute,
whether it is permissive or compulsory or all kinds of counterclaims.

Justice Regalado opined that there is no need of making a clarification because it is already
understood that it covers both counterclaims.52

It is apparent from these minutes that the survival of the counterclaim despite the dismissal of the
complaint under Section 3 stood irrespective of whether the counterclaim was permissive or
compulsory. Moreover, when the Court itself approved the revisions now contained in the 1997 Rules
of Civil Procedure, not only did Justice Regalado’s amendment to Section 3, Rule 17 remain intact, but
the final version likewise eliminated the qualification formerly offered under Section 2 on
"counterclaims that can remain pending for independent adjudication by the court."53 At present,
even Section 2, concerning dismissals on motion of the plaintiff, now recognizes the right of the
defendant to prosecute the counterclaim either in the same or separate action notwithstanding the
dismissal of the complaint, and without regard as to the permissive or compulsory nature of the
counterclaim.

28
In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado expounds on the effects of
the amendments to Section 2 and 3 of Rule 17:

2. Under this revised section [2], where the plaintiff moves for the dismissal of his complaint to which
a counterclaim has been interposed, the dismissal shall be limited to the complaint. Such dismissal
shall be without prejudice to the right of the defendant to either prosecute his counterclaim in a
separate action or to have the same resolved in the same action. Should he opt for the first
alternative, the court should render the corresponding order granting and reserving his right to
prosecute his claim in a separate complaint. Should he choose to have his counterclaim disposed of in
the same action wherein the complaint had been dismissed, he must manifest such preference to the
trial court within 15 days from notice to him of plaintiff’s motion to dismiss. These alternative
remedies of the defendant are available to him regardless of whether his counterclaim is
compulsory or permissive. A similar alternative procedure, with the same underlying reason therefor,
is adopted in Sec. 6, Rule 16 and Sec. 3 of this Rule, wherein the complaint is dismissed on the motion
of the defendant or, in the latter instance, also by the court motu proprio.

xxxx

2. The second substantial amendment to [Section 3] is with respect to the disposition of the
defendant’s counterclaim in the event the plaintiff’s complaint is dismissed. As already observed, he is
here granted the choice to prosecute that counterclaim in either the same or a separate action. x x x x

3. With the aforestated amendments in Secs. 2 and 3 laying down specific rules on the disposition
of counterclaims involved in the dismissal actions, the controversial doctrine in BA Finance
Corporation vs. Co, et al., (G.R. No. 105751, June 30, 1993) has been abandoned, together with the
apparent confusion on the proper application of said Secs. 2 and 3. Said sections were distinguished
and discussed in the author’s separate opinion in that case, even before they were clarified by the
present amendments x x x.54

Similarly, Justice Feria notes that "the present rule reaffirms the right of the defendant to move for
the dismissal of the complaint and to prosecute his counterclaim, as stated in the separate opinion [of
Justice Regalado in BA Finance.]"55 Retired Court of Appeals Justice Herrera pronounces that the
amendment to Section 3, Rule 17 settles that "nagging question" whether the dismissal of the
complaint carries with it the dismissal of the counterclaim, and opines that by reason of the
amendments, the rulings in Metals Engineering, International Container, and BA Finance "may be
deemed abandoned."56 On the effect of amendment to Section 3, Rule 17, the commentators are in
general agreement,57 although there is less unanimity of views insofar as Section 2, Rule 17 is
concerned.58

To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended
Rule 17, those previous jural doctrines that were inconsistent with the new rules incorporated in the
1997 Rules of Civil Procedure were implicitly abandoned insofar as incidents arising after the
effectivity of the new procedural rules on 1 July 1997. BA Finance, or even the doctrine that a
counterclaim may be necessarily dismissed along with the complaint, clearly conflicts with the 1997
29
Rules of Civil Procedure. The abandonment of BA Finance as doctrine extends as far back as 1997,
when the Court adopted the new Rules of Civil Procedure. If, since then, such abandonment has not
been affirmed in jurisprudence, it is only because no proper case has arisen that would warrant
express confirmation of the new rule. That opportunity is here and now, and we thus rule that the
dismissal of a complaint due to fault of the plaintiff is without prejudice to the right of the defendant
to prosecute any pending counterclaims of whatever nature in the same or separate action. We
confirm that BA Finance and all previous rulings of the Court that are inconsistent with this present
holding are now abandoned.

Accordingly, the RTC clearly erred when it ordered the dismissal of the counterclaim, since Section 3,
Rule 17 mandates that the dismissal of the complaint is without prejudice to the right of the
defendant to prosecute the counterclaim in the same or separate action. If the RTC were to dismiss
the counterclaim, it should be on the merits of such counterclaim. Reversal of the RTC is in order, and
a remand is necessary for trial on the merits of the counterclaim.

It would be perfectly satisfactory for the Court to leave this matter at that. Still, an explanation of the
reason behind the new rule is called for, considering that the rationale behind the previous rule was
frequently elaborated upon.

