IX.

DISMISSALS AND DEFAULTS

A. Dismissals
Republic Planters Bank v. Molina (Mel)
September 28, 1988
REPUBLIC PLANTERS BANK
vs.
HON. CONRADO M. MOLINA, as Presiding Judge, Court of First Instance of Manila, Branch XX, SARMIENTO EXPORT
CORPORATION, SARMIENTO SECURITIES CORPORATION and FELICIANO SARMIENTO, JR.,
GANCAYCO, J p:
SUMMARY: Republic Planters Bank filed a case for collection of a sum of money against Sarmiento et al, which was dismissed for
failure to prosecute. The bank filed another civil case, which was also dismissed on motion of Sarmiento et al who alleged that the
second case was barred by res judicata because of prior judgment dismissing the first civil case w/c it claims was already an
adjudication on both cases merits. HELD: Judge on second case acted w/ GAD in dismissing said case on the ground of res judicata.
TC in the first case had no jurisdiction over the persons of the defendants Sarmiento et al since they were not served summons.
Without jurisdiction, TC cannot dismiss the case with prejudice which, in effect, is an adjudication on the merits. Thus, the dismissal of
the first civil case cannot be the basis of res judicata and cannot be a bar to a lawful claim on the second civil case.
DOCTRINE: The order of dismissal in a civil case does not have the effect of an adjudication on the merits of the case if the court that
rendered the same did not have the requisite jurisdiction over the persons of the defendants therein. Thus, it cannot be the basis of res
judicata and it cannot be a bar to a lawful claim. If at all, such a dismissal may be considered as one without prejudice. There is also no
adjudication on the merits when the action was precipitately dismissed by the trial court while the sheriff had not yet submitted his return
of the alias summons.
FACTS:

Republic Planters Bank filed complaint against Feliciano Sarmiento et al. for the collection of a sum of money based on a
promissory note dated Jan. 26, 1970 for P100,000
o Civil Case No. 116028 (First Civil Case) under Br. 36, Manila, J. Florendo

TC Br. 36 (May 21, 1979): First Civil Case was dismissed by J. Florendo for failure of Bank "to prosecute its case within a
reasonable length of time."

MR was filed; denied on Jan. 15, 1979.

Subsequently, the Second Civil Case was filed by the Bank.

o Civil Case No. 129829 (Second Civil Case) under Br. 20, Manila, J. Molina

Sarmiento et al. filed a motion to dismiss on the ground that the cause of action is barred by a prior judgment (res judicata) in
the First Civil Case.
o Order in the First Civil Case was an adjudication upon the merits.

Bank opposed the motion to dismiss on the ground that res judicata does not apply because the summons and complaint in
the First Civil Case were never served upon Sarmiento et al. Thus, TC never acquired jurisdiction over Sarmiento et al and,
consequently, over the case.
o Order of dismissal in the First Civil Case never became final as against Sarmiento et. al.

TC Br. 20 (May 8, 1980): Second Civil Case was dismissed by J. Molina on the ground that the orders issued by J. Florendo
dismissing the First Civil Case & denying MR had become final.
o Dismissal of the First Civil Case had the effect of an adjudication upon the merits
o Dismissal was with prejudice since the order was unconditional
o The lack of jurisdiction over Sarmiento et al in the First Civil Case was of no moment.

Bank filed MR & reiterated its allegation that in the First Civil Case, TC did not acquire jurisdiction over Sarmiento et al and that at
the time the court ordered its dismissal, a motion for an alias writ of summons was pending resolution inasmuch as the sheriff had not
acted on the same.

June 26, 1980: MR denied by the TC in Second Civil Case.

Bank appealed to CA both questioned orders of TC in Second Civil Case. But then, it sought a more speedy remedy in
questioning said orders by filing this petition for certiorari before SC.
ISSUE: Whether TC committed a grave abuse of discretion when it ordered Second Civil Case dismissed on the ground of res judicata
on the ground that the First Civil Case was dismissed previously, for failure of the Bank to prosecute within a reasonable length of time,
although in the said case, TC never acquired jurisdiction over the persons of Sarmiento et al? (YES)
RATIO:

The questioned orders of TC in the Second Civil Case supporting Sarmiento et al's motion to dismiss on the ground of res
judicata are without cogent basis.

SC sustains Banks claim that J. Molina acted without or in excess of jurisdiction when he issued said orders because he
traversed the constitutional precept that "no person shall be deprived of property without due process of law" and that jurisdiction is
vitally essential for any order or adjudication to be binding. Justice cannot be sacrificed for technicality.

Case at Bar: Originally, the action for collection of the loan, evidenced by a PN, was only for P100k but Bank claims that as of
Mar. 5, 1981, the obligation was already P429,219.74. It is a cardinal rule that no one must be allowed to enrich himself at the expense
of another without just cause.

NO JURISDICTION: NOT RES JUDICATA, DISMISSAL w/out PREJUDICE

TC: In the very order of dismissal of First Civil Case, TC admitted that it did not acquire jurisdiction over the persons of Sarmiento
et al. and yet, it held that it was of no moment as to the dismissal of the case.

SC: We disagree. For the court to have authority to dispose of the case on the merits, it must acquire jurisdiction over the subject
matter and the parties. If it did not acquire jurisdiction over the Sarmiento et al as parties to the First Civil Case, it cannot
render any binding decision, favorable or adverse to them, or dismiss the case with prejudice which, in effect, is an
adjudication on the merits (Sec. 3, Rule 17, ROC).

The orders in the First Civil Case disregarded the fundamental principles of remedial law and the meaning and the effect of
jurisdiction. A judgment, to be considered res judicata, must be binding, and must be rendered by a court of competent jurisdiction.
Otherwise, the judgment is a nullity.

The order of dismissal in the First Civil Case does not have the effect of an adjudication on the merits of the case because the
court that rendered the same did not have the requisite jurisdiction over the persons of the defendants therein. This being so, it cannot
be the basis of res judicata and it cannot be a bar to a lawful claim. If at all, such a dismissal may be considered as one without
prejudice (Sec. 2, Rule 17, ROC).

NO FAILURE TO PROSECUTE: Trial courts have the duty to dispose of controversies after trial on the merits whenever
possible. In this case, there are no indications that Bank intentionally failed to prosecute the case. The delay could not be
attributed to its fault. Bank pursued the case with diligence, but jurisdiction could not be acquired over Sarmiento et. al.