Under Act No. 190, or the Code of Procedure in Civil Actions promulgated in 1901, it was recognized
in Section 127(1) that the plaintiff had the right to seek the dismissal of the complaint at any time
before trial, "provided a counterclaim has not been made, or affirmative relief sought by the cross-
complaint or answer of the defendant."59 Note that no qualification was made then as to the nature
of the counterclaim, whether it be compulsory or permissive. The protection of the defendant’s right
to prosecute the counterclaim was indeed unqualified. In City of Manila, decided in 1918, the Court
explained:

By paragraph 1 [of Section 127], it will be seen that, where the defendant has interposed a
counterclaim, or is seeking affirmative relief by a cross-complaint, that then, and in that case, the
plaintiff cannot dismiss the action so as to affect the right of the defendant in his counterclaim or
prayer for affirmative relief. The reason for that exception is clear. When the answer sets up an
independent action against the plaintiff, it then becomes an action by the defendant against the
plaintiff, and, of course, the plaintiff has no right to ask for a dismissal of the defendant’s action.60

Nonetheless, a new rule was introduced when Act No. 190 was replaced by the 1940 Rules of Court.
Section 2, Rule 30 of the 1940 Rules specified that if a counterclaim is pleaded by a defendant prior to
the service of the plaintiff’s motion to dismiss, the action shall not be dismissed against the
defendant’s objection unless the counterclaim can remain pending for independent adjudication by
the court. This qualification remained intact when the 1964 Rules of Court was introduced. 61 The rule
referred only to compulsory counterclaims, or counterclaims which arise out of or are necessarily
connected with the transaction or occurrence that is the subject matter of the plaintiff’s claim, since
the rights of the parties arising out of the same transaction should be settled at the same time.62 As
was evident in Metals, International Container and BA Finance, the rule was eventually extended to

30
instances wherein it was the defendant with the pending counterclaim, and not the plaintiff, that
moved for the dismissal of the complaint.

We should not ignore the theoretical bases of the rule distinguishing compulsory counterclaims from
permissive counterclaims insofar as the dismissal of the action is concerned. There is a particular
school of thought that informs the broad proposition in Dalman that "if the civil case is dismissed, so
also is the counterclaim filed therein,"63 or the more nuanced discussions offered in Metals,
International Container, and BA Finance. The most potent statement of the theory may be found in
Metals,64 which proceeds from the following fundamental premises—a compulsory counterclaim
must be set up in the same proceeding or would otherwise be abated or barred in a separate or
subsequent litigation on the ground of auter action pendant, litis pendentia or res judicata; a
compulsory counterclaim is auxiliary to the main suit and derives its jurisdictional support therefrom
as it arises out of or is necessarily connected with the transaction or occurrence that is the subject
matter of the complaint;65 and that if the court dismisses the complaint on the ground of lack of
jurisdiction, the compulsory counterclaim must also be dismissed as it is merely ancilliary to the main
action and no jurisdiction remained for any grant of relief under the counterclaim.

The first point is derived from Section 4, Rule 9, of the 1964 Rules of Court, while the two latter points
are sourced from American jurisprudence. There is no disputing the theoretical viability of these three
points. In fact, the requirement that the compulsory counterclaim must be set up in the same
proceeding remains extant under the 1997 Rules of Civil Procedure.66 At the same time, other
considerations rooted in actual practice provide a counterbalance to the above-cited rationales.

Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint;
namely a cause (or causes) of action constituting an act or omission by which a party violates the right
of another. The main difference lies in that the cause of action in the counterclaim is maintained by
the defendant against the plaintiff, while the converse holds true with the complaint. Yet, as with a
complaint, a counterclaim without a cause of action cannot survive.

It would then seemingly follow that if the dismissal of the complaint somehow eliminates the cause(s)
of the counterclaim, then the counterclaim cannot survive. Yet that hardly is the case, especially as a
general rule. More often than not, the allegations that form the counterclaim are rooted in an act or
omission of the plaintiff other than the plaintiff’s very act of filing the complaint. Moreover, such
acts or omissions imputed to the plaintiff are often claimed to have occurred prior to the filing of
the complaint itself. The only apparent exception to this circumstance is if it is alleged in the
counterclaim that the very act of the plaintiff in filing the complaint precisely causes the violation of
the defendant’s rights. Yet even in such an instance, it remains debatable whether the dismissal or
withdrawal of the complaint is sufficient to obviate the pending cause of action maintained by the
defendant against the plaintiff.67

These considerations persist whether the counterclaim in question is permissive or compulsory. A


compulsory counterclaim arises out of or is connected with the transaction or occurrence constituting
the subject matter of the opposing party’s claim, does not require for its adjudication the presence of
third parties, and stands within the jurisdiction of the court both as to the amount involved and the
31
nature of the claim.68 The fact that the culpable acts on which the counterclaim is based are founded
within the same transaction or occurrence as the complaint, is insufficient causation to negate the
counterclaim together with the complaint. The dismissal or withdrawal of the complaint does not
traverse the boundaries of time to undo the act or omission of the plaintiff against the defendant, or
vice versa. While such dismissal or withdrawal precludes the pursuit of litigation

by the plaintiff, either through his/her own initiative or fault, it would be iniquitous to similarly
encumber the defendant who maintained no such initiative or fault. If the defendant similarly moves
for the dismissal of the counterclaim or neglects to timely pursue such action, let the dismissal of the
counterclaim be premised on those grounds imputable to the defendant, and not on the actuations of
the plaintiff.

The other considerations supplied in Metals are anchored on the premise that the jurisdictional
foundation of the counterclaim is the complaint itself. The theory is correct, but there are other facets
to this subject that should be taken into account as well. On the established premise that a
counterclaim involves separate causes of action than the complaint even if derived from the same
transaction or series of transactions, the counterclaim could have very well been lodged as a
complaint had the defendant filed the action ahead of the complainant.69 The terms "ancillary" or
"auxiliary" may mislead in signifying that a complaint innately possesses more credence than a
counterclaim, yet there are many instances wherein the complaint is trivial but the counterclaim is
meritorious. In truth, the notion that a counterclaim is, or better still, appears to be merely "ancillary"
or "auxiliary" is chiefly the offshoot of an accident of chronology, more than anything else.

The formalistic distinction between a complaint and a counterclaim does not detract from the fact
that both of them embody causes of action that have in their end the vindication of rights. While the
distinction is necessary as a means to facilitate order and clarity in the rules of procedure, it should be
remembered that the primordial purpose of procedural rules is to provide the means for the
vindication of rights. A party with a valid cause of action against another party cannot be denied the
right to relief simply because the opposing side had the good fortune of filing the case first. Yet this in
effect was what had happened under the previous procedural rule and correspondent doctrine, which
under their final permutation, prescribed the automatic dismissal of the compulsory counterclaim
upon the dismissal of the complaint, whether upon the initiative of the plaintiff or of the defendant.

Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable disposition
of the counterclaims by ensuring that any judgment thereon is based on the merit of the counterclaim
itself and not on the survival of the main complaint. Certainly, if the counterclaim is palpably without
merit or suffers jurisdictional flaws which stand independent of the complaint, the trial court is not
precluded from dismissing it under the amended rules, provided that the judgment or order
dismissing the counterclaim is premised on those defects. At the same time, if the counterclaim is
justified, the amended rules now unequivocally protect such counterclaim from peremptory dismissal
by reason of the dismissal of the complaint.

WHEREFORE, the petition is GRANTED. The Orders dated 9 August 2005 and 10 October 2005 of
Branch 29, Regional Trial Court of San Miguel, Zamboanga del Sur in Civil Case No. 98-012 are SET
32
ASIDE. Petitioner’s counterclaim as defendant in Civil Case. No. 98-012 is REINSTATED. The Regional
Trial Court is ORDERED to hear and decide the counterclaim with deliberate dispatch.

SO ORDERED.

G.R. No. 175507 October 8, 2014

RAMON CHING AND POWING PROPERTIES, INC., Petitioners,


vs.
JOSEPH CHENG, JAIME CHENG, MERCEDES IGNE1 AND LUCINA SANTOS, Respondents.

DECISION

LEONEN, J.:

Rule 17 of the Rules of Civil Procedure governs dismissals of actions at the instance of the plaintiff.
Hence, the "two-dismissal rule" under Rule 17, Section 1 of the Rules of Civil Procedure will not apply
if the prior dismissal was done at the instance of the defendant.

This is a petition for review on certiorari assailing the decision2 and resolution3 of the Court of
Appeals in CA-G.R. SP. No. 86818, which upheld the (1) order4 dated November 22, 2002 dismissing
Civil Case No. 02-103319 without prejudice, and (2) the omnibus order5 dated July 30, 2004, which
denied petitioners’ motion for reconsideration. Both orders were issued by the Regional Trial Court of
Manila, Branch 6.6

The issues before this court are procedural. However, the factual antecedents in this case, which
stemmed from a complicated family feud, must be stated to give context to its procedural
development.

It is alleged that Antonio Ching owned several businesses and properties, among which was Po Wing
Properties, Incorporated (Po Wing Properties).7 His total assets are alleged to have been worth more
than 380 million.8 It is also alleged that whilehe was unmarried, he had children from two women.9

Ramon Ching alleged that he was the only child of Antonio Ching with his common-law wife, Lucina
Santos.10 She, however, disputed this. She maintains that even ifRamon Ching’s birth certificate
indicates that he was Antonio Ching’s illegitimate child, she and Antonio Ching merely adopted him
and treated him like their own.11

Joseph Cheng and Jaime Cheng, on the other hand, claim to be Antonio Ching’s illegitimate children
with his housemaid, Mercedes Igne.12 While Ramon Ching disputed this,13 both Mercedes and
Lucina have not.14

33
Lucina Santos alleged that when Antonio Ching fell ill sometime in 1996, he entrusted her with the
distribution of his estate to his heirs if something were to happen to him. She alleged that she handed
all the property titles and business documents to Ramon Ching for safekeeping.15 Fortunately,
Antonio Ching recovered from illness and allegedly demanded that Ramon Ching return all the titles
to the properties and business documents.16

On July 18, 1996, Antonio Ching was murdered.17 Ramon Ching allegedly induced Mercedes Igne and
her children, Joseph Cheng and Jaime Cheng, to sign an agreement and waiver18 to Antonio Ching’s
estate in consideration of ₱22.5 million. Mercedes Igne’s children alleged that Ramon Ching never
paid them.19 On October 29, 1996, Ramon Ching allegedly executed an affidavit of settlement of
estate,20 naming himself as the sole heir and adjudicating upon himself the entirety of Antonio
Ching’s estate.21

Ramon Ching denied these allegationsand insisted that when Antonio Ching died, the Ching family
association, headed by Vicente Cheng, unduly influenced him to give Mercedes Igne and her children
financial aid considering that they served Antonio Ching for years. It was for this reason that an
agreement and waiver in consideration of 22.5 million was made. He also alleged that hewas
summoned by the family association to execute an affidavit of settlement of estate declaring him to
be Antonio Ching’s sole heir.22

After a year of investigating Antonio Ching’s death, the police found Ramon Ching to be its primary
suspect.23 Information24 was filed against him, and a warrant of arrest25 was issued.