SUMMONS: The sheriff had not yet submitted his return of the alias summons when the action was precipitately dismissed by
TC. These are proven circumstances that negate the action of J. Molina that the dismissal of the First Civil Case has the effect of an
adjudication upon the merits and constitutes a bar to the prosecution of Second Civil Case. The court finds that the 2 questioned orders
of TC are irregular, improper, and, were issued with grave abuse of discretion amounting to excess of jurisdiction.
Petition for Certiorari to SC: Proper
Appeal to the CA pertaining to the questioned orders of TC is not an adequate remedy, because Bank was not able to present evidence
in TC. The sole issue involved in this case is one of jurisdiction, which is appropriate for resolution by the instant petition.
DISPOSITIVE: TC Orders REVERSED and SET ASIDE. The records of the case are ordered returned to the TC for trial and disposition
on the merits. This decision is immediately executory.
Pinga v. Santiago (Joan)
(this digest is long kasi chinannel ni J. Tinga si CJ Puno and went on to discuss the history of the rules re dismissals of counterclaims
under R17. Good read sya, actually, if you have time. The ratio only has about 1-2 paragraphs re the case at bar)
June 30, 2006
EDGARDO PINGA, petitioner, vs.
THE HEIRS OF GERMAN SANTIAGO represented by FERNANDO SANTIAGO, respondents.
TINGA, J.
SUMMARY: The heirs of Santiago filed a complaint for injunction against Pinga (and Saavedra, but I dunno why hes not in the case
title anymore) for allegedly unlawfully entering the coco lands of the Santiagos, cutting wood and bamboos and harvesting the fruits of
the coconut trees. Pinga then filed an Amended Answer with Counterclaim, disputing the Santiagos ownership, and prayed for
P2.1M damages. Because the Santiagos failed to present evidence and their counsel also failed to appear during the hearing, Pinga
moved for the dismissal of the case. RTC granted the motion of Pinga and noted that the Santiagos had failed to prosecute the case for
an unreasonable length of time. Thus, the Santiagos complaint was dismissed. At the same time, the RTC allowed Pinga "to present
their evidence ex-parte" (re Pingas counterclaim). The Santiagos filed a MR, opting NOT to seek that their complaint be reinstated, but
praying instead that the entire action be dismissed and Pinga be disallowed from presenting evidence ex-parte. RTC granted the
Santiagos MR. SC however ruled in favor of Pinga and HELD that under Sec. 3 Rule 17 of the new rules, the dismissal of the
complaint is without prejudice to the right to prosecute the counterclaim, whether compulsory or permissive.
DOCTRINE: The constitutional faculty of the Court to promulgate rules of practice and procedure 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." 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.

Action: Petition for Review under Rule 45

FACTS:
May 1998: Eduardo (Edgardo sa case title) Pinga was named as one of two defendants in a complaint for injunction filed with RTC
San Miguel, Zamboanga del Sur, by the Heirs of German Santiago, represented by Fernando Santiago. The Complaint alleged in
essence that Pinga and co-defendant Vicente Saavedra had been unlawfully entering the coco lands of the Santiagos, cutting

wood and bamboos and harvesting the fruits of the coconut trees. The Santiagos prayed that Pinga and Saavedra be enjoined from
committing "acts of depredation" on their properties, and ordered to pay damages.
Amended Answer with Counterclaim: Pinga and Saavedra disputed the Santiagos' ownership of the properties, asserting that:
Pinga's father, Edmundo, from whom they derived their interest, had been in possession of the properties since the 1930s.
As far back as 1968, the Santiagos had already been ordered ejected from the properties after a complaint for forcible entry was filed
by the heirs of Edmundo.
Santiagos application for free patent was rejected by OP in 1971.
PRAYER: Various types of damages in totaling P2.1M plus costs (counterclaim!)
July 2005: Trial of the case had not yet been completed. Moreover, the Santiagos, as plaintiffs, had failed to present their
evidence.
It appears that in Oct 2004, RTC already ordered the dismissal of the complaint after Santiagos' counsel had sought the
postponement of the hearing scheduled then. However, the order of dismissal was subsequently reconsidered by the RTC, which
took into account the assurance of said counsel that he would give priority to that case.
July 05: At the hearing, Santiagos counsel on record failed to appear, sending in his stead a representative who sought the
postponement of the hearing. Counsel for Pinga and Saavedra opposed such and moved instead for the dismissal of the case.
RTC noted that it was obvious that the Santiagos 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 Pinga and
Saavedra "to present their evidence ex-parte."
The Santiagos filed a MR, opting however not to seek that their complaint be reinstated, but praying instead that the entire action be
dismissed and Pinga be disallowed from presenting evidence ex-parte. They claimed that the RTC order allowing the presentation
of evidence ex-parte was not in accord with established jurisprudence. They cited cases: City of Manila v. Ruymann, Domingo v.
Santos, which noted those instances in which a counterclaim could not remain pending for independent adjudication.
RTC granted the MR of Santiagos and dismissed the counterclaim, citing as the only ground that "there is no opposition to the MR
(LOL)
Pinga filed a MR, but was denied.
Notably, the Santiagos filed an Opposition to Defendants' Urgent MR, wherein they argued that the prevailing jurisprudential rule 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."
Case was elevated to SC directly by Petition for Review under Rule 45 on a pure question of law.
ISSUE: Whether or not the dismissal of the complaint necessarily carries the dismissal of the compulsory counterclaim (NO)
HELD & DISPOSITIVE: Under Section 3, Rule 17, 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. Petition is GRANTED. Counterclaim as defendant is REINSTATED. RTC is ORDERED to
hear and decide the counterclaim with deliberate dispatch.