On October 7, 1998, Joseph Cheng, Jaime Cheng, and Mercedes Igne (the Chengs) filed a complaint
for declaration of nullity of titles against Ramon Ching before the Regional Trial Court of Manila. This
case was docketed as Civil Case No. 98-91046 (the first case).26

On March 22, 1999, the complaint was amended, with leave of court, to implead additional
defendants, including Po Wing Properties, of which Ramon Ching was a primary stockholder.The
amended complaint was for "Annulment of Agreement, Waiver, Extra-Judicial Settlement of Estate
and the Certificates of Title Issued by Virtue of Said Documents with Prayer for Temporary Restraining
Order and Writ of Preliminary Injunction."27 Sometime after, Lucina Santos filed a motion for
intervention and was allowed to intervene.28

After the responsive pleadings had been filed, Po Wing Properties filed a motion to dismiss on the
ground of lack of jurisdiction of the subject matter.29

On November 13, 2001, the Regional Trial Court of Manila, Branch 6, granted the motion to dismiss
on the ground of lack of jurisdiction over the subject matter.30 Upon motion of the Chengs’ counsel,
however, the Chengs and Lucina Santos were given fifteen (15) days to file the appropriate pleading.
They did not do so.31

On April 19, 2002, the Chengs and Lucina Santos filed a complaint for "Annulment of Agreement,
Waiver, Extra-Judicial Settlement of Estate and the Certificates of Title Issued by Virtue of Said
34
Documents with Prayer for Temporary Restraining Order and Writ of Preliminary Injunction" against
Ramon Ching and Po Wing Properties.32 This case was docketed as Civil Case No. 02-103319 (the
second case) and raffled to Branch 20 of the Regional Trial Court of Manila.33 When Branch 20 was
made aware of the first case, it issued an order transferring the case to Branch 6, considering that the
case before it involved substantially the same parties and causes of action.34

On November 11, 2002, the Chengs and Lucina Santos filed a motion to dismiss their complaint in the
second case, praying that it be dismissed without prejudice.35

On November 22, 2002, Branch 6 issued an order granting the motion to dismiss on the basis that the
summons had not yet been served on Ramon Ching and Po Wing Properties, and they had not yet
filed any responsive pleading. The dismissal of the second case was made without prejudice.36

On December 9, 2002, Ramon Ching and Po Wing Properties filed a motion for reconsideration of the
order dated November 22, 2002. They argue that the dismissal should have been with prejudice
under the "two dismissal rule" of Rule 17, Section 1 of the 1997 Rules of Civil Procedure, in view of
the previous dismissal of the first case.37

During the pendency of the motion for reconsideration, the Chengs and Lucina Santos filed a
complaint for "Disinheritance and Declaration of Nullity of Agreement and Waiver, Affidavit of Extra
judicial Agreement, Deed of Absolute Sale, and Transfer Certificates of Title with Prayer for TRO and
Writ of Preliminary Injunction" against Ramon Ching and Po Wing Properties. This case was docketed
as Civil Case No. 02-105251(the third case) and was eventually raffled to Branch 6.38

On December 10, 2002, Ramon Ching and Po Wing Properties filed their comment/opposition to the
application for temporary restraining order in the third case. They also filed a motion to dismiss on
the ground of res judicata, litis pendencia, forum-shopping, and failure of the complaint to state a
cause of action. A series of responsive pleadings were filed by both parties.39

On July 30, 2004, Branch 6 issued an omnibus order40 resolving both the motion for reconsideration
in the second case and the motion to dismiss in the third case. The trial court denied the motion for
reconsideration and the motion to dismiss, holding that the dismissal of the second case was without
prejudice and, hence, would not bar the filing of the third case.41 On October 8, 2004, while their
motion for reconsideration in the third case was pending, Ramon Ching and Po Wing Properties filed a
petition for certiorari (the first certiorari case) with the Court of Appeals, assailing the order dated
November 22,2002 and the portion of the omnibus order dated July 30, 2004, which upheldthe
dismissal of the second case.42

On December 28, 2004, the trial court issued an order denying the motion for reconsideration in the
third case. The denial prompted Ramon Ching and Po Wing Properties to file a petition for certiorari
and prohibition with application for a writ of preliminary injunction or the issuance of a temporary
restraining order (the second certiorari case) with the Court of Appeals.43

35
On March 23, 2006, the Court of Appeals rendered the decision44 in the first certiorari case
dismissing the petition. The appellate court ruled that Ramon Ching and Po Wing Properties’ reliance
on the "two-dismissal rule" was misplaced since the rule involves two motions for dismissals filed by
the plaintiff only. In this case, it found that the dismissal of the first case was upon the motion of the
defendants, while the dismissal of the second case was at the instance of the plaintiffs.45

Upon the denial of their motion for reconsideration,46 Ramon Ching and Po Wing Properties filed this
present petition for review47 under Rule 45 of the Rules of Civil Procedure.

Ramon Ching and Po Wing Properties argue that the dismissal of the second case was with prejudice
since the non-filing of an amended complaint in the first case operated as a dismissal on the merits.48
They also argue that the second case should be dismissed on the ground of res judicata since there
was a previous final judgment of the first case involving the same parties, subject matter, and cause
of action.49

Lucina Santos was able to file a comment50 on the petition within the period required.51 The Chengs,
however, did not comply.52 Upon the issuance by this court of a show cause order on September 24,
2007,53 they eventually filed a comment with substantially the same allegations and arguments as
that of Lucina Santos’.54

In their comment, respondents allege that when the trial court granted the motion to dismiss, Ramon
Ching’s counsel was notified in open court that the dismissal was without prejudice. They argue that
the trial court’s order became final and executory whenhe failed to file his motion for reconsideration
within the reglementary period.55

Respondents argue that the petition for review should be dismissed on the ground of forum shopping
and litis pendencia since Ramon Ching and Po Wing Properties are seeking relief simultaneously in
two forums by filing the two petitions for certiorari, which involved the same omnibus order by the
trial court.56 They also argue that the "two-dismissal rule" and res judicata did not apply since (1) the
failure to amend a complaint is not a dismissal, and (2) they only moved for dismissal once in the
second case.57

In their reply,58 petitioners argue that they did not commit forum shopping since the actions they
commenced against respondents stemmed from the complaints filed against them in the trial
courts.59 They reiterate that their petition for review is only about the second case; it just so
happened that the assailed omnibus order resolved both the second and third cases.60

Upon the filing of the parties’ respective memoranda,61 the case was submitted for decision.62

For this court’s resolution are the following issues:

I. Whether the trial court’s dismissal of the second case operated as a bar to the filing of a third
case, asper the "two-dismissal rule"; and

36
II. Whether respondents committed forum shopping when they filed the third case while the
motion for reconsideration of the second case was still pending.

The petition is denied.

The "two-dismissal rule" vis-à-vis

the Rules of Civil Procedure

Dismissals of actions are governed by Rule 17 of the 1997 Rules of Civil Procedure. The pertinent
provisions state:

RULE 17
DISMISSAL OF ACTIONS

SEC. 1. Dismissal upon notice by plaintiff. — A complaint may be dismissed by the plaintiff by filing a
notice of dismissal at any time before service of the answer or of a motion for summary judgment.
Upon such notice being filed, the court shall issue an order confirming the dismissal. Unless otherwise
stated in the notice, the dismissal is without prejudice, except that a notice operates as an
adjudication upon the merits when filed by a plaintiff who has once dismissed in a competent court
an action based on or including the same claim.

SEC. 2. Dismissal upon motion of plaintiff. — Except as provided in the preceding section, a complaint
shall not be dismissed at the plaintiff's instance save upon approval of the court and upon such terms
and conditions as the court deems proper. If a counterclaim has been pleaded by a defendant prior to
the service upon him of the plaintiff’s motion for dismissal, the dismissal shall be limited to the
complaint. The dismissal shall be without prejudice to the right of the defendant to prosecute his
counterclaim in a separate action unless within fifteen (15) days from notice of the motion he
manifests his preference to have his counterclaim resolved in the same action. Unless otherwise
specified in the order, a dismissal under this paragraph shall be without prejudice. A class suit shall
not be dismissed or compromised without the approval of the court.

SEC. 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause, the plaintiff fails to appear on
the date of the presentation of his evidence in chief on the complaint, or to prosecute his action for
an unreasonable length of time, or to comply with these Rules or any order of the court, the
complaint may be dismissed upon motion of the defendant or upon the court's own motion, without
prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate
action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise
declared by the court. (Emphasis supplied)

The first section of the rule contemplates a situation where a plaintiff requests the dismissal of the
case beforeany responsive pleadings have been filed by the defendant. It is donethrough notice by
the plaintiff and confirmation by the court. The dismissal is without prejudice unless otherwise
declared by the court.
37
The second section of the rule contemplates a situation where a counterclaim has been pleaded by
the defendant before the service on him or her of the plaintiff’s motion to dismiss. It requires leave of
court, and the dismissal is generally without prejudice unless otherwise declared by the court.

The third section contemplates dismissals due to the fault of the plaintiff such as the failure to
prosecute. The case is dismissed either upon motion of the defendant or by the court motu propio.
Generally, the dismissal is with prejudice unless otherwise declared by the court.

In all instances, Rule 17 governs dismissals at the instance of the plaintiff, not of the defendant.
Dismissals upon the instance of the defendant are generally governed by Rule 16, which covers
motions to dismiss.63

In Insular Veneer, Inc. v. Hon. Plan,64 Consolidated Logging and Lumber Mills filed a complaint against
Insular Veneer to recover some logs the former had delivered to the latter. It also filed ex partea
motion for issuance of a restraining order. The complaint and motion were filed in a trial court in
Isabela.65

The trial court granted the motion and treated the restraining order as a writ of preliminary
injunction. When Consolidated Logging recovered the logs, it filed a notice of dismissal under Rule 17,
Section 1 of the 1964 Rules of Civil Procedure.66

While the action on its notice for dismissal was pending, Consolidated Logging filed the same
complaint against Insular Veneer, this time in a trial court in Manila. It did not mention any previous
action pending in the Isabela court.67

The Manila court eventually dismissed the complaint due to the nonappearance of Consolidated
Logging’s counsel during pre-trial. Consolidated Logging subsequently returned to the Isabela court to
revive the same complaint. The Isabela court apparently treated the filing of the amended complaint
as a withdrawal of its notice of dismissal.68

Insular Veneer also filed in the Isabela court a motion to dismiss, arguing that the dismissal by the
Manila court constituted res judicataover the case. The Isabela court, presided over by Judge Plan,
denied the motion to dismiss. The dismissal was the subject of the petition for certiorari and
mandamus with this court.69

This court stated that:

In resolving that issue, we are confronted with the unarguable fact that Consolidated Logging on its
volition dismissed its action for damages and injunction in the Isabela court and refiled substantially
the same action in the Manila court. Then, when the Manila court dismissed its action for failure to
prosecute, it went hack [sic] to the Isabela court and revived its old action by means of an amended
complaint.