RATIO:
SC FIRST NOTES: HOLLOW REASONING BY RTC re the dismissal
RTC, in dismissing the counterclaim, did not expressly adopt the argument that the dismissal of complaint extended as well to the
counterclaim. Instead, RTC justified the dismissal of the counterclaim on the ground that "there is no opposition to the MR seeking the
dismissal of the counterclaim."
SC: 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 Pinga, the "failure to file an opposition to the
Plaintiff's MR is definitely not one among the established grounds for dismissal [of the counterclaim]."
Still, the dismissal of the counterclaim by the RTC betrays at very least a tacit recognition of the argument that the counterclaim did not
survive the dismissal of the complaint. At most, the dismissal of the counterclaim over the objection of Pinga on grounds other than the
merits of the counterclaim, despite the provisions under Rule 17, constitutes a debatable question of law, presently meriting
justiciability through the instant action.
ROC PROVISION (OLD vs. NEW)
NEW: Section 3, Rule 17 of the 1997 Rules of Civil Procedure: 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.
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.
OLD: Sec 3. Rule 17 of the 1964 Rules of Court: 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.
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."
HOWEVER, Jurisprudence construing the 1964 Rules was hardly silent on the matter, (In other words, SC in a number of case
interpreted the silent 1964 rule, and the Courts interpretation was that it was with prejudice, w/c was contrary to the new rule.)
NOTE first, however that the cases cited by the Santiagos, all of which were decided more than five decades ago were not on all fours
with the present case since none of the complaints were dismissed either due to the fault of the plaintiff or upon the instance of the
defendant.
Footnote says on cases cited by the Santiagos: City of Manila and Belleza both involved a complaint dismissed upon the initiative of the
plaintiffs. Domingo concerned a complaint which was dismissed after a trial on the merits wherein the plaintiff failed to introduce any
evidence in his behalf. In Froilan, a complaint-in-intervention was dismissed motu proprio by the trial court after the court was notified of
a supervening event that satisfied the obligations of the defendant to the plaintiff-in-intervention
SC: The distinction is relevant, for under the previous and current incarnations of the Rules, 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.* 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.
*Footnote reminds: Unless the plaintiff initiates the dismissal of the complaint by way of notice at any time before service of the
answer or of a motion for summary judgment, in which case it is Sec 1, Rule 17 that governs, whether under the 1964 or 1997
Rules.
(In short, first, it depends on upon whose instance the dismissal was sought: 1) If failure of plaintiff to prosecute or upon instance of
defendant, then Sec. 3, 2) If upon instance of plaintiff, then Sec. 2, 3) But if upon instance of plaintiff, determine first how and when the
motion was filed or if it is a motion for summary judgment, because if its by way of notice at any time before service of the answer or of
a motion for summary judgment, then Sec. 1 applies. HAHA lalo ba gumulo? LOL)
There exists more appropriate precedents which the Santiagos could have cited:
BA Finance Corp. v. Co 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.
[SC side-comments first, before discussing jurisprudence.]
RULES: The necessity of such distinction was provided in the 1964 Rules itself, particularly Sec 2, Rule 17: in instances wherein the
plaintiff seeks the dismissal 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."
COMMENTARIES: The vaunted commentaries of CJ Moran, remarking on Sec 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."
JURISPRUDENCE: The view expressed in Moran's Commentaries was adopted by the Court. (From precedents to BA Finance.)
Lim Tanhu v. Ramolete (cited lang)
Dalman v. City Court of Dipolog City where 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 brgy 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. The Court refused to reinstate the counterclaim, opining without elaboration, "[i]f the civil case is dismissed,
so also is the counterclaim filed therein." 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. Notably, the qualification
concerning compulsory counterclaims was provided in Sec 2, Rule 17 of the 1964 Rules, the provision governing dismissals by order of
the court, and not Sec 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.
Sps Sta. Maria, Jr. v. CA ostensibly supplied the gap on the effect on the counterclaim of complaints dismissed under Sec 3. While
SC 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."
JBL Reyes, in said case: 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 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.
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 Sec 3, Rule 17. On the other hand, Section 2 was clearly limited in scope to those dismissals sustained at the instance
of the plaintiff.
SC NARRATES LOL: 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: Metals Engineering Resources Corp. v. CA and Intl Container Terminal Services v. CA.
Metals case: In Metals, the complaint was expunged from the record after the defendant had filed a MR of a TC 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. 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. 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. 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.
ICTSI case: The defendant filed a MTD which was granted. 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." Then it ruled that the counterclaim did not survive such dismissal. After
classifying the counterclaim therein as compulsory, "[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."
BA FINANCE!!!!: 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. SC 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." Express 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.
Dissent in BA Finance by J. Regalado & CJ Narvasa: The two agreed that TC 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. BUT they disagreed 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 Sec 3, Rule 17, and not Sec 2 of the same rule.
Justice Regalado, who ironically penned the decision in Metals cited by the majority: Turning back to Rule 17, it is readily apparent that
Secs 2 and 3 thereof envisage different factual and adjective situations.
SEC 2: The dismissal of the complaint under Sec 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.
SEC 3: 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 Sec 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.
J. 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 and International Container, both relied upon by the majority, involved the
application of Sec 2, Rule 17 and not Sec 3, which he insisted as the applicable provision in the case at bar.
THEN CAME THE AMENDMENT OF THE 1964 RULES
The partial dissent of J. Regalado in BA Finance proved opportune, as he happened then to be a member of the Rules of Court
Revision Committee (LOL) tasked with the revision of the 1964 Rules. Just a few months after BA Finance was decided, J. Regalado
proposed before the Committee an amendment to Sec 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 is reflected in the minutes of the meeting of the Committee:
J. Regalado: After the words "upon the court's own motion", 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." APPROVED.

J. Herrera observed that under Secs. 1 to 3, it is not the action that is dismissed but the complaint. He asked whether there is any
distinction between "complaint" and "action." Regalado opined that the action of the plaintiff is initiated by his complaint.
J. Feria then suggested that the dismissal be limited to the complaint. The words "An action" will be changed to "a complaint" (in all
sections). APPROVED.
CA Pao 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. J. Regalado opined that there is no need of making a clarification because it is already
understood that it covers both counterclaims.
CONCLUSION from the minutes: 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, not only did J.
Regalado's amendment to Sec 3, Rule 17 remain intact, but the final version likewise eliminated the qualification formerly offered under
Sec 2 on "counterclaims that can remain pending for independent adjudication by the court." At present, even Sec 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.
EFFECTS OF THE AMENDMENT, as discussed by J. Regalado in his commentaries:
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 TC 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.
The second substantial amendment to [Sec 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. . .
With the aforestated amendments, the controversial doctrine in BA Finance 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
COMMENTS from other justices:
J. FERIA: 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 J. Regalado in BA Finance.
Retired CA J. Herrera: The amendment to Sec 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."
On the effect of amendment to Sec 3, Rule 17, the commentators are in general agreement, although there is less unanimity of views
insofar as Section 2, Rule 17 is concerned.
TO SUM UP THE HISTORY:
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 conflICTSI with the 1997 Rules. 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.
CASE AT BAR:
RTC clearly erred when it ordered the dismissal of the counterclaim, since Sec 3 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.
BUT WAIT THERES MORE HUHU. SC felt the need to explain the rationale behind the amendment.
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.
ACT 190: Under Act No. 190, or the Code of Procedure in Civil Actions promulgated in 1901, it was recognized in Sec 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." 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.
City of Manila, decided in 1918: By paragraph 1 [of Sec 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.
1940 ROC: 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.
1964 ROC: The qualification in the 1940 ROC remained intact when the 1964 Rules was introduced. 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. As was evident in Metals, International Container and BA Finance, the rule was eventually extended to instances wherein it was
the defendant with the pending counterclaim, and not the plaintiff, that moved for the dismissal of the complaint.
PERMISSIVE v. COMPULSORY: 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," 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, which proceeds from the following fundamental premises:
1) 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
2) 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
3) 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. 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.
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
nature of the claim. 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. 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.
EQUITABLE: Thus, the present rule embodied in Secs 2 and 3 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, TC 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.
B. Defaults
Co v. Acosta (Erika)
January 17, 1985
RUFINO CO
vs.
HON. EFICIO B. ACOSTA, in his Official Capacity as Presiding Judge; RTC, Branch CLV, Pasig, Metro Manila, and THE
REFRIGERATION INDUSTRIES, INC., and DELTA MOTORS CORPORATION
GUTIERREZ, JR., J.
NATURE: Petition for certiorari
SUMMARY: Pepsi ordered/purchased 12,000 refrigerators from Rufino Cos CTC appliance center. Co assigned his rights to the
purchase orders to Refrigerations Industries, Inc. (RII). RII delivered 1,000 refrigerators to Pepsi, which the latter received but later
refused to pay for because Pepsi refused to recognize the assignment to RII. RII sued Pepsi and Co for collection of sum of money, but
later dropped the suit against Pepsi after executing an instrument called Joint Release, Waiver and/or Quitclaim. Co did not file his
answer and was declared in default. Judgment was rendered against him. He now claims that since both he and Pepsi are
indispensable parties, the CFI lost its authority to act on the case insofar as Co is concerned. SC agreed.
DOCTRINE: Lim Tanhu v. Ramolete: Since the singleness of the cause of action also inevitably implies that all the defendants are
indispensable parties, the court's power to act is integral and cannot be split such that it cannot relieve any of them and at the same
time render judgment against the rest. [see other doctrinal stuff from Tanhu in the RATIO]
FACTS:
Nov 20, 1979: Pepsi Cola Bottling Company of the Philippines, Inc., through Mr. C.M. Aboitiz issued three (3) purchase orders
addressed to CTC Appliance Center for 12,000 units of refrigerators valued at P35,322,900. (i.e. Pepsi bought refrigerators from CTC)
Petitioner Rufino Co is the proprietor of the Center.
Nov 21, 1979: in a formal deed of assignment, petitioner Co assigned his rights and interests to the three purchase orders and
to the money value of the deliveries made or to be made thereunder to respondent Refrigerations Industries, Inc. (RII)
Mar 13, 1980: PEPSI wrote a letter to RII and Delta Motors Corp, informing them that on Mar 9, 1981[1980, probably], it took notice of
the assignments of the purchase orders by Co and stated that it was NOT recognizing the same.
In the course of time, 10,000 units of refrigerators were delivered and paid. No problem arose from these 10,000 units.
Mar 18, 1981: PEPSI wrote a letter to Co requesting the delivery of 1,000 units of refrigerators not later than Mar 31, 1981 and stating
that PEPSI will be talking directly to RII through Mr. Dominador Gana on the matter of storage fees.
Mar 23-May 21, 1981: PEPSI received 1,000 units of refrigerators directly from RII. Total invoice price: P2,907,535
June 2, 1981: RII sent a letter of demand to PEPSI.
June 4, 1981: PEPSI wrote RII acknowledging receipt of the demand letter but stating that it does not recognize and does not
feel bound by Co's assignment of the purchase orders.
June 24, 1981: RII sent another letter of demand to PEPSI demanding payment of the P2,907,535 within five days.
June 26, 1981: PEPSI informed RII that there is no legal basis for the demand and no reason for PEPSI to pay the 1,000 units.
It added further that RII's recourse is against Co.
July 8, 1981: failing to collect from PEPSI, RII sent a letter of demand to Co demanding payment of P2,907,535, but the latter refused
and failed to pay.
Sept 10, 1981: RII and Delta Motors Corporation filed a Civil Case for a sum of money with attachment before CFI of Rizal (Br. 10),
against Pepsi and Rufino Co.
Nov 26, 1981: RII and Delta filed a formal ex-parte motion to dismiss the complaint against PEPSI. Attached to the motion is an
instrument entitled "Joint Release, Waiver and/or Quitclaim" which covenants that Delta Motors, RII, and PEPSI mutually agreed to
release and forever discharge each other from any and all liabilities or causes of action arising out of the transaction involving the 1,000
units of refrigerators in order to maintain harmonious business relations among the parties.
CFI (Nov 26, 1981): complaint against Pepsi DISMISSED.
Nov 19, 1982: RII and Delta filed an ex-parte motion to declare Rufino Co in default for having failed to file his answer.
CFI (Nov 22, 1982): Co is declared in default; RII and Delta allowed to present evidence ex-parte on Dec 3, 1982 at 2:30 p.m.
CFI (Mar 9, 1983): decision; in favor of RII and Delta, and against Co
Co to pay P2,907,535 plus the legal rate of interest from date of demand

P200K attorney's fees; plus costs

Apr 12, 1983: petitioner Co filed a "Petition for Relief from Judgment" alleging:
That excusable negligence transpired which prevented him from availing the usual and ordinary remedies under the law.
That he has a valid and meritorious defense and had he not been prevented from presenting his evidence the decision could have been
different.
CFI (Apr 12, 1983): pending resolution of Co's petition for relief from judgment, CFI issued a writ of execution
Thus, virtually all of Co's real properties were levied upon on execution and advertised for sale at public auction on July 15, 20, and 22,
1983.
Apr 27, 1983: Co filed a motion for a restraining order to restrain the writ of execution.
June 6, 1983: Co filed an urgent motion for resolution of his petition for the issuance of a restraining order.
June 9, 1983: Co again filed an urgent supplementary motion for a restraining order pending the resolution of his petition for relief or a
motion to dismiss the case.
July 6, 1983: Co filed still another urgent motion for resolution of his petition for the issuance of a restraining order pointing out that the
CFI had not resolved his motion even as the date of sale in the sheriff's notice for the sale on execution of his properties was only a few
days away.
CFI (July 13, 1983): Cos Petition for Relief from Judgment and Petition for the Issuance of a Restraining Order DENIED
Aug 31, 1983: SC issued a TRO enjoining the respondent RTC of Pasig from taking further action in the Civil Case for a sum of money,
more particularly from taking any further proceedings relative to the writ of execution in said civil case, until further orders.
ISSUE: W/N the dismissal of the case against Pepsi entitles Co to the dismissal of the case against him (YES)
RATIO:
Co: he and Pepsi are indispensable parties sued under a common cause of action and that if the complaint is dismissed insofar as
Pepsi is concerned, the CFI should have ordered also the dismissal of the case insofar as it affects Co.
it does not matter that the dismissal is upon the evidence presented by the plaintiffs RII and Delta or upon the their mere desistance, for
in both instances, a lack of sufficient legal basis must be the cause.
RII and Delta: Co is confusing the decision of the CFI because instead of questioning the order denying the petition for relief from
judgment, Co assails the decision of the court dated Mar 9, 1983 which has already become final and executory with the writ of
execution issued already being implemented by the Deputy Sheriff of Rizal.
Lim Tanhu v. Hon. Ramolete is not applicable because there are important facts which differentiate the Lim Tanhu case from the instant
petition.
(1) Lim Tanhu: the same cause of action was averred by several defendants, some of whom were declared in default and some of
whom filed their answers.
CASE AT BAR: RII's cause of action against Co is entirely different from its cause of action against PEPSI, the former being the
assignor of the purchase orders and the latter being the maker of the purchase orders;
(2) Lim Tanhu: some of the defendants were declared in default, hence, the defenses set up by those who answered the complaint
were available to the other defendants who were declared in default.
CASE AT BAR: both defendants Co and PEPSI did not answer the complaint. There are no defenses which can be interposed by Co;
(3) Lim Tanhu: a motion to lift the order of default was filed by the defaulting defendant
CASE AT BAR: no motion to lift order of default was filed by Co; and
(4) Lim Tanhu: all the defendants were indispensable parties
CASE AT BAR: RII and Delta may file an action against any of the defendants (Co or Pepsi) for the simple reason that a valid judgment
can be rendered against either of the two defendants.
SC: We agree with Co.
RII and Delta's complaint for a sum of money with attachment against PEPSI and Co clearly shows that PEPSI and Co are
indispensable parties to the case.
In fact RII and Delta sued both PEPSI and Co under a common cause of action.
Par. 21 of the complaint: both defendants are guilty of conspiracy; connivance, unfair play, and foul tactics because on the one hand,
PEPSI received and accepted the 1,000 refrigerators from plaintiffs without the intention to pay the latter but only with the intent to set
off the debts of Rufino Co. On the other hand, Rufino Co refused to pay plaintiffs the price of the 1,000 refrigerators despite due
demand, and he was happy that his debts or obligations to PEPSI were set off or were discounted by means not coming from his
pockets. In other words, both defendants acting in concert and with a view to victimize the hapless and unsuspecting plaintiffs made
simultaneous acts calculated to gain and to profit from the loss and misfortune of plaintiffs.
The affidavit attached in support of the complaint is framed in such a way that there can be no doubt as to the intention of RII and Delta
in suing PEPSI and Co as indispensable parties.
Pars. (2) and (3) of said affidavit:
2. That, however, in spite of Pepsi's rejection and refusal to honor and to recognize the assignment, Pepsi, as aforesaid received and
accepted the delivery to it by Refrigeration of 1,000 units of "Frigidaire" and "Sharp" electric refrigerators of various sizes and
measurements. But Pepsi refused to pay the invoice price of P2,907,535.00, because Pepsi's intention was not to pay Refrigeration
and Delta but only to set off the accountabilities and obligations of Rufino Co to Pepsi. Upon formal demand by Refrigeration and Delta
upon Pepsi and Rufino Co to pay for the 1,000 refrigerators; both Pepsi and Rufino Co refused to pay, without just or legal grounds:
3. That based on the Deed of Assignment issued by Rufino Co in favor of Refrigeration and Delta, and from the surrounding acts and
circumstances performed by Pepsi, especially its acts in rejecting the assignment by Rufino Co, its receiving and accepting the delivery
of 1,000 units of refrigerators from Refrigeration, and its keen desire to just set-off the debts of Rufino Co and not to pay a single cent to
Refrigeration and Delta, it is clear that Pepsi was guilty of a fraud, bad faith, and deceit in contracting the debt or incurring the
obligation, thereby prejudicing and damaging Refrigeration and Delta in the huge amount aforementioned.