38
Consolidated Logging would liketo forget the Manila case, consign it to oblivion as if it were a bad
dream, and prosecute its amended complaint in the Isabela court as if nothing had transpired in the
Manila court. We hold that it cannot elude the effects of its conduct in junking the Isabela case and in
giving that case a reincarnation in the Manila court.

Consolidated Logging’ [sic] filed a new case in Manila at its own risk. Its lawyer at his peril failed
toappear at the pre-trial.70

This court ruled that the filing of the amended complaint in the Isabela court was barred by the prior
dismissal of the Manila court, stating that:

The provision in section 1(e), Rule 16 of the Rules of Court that an action may be dismissed because
"there is another action pending between the same parties for the same cause" presupposes that two
similar actions are simultaneously pending in two different Courts of First Instance. Lis pendensas a
ground for a motion to dismiss has the same requisites as the plea of res judicata.

On the other hand, when a pleading is amended, the original pleading is deemed abandoned. The
original ceases to perform any further function as a pleading. The case stands for trial on the
amended pleading only. So, when Consolidated Logging filed its amended complaint dated March 16,
1970 in Civil Case No. 2158, the prior dismissal order dated January 5, 1970 in the Manila case could
he [sic] interposed in the Isabela court to support the defense of res judicata.71

As a general rule, dismissals under Section 1 of Rule 17 are without prejudice except when it is the
second time that the plaintiff caused its dismissal. Accordingly, for a dismissal to operate as an
adjudication upon the merits, i.e, with prejudice to the re-filing of the same claim, the following
requisites must be present:

(1) There was a previous case that was dismissed by a competent court;

(2) Both cases were based on or include the same claim;

(3) Both notices for dismissal werefiled by the plaintiff; and

(4) When the motion to dismiss filed by the plaintiff was consented to by the defendant on the
ground that the latter paid and satisfied all the claims of the former.72

The purpose of the "two-dismissal rule" is "to avoid vexatious litigation."73 When a complaint is
dismissed a second time, the plaintiff is now barred from seeking relief on the same claim.

The dismissal of the second case was without prejudice in view of the "two-dismissal rule"

Here, the first case was filed as an ordinary civil action. It was later amended to include not only new
defendants but new causes of action that should have been adjudicated in a special proceeding. A
motion to dismiss was inevitably filed by the defendants onthe ground of lack of jurisdiction.

39
The trial court granted that motion to dismiss, stating that:

A careful perusal of the allegations of the Amended Complaint dated February 10, 1999, filed by
Plaintiff Joseph Cheng, show that additional causes of action were incorporated i.e. extra-judicial
settlement of the intestate estate of Antonio Ching and receivership, subject matters, which should
be threshed out in a special proceedings case. This is a clear departure from the main cause of action
in the original complaint which is for declaration of nullity of certificate of titles with damages. And
the rules of procedure which govern special proceedings case are different and distinct from the rules
of procedure applicable in an ordinary civil action.

In view of the afore-going, the court finds the Motion to Dismiss filed by Atty. Maria Lina Nieva S.
Casals to be meritorious and the Court is left with no alternative but to dismiss as it hereby dismisses
the Amended Complaint.

However, on motion of Atty. Mirardo Arroyo Obias, counsel for the plaintiffs, he is given a period of
fifteen (15) days from today, within which to file an appropriate pleading, copy furnished to all the
parties concerned.

....

SO ORDERED.74

Petitioners are of the view that when Atty. Mirardo Arroyo Obias failed to file the appropriate
pleading within fifteen (15) days, he violated the order of the court. This, they argue, made the
original dismissal an adjudication upon the merits, in accordance with Rule 17, Section 3, i.e., a
dismissal through the default of the plaintiff. Hence, they argue that when respondents filed the
second case and then caused its dismissal, the dismissal should have been with prejudice according to
Rule 17, Section 1, i.e., two dismissals caused by the plaintiff on the same claim. Unfortunately,
petitioners’ theory is erroneous.

The trial court dismissed the first case by granting the motion to dismiss filed by the defendants.
When it allowed Atty. Mirardo Arroyo Obias a period of fifteen (15) days tofile an appropriate
pleading, it was merely acquiescing to a request made bythe plaintiff’s counsel that had no bearing on
the dismissal of the case.

Under Rule 17, Section 3, a defendant may move to dismiss the case if the plaintiff defaults; it does
not contemplate a situation where the dismissal was due to lack of jurisdiction. Since there was
already a dismissal prior to plaintiff’s default, the trial court’s instruction to file the appropriate
pleading will not reverse the dismissal. If the plaintiff fails to file the appropriate pleading, the trial
court does not dismiss the case anew; the order dismissing the case still stands.

The dismissal of the first case was done at the instance of the defendant under Rule 16, Section 1(b)
of the Rules of Civil Procedure, which states:

40
SECTION 1. Grounds.— Within the time for but before filing the answer to the complaint or pleading
asserting a claim, a motion to dismiss may be made on any of the following grounds:

....

(b) That the court has no jurisdiction over the subject matter of the claim;

....

Under Section 5 of the same rule,75 a party may re-file the same action or claim subject to certain
exceptions.

Thus, when respondents filed the second case, they were merely refiling the same claim that had
been previously dismissed on the basis of lack of jurisdiction. When they moved to dismiss the second
case, the motion to dismiss can be considered as the first dismissal at the plaintiff’s instance.