Lim Tanhu v. Hon. Ramolete: APPLICABLE

The fact that in that case several defendants were declared in default and the defenses set up by those who answered the complaint
were available to those who were in default, while in the case at bar both PEPSI and Co did not answer the complaint, is of no moment
because our ruling in the Lim Tanhu case was based on the fact that all the defendants therein were indispensable parties and
the plaintiff moved for the dropping of two defendants from the complaint.
Similar to this case where both PEPSI and Co were sued as indispensable parties under a common cause of action, and on motion of
the plaintiffs, PEPSI was dropped as a party defendant.
Lim Tanhu: in all instances where a common cause of action is alleged against several defendants, some of whom answer and the
others do not, the latter or those in default acquire a vested right not only to own the defense interposed in the answer of their codefendant or co-defendants not in default but also to expect a result of the litigation totally common with them in kind and in amount
whether favorable or unfavorable.
The substantive unity of the plaintiff's cause against all the defendant is carried through to its objective phase as ineluctably demanded
by the homogeneity and indivisibility of justice itself.
Since the singleness of the cause of action also inevitably implies that all the defendants are indispensable parties, the
court's power to act is integral and cannot be split such that it cannot relieve any of them and at the same time render
judgment against the rest.
When any defendant allows himself to be in default knowing that his co-defendant has already answered, he does so trusting in the
assurance implicit in the rule that his default is in essence a mere formality that deprives him of no more than the right to take part in
the trial and that the court would deem anything done by or for the answering defendant as done by or for him.
Presumption is that otherwise he would not have seen to it that he would not be in default.
Of course, he has to suffer the consequences of whatever the answering defendant may do or fail to do, regardless of possible adverse
consequences, but if the complaint has to be dismissed in so far as the answering defendant is concerned it becomes his inalienable
right that the same be dismissed also as to him.
It does not matter that the dismissal is upon the evidence presented by the plaintiff himself or upon the latter's mere
desistance, for in both contingencies, the lack of sufficient legal basis must be the cause.
The integrity of the common cause of action against all the defendants and the indispensability of all of them in the proceedings do not
permit any possibility of waiver of the plaintiff's right only as to one or some of them, without including all of them, and so, as a rule,
withdrawal must be deemed to be a confession of weakness as to all.
This is not only elementary justice; it also precludes the concomitant hazard that plaintiff might resort to the kind of stratagem that would
result (as in this case) in totally depriving petitioners of every opportunity to defend themselves against her claim, which the record does
not show to be invulnerable
Where all the defendants are indispensable parties, for which reason the absence of any of them in the case would result in the court's
losing its competency to act validly, any compromise that the plaintiff might wish to make with any of them must, as a matter of correct
procedure, have to await until after the rendition of the judgment, at which state the plaintiff may then treat the matter of its execution
and the satisfaction of his claim as variably as he might please.
CASE AT BAR
CFI erred in (1) declaring Co in default; (2) in hearing the plaintiffs (RII and Delta) evidence ex-parte; (3) in rendering the decision; (4)
in issuing the writ of execution and in having Co's properties levied upon in execution; (5) in having them advertised for sale, and
consequently, (6) in ordering them sold to answer for RII and Delta's claim.
After the CFI dropped PEPSI as a party defendant, it lost authority to act further in the case insofar as Co is concerned.
Furthermore, RII and Delta's admission in their complaint that the assignments made to them by Co are genuine, valid, and in accord
with Art 1475 of the Civil Code taken together with the joint waiver, release, or quitclaim in favor of PEPSI which received and profited
from the 1,000 refrigerators virtually absolve Co from any and all legal liability insofar as the purchase orders are concerned.
DISPOSITION: Petition granted. The proceedings in the respondent court in the Civil Case subsequent to the Nov 26, 1981 order
dismissing the complaint as against Pepsi are hereby annulled and set aside, particularly the ex-parte presentation of RII and Delta's
evidence against Co and the decision dated Mar 9, 1983. CFI/RTC is ordered to extend the effects of the dismissal of the complaint to
petitioner Rufino Co. CFI/RTC is permanently enjoined from taking any further action in said civil case except as herein indicated.
Lina v. Court of Appeals (Kat)
April 9, 1985
ALEX LINA, petitioner, vs.
THE HONORABLE COURT OF APPEALS; HONORABLE GREGORIO PINEDA, as Presiding Judge of the Court of First Instance of
Rizal, Branch XXI at Pasig; and NORTHERN MOTORS, INC., respondents.
RELOVA, J
SUMMARY: Northern Motors filed a case against Lina. When no answer was filed by Lina, Northern Motors filed a motion to declare
him in default. Lina informed the CFI that he had mailed a motion for extension of time. Despite this, he was declared in default, without
the CFI ruling on his motion for extension of time. He filed a petition for certiorari/prohibition with the CA, which the CA denied. SC
agreed with both the CFI and the CA.
DOCTRINE: Under the Rules of Court, the remedies available to a defendant in the Court of First Instance (now Regional Trial Court)
are:
a) The defendant in default may, at any time after discovery thereof and before judgment, file a motion, under oath, to set aside the
order of default on the ground that his failure to answer was due to fraud, accident, mistake or excusable neglect, and that he has a
meritorious defense; (Sec. 3, Rule 18)

b) If the judgment has already been rendered when the defendant discovered the default, but before the same has become final and
executory, he may file a motion for new trial under Section 1 (a) of Rule 37;
c) If the defendant discovered the default after the judgment has become final and executory, he may file a petition for relief under
Section 2 of Rule 38; and
d) He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition to set aside
the order of default has been presented by him. (Sec. 2, Rule 41)
FACTS:
March 31, 1982: Northern Motors, Inc.(NMI) filed with the then CFI of Rizal (Pasig) a case for sum of money with damages April 22,
1982: Alex Lina was served with summons together with a copy of the complaint.
May 8, 1982: When no answer or motion to dismiss was filed by Lina, NMI filed a motion to declare him in default.
The motion was set for hearing on May 21, 1982.
May 19, 1982: Lina filed his opposition to the aforesaid motion inviting attention to the fact that he had filed a motion for extension of
time to file responsive pleading within the reglementary period.
May 26, 1982: Judge Pineda issued an order declaring Lina in default and allowing NMI to adduce its evidence ex parte.
May 27, 1982: Lina filed his answer to the complaint.
CFI (July 28, 1982): in favor of NMI (judgment in default)
August 11, 1982: Lina filed a motion to set aside decision dated July 28, 1982.
CFI (August 25, 1982 order): denying Linas motion to set aside decision.
October 6, 1982: Lina filed with the then CA a petition for certiorari/prohibition
CA (November 29, 1982 decision): denied petition
When NMI filed on May 8, 1982, its motion to declare Lina in default because the last day for him to file an answer under the summons
was May 7, 1982, Lina has not filed an answer. So, there was actually a valid ground for the motion, and the CFI could have validly
declared Lina in default, especially because, at that time it was still unaware of the fact that on May 5, 1982, Lina had sent to it, by
registered mail, a motion for extension of twenty days from May 7, 1982, within which to file an answer, and which motion was received
by the CFI only on May 19, 1982.
But, CFI did not immediately act on the motion to declare Lina in default, so that by May 19, 1982, the Lina was still able to file an
opposition to the motion asking him to be declared in default. The principal ground of the opposition of Lina was the fact that he had
sent, by registered mail, a motion for extension of time to file responsive pleading, and he even attached to his opposition a copy of the
motion for extension.
On May 26, 1982, CFI resolved the motion to declare Lina in default by granting the motion. Now since on May 26, 1982, the motion for
extension of time to file responsive pleading was already before the court, as it received the same on May 19, 1982, and aside from
this, a copy thereof was attached to Lina's opposition to NMI's motion to declare defendant (Lina) in default, it is conclusively assumed
that the respondent court, in resolving the motion to declare Lina in default, had taken into consideration the motion for extension,
especially because the ground of Lina's opposition to the motion to declare defendant (Lina) in default is the fact that he had asked for
extension of time to file responsive pleading. Now, then, when CFI declared Lina in default, it is a clear and inevitable implication,
without the need of an express statement to that effect, although it would have been more desirable, that the motion for extension of
time to file responsive pleading was denied. In other words, the Order of May 26, 1982 had the necessary and logical implication that
Lina's opposition to the motion to declare defendant (Lina) in default, based upon the ground that he had asked for extension of time to
file responsive pleading, was disapproved or denied by the court
Hence, petition for certiorari/prohibition
ISSUES:
1. W/N the order of default was issued in grave abuse of discretion amounting to lack of jurisdiction? NO
2. W/N certiorari is proper in a case where judgment by default was rendered without an order of default being furnished petitioner
(Lina) and where meritorious defenses exist, which are for the trial court to evaluate and which evaluation was not done in this case?
NO
HELD: Petition is DISMISSED
RATIO:
ORDER (AND JUDGMENT) OF DEFAULT IS PROPER
We are in agreement with CA's affirmance of the questioned order of the trial court.
ADDITIONAL TIME IS DISCRETIONARY W/ TC
The granting of additional time within which to file an answer to a complaint is a matter largely addressed to the sound discretion of the
trial court.
"While trial courts are persuaded, as a matter of policy, to adopt a basically flexible attitude in favor of the defendant in this area of our
adjective law, the defense should never be lulled into the belief that whenever trial courts refuse a second request for extension to file
an answer, the appellate courts will grant relief (Naga Development Corporation vs. Court of Appeals)."
CAB: it was on May 5, 1982 or two (2) days before the expiration of the fifteen-day reglementary period given to NMI to file his
responsive pleading when Lina moved for an extension of twenty (20) days from May 7 within which to file his answer. Upon motion of
NMI and over the objection of Lina respondent judge issued an order declaring Lina in default.
REMEDIES
Under the Rules of Court, the remedies available to a defendant in the Court of First Instance (now Regional Trial Court) are:
a) The defendant in default may, at any time after discovery thereof and before judgment, file a motion, under oath, to set
aside the order of default on the ground that his failure to answer was due to fraud, accident, mistake or excusable neglect,

and that he has a meritorious defense; (Sec. 3, Rule 18)

b) If the judgment has already been rendered when the defendant discovered the default, but before the same has become
final and executory, he may file a motion for new trial under Section 1 (a) of Rule 37;
c) If the defendant discovered the default after the judgment has become final and executory, he may file a petition for relief
under Section 2 of Rule 38; and
d) He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition to
set aside the order of default has been presented by him. (Sec. 2, Rule 41)
Lina did not avail himself of any of the above remedies. Instead, he went to the appellate court on certiorari prohibition.
CERTIORARI v. APPEAL
CA (agreed by SC): Where the judgment rendered by the respondent court is the one sought to be annulled, a petition for relief, under
Rule 38 of the Revised Rules of Court, which is a remedy in the ordinary course of law, could have been just as plain, adequate and
speedy as certiorari. Such a remedy could have been granted by the respondent court. And if the respondent court still denies the
petition, then petitioner can take an appeal on the order denying the petition, and in the course of such appeal petitioner can also assail
the judgment on the merits upon the ground that it is supported by the evidence, or it is contrary to law
MELENCIO-HERRERA, J., dissenting:
(1) The Order of default was issued with grave abuse of discretion
Pertinent dates:
May 7, 1982 Last day to file answer.
May 5, 1982 Lina filed Motion for Extension of 20 days from May 7, 1982 to file answer.
May 8, 1982 NMI filed motion to declare petitioner Lina in default.
May 19, 1982 Lina filed opposition.
May 19, 1982 Court received petitioner's motion for extension to file answer.
May 26, 1982 Court declared petitioner in default.
May 27, 1982 Lina filed answer (last day of extended period)
July 28, 1982 Court rendered judgment by default.
Linas Motion for extension to file Answer was already before the Court when it declared petitioner Lina in default. What is more, the
Answer had already been filed within the extended period requested when judgment by default was rendered.
Cases should be resolved on the merits rather than on technicalities. Every party-litigant should be afforded the amplest opportunity for
the proper and just disposition of his cause, free from the constraints of technicalities (A-One Feeds, Inc. vs. CA (1980)).
TC should have resolved the Motion for Extension before declaring petitioner Lina in default. It cannot be "conclusively assumed" that it
had taken the same into consideration when it issued the Order of default, although that was Lina's ground in his opposition to the
default Motion.
A defendant should not presume that a Motion for extension would be favorably acted on.
However, under the circumstances of the case, it was Lina's first Motion for extension; said Motion was filed before the expiration of the
reglementary period within which to submit an Answer; and the Answer having been filed within the extended period requested, in the
interest of substantial justice, the Order of default should not have been issued.
(2) Certiorari was a proper remedy.
Dimayacyac vs. CA (1979) : The ordinary remedy which should be availed of by a party who has been declared in default and judgment
rendered against him is that of appeal and not certiorari. This rule, however, is not without exceptions for to insist on its application in all
cases may not always serve the ends of justice. The object of procedural law is to facilitate the adjudication of conflicting claims. Thus,
although an appeal is available, certiorari still lies when such appeal does not prove to be a more speedy and adequate remedy
Boticano v. Chu, Jr. (Therese)
March 16, 1987
ELISEO BOTICANO, petitioner,
vs.
MANUEL CHU, JR., respondent.
PARAS, J.:
SUMMARY: Chu failed to pay Boticano for damages made on Boticanos truck, so Boticano filed a complaint against Chu. Summons
was served on Chu through his wife, in their house. Boticano eventually moved to declare Chu in default for failure to file responsive
pleadings in time. TC granted the motion and also ruled in favor of Boticano. Chu subsequently filed several motions and pleadings. At
the SC, Chu argued that the summons was not properly served, thus the court did not acquire jurisdiction.
HELD: The Court ruled that jurisdiction was properly acquired by the TC over Chu through both service of summons and voluntary
appearance in court. He was properly declared in default for not having filed any answer. Despite Chus failure to file a motion to set
aside the declaration of default, he has the right to appeal the default judgment but in the appeal only the evidence of Boticano may be
considered, Chu not having adduced any defense evidence.
Effects of Appeal:
1. If appeal is made WITHOUT asking the RTC to set aside the declaration of default CA will review RTC judgment but no opportunity
to present evidence is given to the defense
2. If defendant first asked RTC to set aside the declaration of default and he is able to prevail, he has an opportunity to present
evidence if the motion be granted, and subsequently have this evidence considered on appeal if he still obtains unfavorable judgment.
NATURE: Petition for review on certiorari seeking to reverse and set aside the ff:
(a) the decision of the Court of Appeals * promulgated on March 31, 1981 in CA-G.R. No. 65287-R entitled: "Eliseo Boticano, plaintiff-