Petitioners do not deny that the second dismissal was requested by respondents before the service of
any responsive pleadings. Accordingly, the dismissal at this instance is a matter of right that is not
subject to the trial court’s discretion. In O.B. Jovenir Construction and Development Corporation v.
Macamir Realty and Development Corporation:76

[T]he trial court has no discretion or option to deny the motion, since dismissal by the plaintiff under
Section 1, Rule 17 is guaranteed as a matter of right to the plaintiffs. Even if the motion cites the most
ridiculous of grounds for dismissal, the trial court has no choice but to consider the complaint as
dismissed, since the plaintiff may opt for such dismissal as a matter of right, regardless of ground.77
(Emphasis supplied)

For this reason, the trial court issued its order dated November 22, 2002 dismissing the case, without
prejudice. The order states:

When this Motion was called for hearing, all the plaintiffs namely, Joseph Cheng, Jaime Cheng,
Mercedes Igne and Lucina Santos appeared without their counsels. That they verbally affirmed the
execution of the Motion to Dismiss, as shown by their signatures over their respective names
reflected thereat. Similarly, none of the defendants appeared, except the counsel for defendant,
Ramon Chang [sic], who manifested that they have not yet filed their Answer as there was a defect in
the address of Ramon Cheng [sic] and the latter has not yet been served with summons.

Under the circumstances, and further considering that the defendants herein have not yet filed their
Answers nor any pleading, the plaintiffs has [sic] the right to out rightly [sic] cause the dismissal of the
Complaint pursuant to Section 2, Rule 17 of the 1997 Rules of Civil Procedure without prejudice.
Thereby, and as prayed for, this case is hereby ordered DISMISSED without prejudice.

SO ORDERED.78 (Emphasis supplied)

41
When respondents filed the third case on substantially the same claim, there was already one prior
dismissal at the instance of the plaintiffs and one prior dismissal at the instance of the defendants.
While it is true that there were two previous dismissals on the same claim, it does not necessarily
follow that the re-filing of the claim was barred by Rule 17, Section 1 of the Rules of Civil Procedure.
The circumstances surrounding each dismissal must first be examined to determine before the rule
may apply, as in this case.

Even assuming for the sake of argument that the failure of Atty. Mirardo Arroyo Obias to file the
appropriate pleading in the first case came under the purview of Rule 17, Section 3 of the Rules of
Civil Procedure, the dismissal in the second case is still considered as one without prejudice. In Gomez
v. Alcantara:79

The dismissal of a case for failure to prosecute has the effect of adjudication on the merits, and is
necessarily understood to be with prejudice to the filing of another action, unless otherwise provided
in the order of dismissal. Stated differently, the general rule is that dismissal of a case for failure to
prosecute is to be regarded as an adjudication on the merits and with prejudice to the filing of
another action, and the only exception is when the order of dismissal expressly contains a
qualification that the dismissal is without prejudice.80 (Emphasis supplied)

In granting the dismissal of the second case, the trial court specifically orders the dismissal to be
without prejudice. It is only when the trial court’s order either is silent on the matter, or states
otherwise, that the dismissal will be considered an adjudication on the merits.

However, while the dismissal of the second case was without prejudice, respondents’ act of filing the
third case while petitioners’ motion for reconsideration was still pending constituted forum shopping.

The rule against forum shopping and the "twin-dismissal rule"

In Yap v. Chua:81

Forum shopping is the institution of two or more actions or proceedings involving the same parties for
the same cause of action, either simultaneously or successively, on the supposition that one or the
other court would make a favorable disposition. Forum shopping may be resorted to by any party
against whom an adverse judgment or order has been issued in one forum, in an attempt to seek a
favorable opinion in another, other than by appeal or a special civil action for certiorari. Forum
shopping trifles with the courts, abuses their processes, degrades the administration of justice and
congest court dockets. What iscritical is the vexation brought upon the courts and the litigants by a
party who asks different courts to rule on the same or related causes and grant the same or
substantially the same reliefs and in the process creates the possibility of conflicting decisions being
renderedby the different fora upon the same issues. Willful and deliberate violation of the rule
against forum shopping is a ground for summary dismissal of the case; it may also constitute direct
contempt.

42
To determine whether a party violated the rule against forum shopping, the most important factor
toask is whether the elements of litis pendentiaare present, or whether a final judgment in one case
will amount to res judicatain another; otherwise stated, the test for determining forum shopping is
whether in the two (or more) cases pending, there is identity of parties, rights or causes of action, and
reliefs sought.82 (Emphasis supplied)

When respondents filed the third case, petitioners’ motion for reconsideration of the dismissal of the
second case was still pending. Clearly, the order of dismissal was not yet final since it could still be
overturned upon reconsideration, or even on appeal to a higher court.

Moreover, petitioners were not prohibited from filing the motion for reconsideration. This court has
already stated in Narciso v. Garcia83 that a defendant has the right to file a motion for
reconsideration of a trial court’s order denying the motion to dismiss since "[n]o rule prohibits the
filing of such a motion for reconsideration."84 The second case, therefore, was still pending when the
third case was filed.

The prudent thing that respondents could have done was to wait until the final disposition of the
second case before filing the third case. As it stands, the dismissal of the second case was without
prejudice to the re-filing of the same claim, in accordance with the Rules of Civil Procedure. In their
haste to file the third case, however, they unfortunately transgressed certain procedural safeguards,
among which are the rules on litis pendentiaand res judicata.

In Yap:

Litis pendentiaas a ground for the dismissal of a civil action refers to that situation wherein another
action is pending between the same parties for the same cause of action, such that the second action
becomes unnecessary and vexatious. The underlying principle of litis pendentia is the theory that a
party is not allowed to vex another more than once regarding the same subject matter and for the
same cause of action. This theory is founded on the public policy that the same subject matter should
not be the subject of controversy incourts more than once, in order that possible conflicting
judgments may be avoided for the sake of the stability of the rights and status of persons.