appellee v. Jaime Sigua, defendant and Manuel Chu, Jr., defendant-appellant" which holds that the defendant-appellant was not
properly served with summons and
(b) the resolution denying petitioner's motion for reconsideration of said decision.
FACTS:
Petitioner Eliseo Boticano is the registered owner of a Bedford truck with plate No. QC-870, T-Pilipinas '77 which he was using in
hauling logs for a certain fee.
11:00 o'clock in the evening of September 3, 1971: while loaded with logs, it was properly parked by its driver Maximo Dalangin at
the shoulder of the national highway in Barrio Labi, Bongabon, Nueva Ecija when it was hit and bumped at the rear portion by another
Bedford Truck owned by private respondent Manuel Chu, Jr. and driven by Jaime Sigua, a co-defendant in this case.
Manuel Chu, Jr. agreed with Boticano to shoulder the expenses of the repair of the damaged truck.
When Manuel Chu, Jr. failed to comply with aforesaid agreement as well as to pay damages representing lost income despite
Boticano's demands, Boticano filed a complaint on November 24, 1977 at the CFI of Nueva Ecija, againstManuel Chu, Jr. (truck owner)
and Jaime Sigua (his driver) for damages.
Summons was issued on December 12, 1977 but was returned unserved for defendant Jaime Sigua because he was no longer
connected with San Pedro Saw Mill, Guagua, Pampanga, while another copy of the summons for Manuel Chu, Jr. was returned duly
served on him thru his wife Veronica Chu at his dwelling house.
February 15, 1978: Boticano moved to dismiss the case against Jaime Sigua and to declare Manuel Chu, Jr. in default for
failure to file responsive pleadings within the reglementary period. (GRANTED)
TC: From the evidence adduced by the Boticano found that Manuel Chu, Jr. is responsible for the fault and negligence of his
driver Sigua under Article 2180 of the Civil Code, whose negligence and lack of due care was the immediate and proximate cause of
the damage to petitioner's truck and ruled in favor of plaintiff-petitioner.
Manuel Chu filed with the TC a Notice of Appeal and an Urgent Motion for Extension of Time to file Record on Appeal.
(GRANTED same date)
March 26, 1979: Atty. Hermenegildo D. Ocampo, counsel of record of private respondent, filed a "Motion to Withdraw as Counsel" while
the new counsel Atty. Wilfredo G. Laxamana entered his appearance on April 18, 1979 and filed his record on appeal on the same date.
May 4, 1979: Boticano filed with the TC a Motion to Dismiss Appeal and for execution which was set for hearing on May 14, 1979
wherein Chus counsel personally appeared and opposed Boticanos motion.
May 14, 1979: Chu filed his reply to opposition, after which on May 16, 1979 the trial court issued an order denying aforesaid motion.
TC, May 22 1979: Approved Chus record on appeal.
CA: Appealed judgment SET ASIDE; null and void. Remand to court of origin. Denied MR.
ISSUE/S:
W/N a defendant declared in default in the RTC may appeal the default judgment that may subsequently be rendered even if
he has not asked the RTC to set aside the declaration of default (YES)
W/N Manuel Chu was properly served with summons (YES)
W/N Chu voluntarily submitted himself to the jurisdiction of the TC by filing: notice of appeal, appeal bond, motion for extension
of time to file record on appeal, motion for withdrawal on appearance etc (YES)
HELD/RATIO:
SCS PREVIOUS RULINGS:
One of the circumstances considered by the Court as indicative of waiver by the defendant-appellant of any alleged defect of
jurisdiction over his person arising from defective or even want of process, is his failure to raise the question of jurisdiction in the CFI
and at the first opportunity.
Defects in jurisdiction arising from irregularities in the commencement of the proceedings, defective process or even absence of
process may be waived by a failure to make seasonable objections.
Dalman v. City Court of Dipolog: As to the dismissal of the criminal case, the question of jurisdiction which was never raised in said
case before the trial court cannot be done at this stage and level.
CHU VOLUNTARILY SUBMITTED HIMSELF TO TC JURISDICTION
Chu could have questioned the jurisdiction of the lower court but he did not.
It can of course be argued that the failure to question the lower court's jurisdiction cannot be accounted against Chu for his having been
declared in default gave him no chance to participate in the court deliberations and therefore no chance to raise the jurisdictional issue,
but then, he could have done so, in the subsequent pleadings he filed.
Besides, even assuming that such failure cannot be taken against him, the fact is he had VOLUNTARILY submitted himself to the
court's jurisdiction.
He filed a Notice of Appeal, Appeal Bond, Motion for Extension of Time to File Record on Appeal, Record on Appeal, Motion for
Withdrawal of Appearance, Notice of Appearance and Opposition to Plaintiff's Motion to Dismiss Appeal and for Issuance of a Writ of
Execution.
Not only did he submit pleadings and motions, but he likewise appeared in person, thru counsel in the hearing held on May 14, 1979 at
8:30 a.m. and orally argued in open court on the pending incident.
Section 23, Rule 14 of the Rules of Court: the defendant's voluntary appearance in the action shall be equivalent to service. Thus,
under this principle, it has been consistently held by the Supreme Court that the defect of summons is cured by the voluntary
appearance of the defendant.
CA: No presumption can arise that he voluntarily submitted himself to the jurisdiction of the Court. All of these actions taken by Chu are
geared and mustered towards contesting the court's jurisdiction over his person, or of attacking the validity of the judgment on
jurisdictional grounds.