The requisites of litis pendentiaare: (a) the identity of parties, or at least such as representing the
same interests in both actions; (b) the identity of rights asserted and relief prayed for, the relief being
founded on the same facts; and (c) the identity of the two cases such that judgment in one, regardless
ofwhich party is successful, would amount to res judicatain the other.85 (Emphasis supplied)

There is no question that there was an identity of parties, rights, and reliefs in the second and third
cases. While it may be true that the trial court already dismissed the second case when the third case
was filed, it failed to take into account that a motion for reconsideration was filed in the second case
and, thus, was still pending. Considering that the dismissal of the second case was the subject of the
first certiorari case and this present petition for review, it can be reasonably concluded that the
second case, to this day, remains pending.

43
Hence, when respondents filed the third case, they engaged in forum shopping. Any judgment by this
court on the propriety of the dismissal of the second case will inevitably affect the disposition of the
third case.

This, in fact, is the reason why there were two different petitions for certiorari before the appellate
court. The omnibus order dated July 30, 2004 denied two pending motions by petitioners: (1) the
motion for reconsideration in the second case and (2) the motion to dismiss in the third case. Since
petitioners are barred from filing a second motion for reconsideration of the second case, the first
certiorari case was filed before the appellate court and is now the subject of this review. The denial of
petitioners’ motion for reconsideration in the third case, however, could still be the subject of a
separate petition for certiorari. That petition would be based now on the third case, and not on the
second case.

This multiplicity of suits is the veryevil sought to be avoided by the rule on forum shopping. In Dy v.
Mandy Commodities Co., Inc.,86 the rule is that:

Once there is a finding of forum shopping, the penalty is summary dismissal not only of the petition
pending before this Court, but also of the other case that is pending in a lower court. This is so
because twin dismissal is a punitive measure to those who trifle with the orderly administration of
justice.87 (Emphasis supplied)

The rule originated from the 1986 case of Buan v. Lopez, Jr.88 In Buan, petitioners filed a petition for
prohibition with this court while another petition for prohibition with preliminary injunction was
pending before the Regional Trial Court of Manila involving the same parties and based on the same
set of facts. This court, in dismissing both actions, stated:

Indeed, the petitioners in both actions . . . have incurred not only the sanction of dismissal oftheir
case before this Court in accordance with Rule 16 of the Rules of Court, but also the punitive measure
of dismissal of both their actions, that in this Court and that in the Regional Trial Court as well. Quite
recently, upon substantially identical factual premises, the Court en banchad occasion to condemn
and penalize the act of litigants of filing the same suit in different courts, aptly described as "forum
shopping[.]"89

The rule essentially penalizes the forum shopper by dismissing all pending actions on the same claim
filed in any court. Accordingly, the grant of this petition would inevitably result in the summary
dismissal of the third case. Any action, therefore, which originates from the third case pending with
any court would be barred by res judicata.

Because of the severity of the penalty of the rule, an examination must first be made on the purpose
of the rule.1âwphi1 Parties resort to forum shopping when they file several actions of the same claim
in different forums in the hope of obtaining a favorable result. It is prohibited by the courts as it
"trifle[s] with the orderly administration of justice."90

44
In this case, however, the dismissal of the first case became final and executory upon the failure of
respondents’counsel to file the appropriate pleading. They filed the correct pleading the second time
around but eventually sought its dismissal as they"[suspected] that their counsel is not amply
protecting their interests as the case is not moving for almost three (3) years."91 The filing of the
third case, therefore, was not precisely for the purpose of obtaining a favorable result butonly to get
the case moving, in an attempt to protect their rights.

It appears that the resolution on the merits of the original controversy between the parties has long
beenmired in numerous procedural entanglements. While it might be more judicially expedient to
apply the "twin-dismissal rule" and disallow the proceedings in the third case to continue, it would
not serve the ends of substantial justice. Courts of justice must always endeavor to resolve cases on
their merits, rather than summarily dismiss these on technicalities: [C]ases should be determined on
the merits, after all parties have been given full opportunity to ventilate their causes and defenses,
rather than on technicalities or procedural imperfections. In that way, the ends of justice would be
served better. Rules of procedure are mere tools designed to expedite the decision or resolution of
cases and other matters pending in court. A strict and rigid application of rules, resulting in
technicalities that tend to frustrate rather than promote substantial justice, must be avoided.In fact,
Section 6 of Rule 1 states that the Rules [on Civil Procedure] shall be liberally construed in order to
promote their objective of ensuring the just, speedy and inexpensive disposition of every action and
proceeding.92 (Emphasis supplied)

The rule on forum shopping will not strictly apply when it can be shown that (1) the original case has
been dismissed upon request of the plaintiff for valid procedural reasons; (2) the only pending matter
is a motion for reconsideration; and (3) there are valid procedural reasons that serve the goal of
substantial justice for the fresh new· case to proceed.

The motion for reconsideration filed in the second case has since been dismissed and is now the
subject of a petition for certiorari. The third case filed apparently contains the better cause of action
for the plaintiffs and is now being prosecuted by a counsel they are more comfortable with.
Substantial justice will be better served if respondents do not fall victim to the labyrinth in the
procedures that their travails led them. It is for this reason that we deny the petition. WHEREFORE,
the petition is DENIED. The Regional Trial Court of Manila, Branch 6 is ordered to proceed with Civil
Case No. 02-105251 with due and deliberate dispatch.

SO ORDERED.

45