SC: NO. The Notice of Appeal unmistakably indicates the reason for the appeal, which reads:
2. That, the herein defendant is not contented with the aforesaid Decision for it is contrary to the evidence and the law and the award of
damages is so excessively unsupported by any evidence to warrant the same; hence, he is appealing said Decision to the Hon. Court
of Appeals, Manila, both on questions of facts and law.
THUS: CA conclusion has no basis.
DEFENDANT DECLARED IN DEFAULT MAY APPEAL DEFAULT JUDGMENT EVEN IF HE DID NOT ASK THE RTC TO SET ASIDE
DEFAULT DECLARATION
HOWEVER! Distinction as to appeal:
(a) If an appeal is made without first asking the RTC to set aside the declaration of default, and the appellate court sets aside on
said declaration, all he can get is a review of the RTC's default judgment without the opportunity of having the higher court
consider defense evidence (for the simple reason that no evidence was even adduced by him in the RTC) (See Rule 41, sec. 2, par.
3, Rules of Court).
(b) If upon the other hand, the defendant first asks the RTC to set aside the declaration of default (See Rule 18, secs. 2 and 3,
Rules of Court), and he is able to prevail, the declaration win be set aside, and h e will now have the opportunity to present his
evidence in the RTC. Thus, even if he finally loses in the RTC's subsequent decision, his defense can be considered, when appeal is
made to the appellate tribunal. Of course, even if the default declaration is not set aside despite his motion for the setting aside, he will
be entitled to all notices in the court proceedings, and can file any pleading he may wish to file, including the notice of appeal. (See
Rule 13, sec. 9, Rules of Court).
Aforementioned rules applicable to : Metropolitan TC, Municipal TC, Municipal Circuit TC; Not to: Summary proceedings.
CHU WAS VALIDLY SERVED SUMMONS
CAB: Summons was timely issued and received by Chu In fact, he never denied actual receipt of such summons but confined himself
to the argument that the Sheriff should prove that personal service was first made before resorting to substituted service,
Montalban v. Maximo: The constitutional requirement of due process exacts that the service be such as may be reasonably expected
to give the notice desired. Once the service provided by the rules reasonably accomplishes that end, the requirement of justice is
answered; the traditional notions of fair play are satisfied; due process is served.
The burden on a plaintiff is not to be enlarged with a restrictive construction desired by the defendant.
Finally in a last ditch effort, Chu insists that there was no valid service of summons because he is a partner and general manager in
San Pedro Sawmill.
Consequently, his wife, to whom summons and complaint were allegedly served not being partnership, cannot receive the same under
Section 13 of Rule 14 of the Rules of Court.
It has however been settled that actions must be brought by the real parties in interest and against the persons who are bound by the
judgment obtained therein.
The title of the case both in the trial court, in the Court of Appeals and in this Court shows that the partnership is not a party. On the
contrary, as previously stated private respondent himself assumed the responsibility of the accident and is now estopped to disclaim the
liabilities pertaining thereto.
CONCLUSION
Jurisdiction was properly acquired by the trial court over the person of respondent thru both service of summons and voluntary
appearance in court;
He was properly declared in default for not having filed any answer;
Despite Chus failure to file a motion to set aside the declaration of default, he has the right to appeal the default judgment but in the
appeal only the evidence of the Boticano may be considered, Chu not having adduced any defense evidence; We agree with the
findings of fact by the trial court, the same being unrebutted.
DISPOSITION: WHEREFORE, the assailed decision and resolution of the Court of Appeals are REVERSED and SET ASIDE, and the
decision of the then Court of First Instance (now Regional Trial Court)of Nueva Ecija, Cabanatuan City in Civil Case No. 6754 "Eliseo
Boticano v. Manuel Chu, Jr. and Jaime Sigua" is hereby REINSTATED.

Denso (Phils.), Inc. v. Intermediate Appellate Court (Chrissa)

FACTS: Kamayan sued Denso for rent and repair costs on their building that burned down. Denso filed a motion for extension of time to
file its answer, eventhough it counsel was already preparing the answer. The RTC denied the motion for extension for allegedly not
giving Kamayan a copy of the pleading and declared Denso in default. It received Kamayans evidence and witnesses and ruled against
Denso. Later, it reversed itself and let Denso present its evidence but deprived Denso of its right to cross-examine witnesses already
previously presented. Denso focused on filing its MR on this issue which led to the court reviving it prior decision.
SC ruled that the motion for extension was arbitrarily denied. If a defendant is improperly declared in default, his time to answer not
having expired because of a timely ex parte motion for extension, he should be entitled to relief which should consist not only in the
admission of his responsive pleading, but of the right to cross-examine the witnesses presented and to object to exhibits offered in his
absence, if not indeed to have trial commence all over again.
February 27, 1987
DENSO (PHILS.), INC., petitioner, vs. THE INTERMEDIATE APPELLATE COURT AND KAYAMANAN DEVELOPMENT
CORPORATION, respondents.
NARVASA, J p:

On June 23, 1984, at about 11 o'clock in the evening, a fire broke out at the Nippondenso Building at Pasong Tamo Ext., Makati, Metro
Manila. The building was owned by the Kayamanan Development Corporation and was then under lease to Denso (Phils), Inc.
The fire caused extensive damage. DENSO and its correspondent firm in Japan, NIPPONDENSO, reportedly suffered losses
amounting to P6,131,976.65 and P682,212.58, respectively. KAYAMANAN's loss was placed at P1,750,000.00.
A year or so later, KAYAMANAN instituted an action against DENSO in the RTCat Makati, for recovery of
(a) unpaid rentals from June, 1984 to March, 1985, amounting to an aggregate of P471,546.69
(b) the cost of repairing the damage caused by the fire to the leased building, it being alleged that DENSO was bound
to bear said cost under their lease agreement; and
(c) unrealized monthly rents and attorney's fees
Summons was served on DENSO on June 10, 1985 but not referred by DENSO to its counsel until June 22, 1985.
This prompted the latter to file on June 25, 1985 a "MOTION FOR EXTENSION OF TIME TO FILE ANSWER," pleading the late
referral, the need to attend to other legal work of equal importance, as well as the time requirement for study of the factual and legal
points involved in the action, and praying, in consequence, for an additional period of 15 days from June 25 within which to present the
requisite responsive pleading.
The motion closed with a "Notice of Hearing" addressed to the Clerk of Court, asking that the motion be submitted to the court for
consideration and approval immediately upon its receipt; and a notation that a copy of the motion had been furnished plaintiff
KAYAMANAN's counsel.
The copy of the motion was actually received by KAYAMANAN's counsel the following day, June 26, 1985.
The motion for extension was however denied by Judge Teofilo Guadiz, Jr. considering "that there was no proof of service that
plaintiff received a copy of said motion."
same day, KAYAMANAN presented an "Ex-parte Motion to Declare Defendant in Default" asserting that the reglementary period
of 15 days for DENSO to file answer had expired on June 25, 1985 without any answer having been filed, but making no reference
to DENSO's motion for extension
Judge Guadiz promulgated an Order deeming the motion for default to be "well-taken," and accordingly declaring DENSO in default
and setting the reception of KAYAMANAN's evidence ex-parte on the following day
at the appointed date , the Court did receive KAYAMANAN's evidence ex-parte, and four (4) days later, on July 1, 1985, Judge Guadiz
rendered judgment by default, sentencing DENSO to pay to KAYAMANAN P471,546.69 as accumulated monthly rentals and cost of
services from June, 1984 to March, 1985; P2,856,000.30 as the reasonable cost of repair of the "damage building" (sic); and 10% of
the total amounts awarded, as attorney's fees.
evidently in complete ignorance thereof, DENSO's counsel drew up its answer to the complaint, which was completed on July 5,
1985 and filed on July 8, 1985. To this pleading were appended copies of letters from DENSO to KAYAMANAN appealing for a 30%
rental rebate due to the prejudicial consequences of the fire ; giving notice of the termination of the lease and formally turning over the
leased premises
DENSO learned of the order of default and the judgment by default. It then filed on August 2, 1985 a verified motion for
reconsideration
Sept 3 ORDER: TC promulgated an Order setting aside, "in the interest of substantial justice," the order of default ; but hearing
was rescheduled only for the presentation of defendant DENSO's evidence, the Court explicitly stating that the evidence already
presented (by KAYAMANAN) would remain on record "without the right of cross examination on the part of the defendant." at DENSO's
instance, hearing was re-scheduled o
DENSO orally asked the Court to reconsider its Order of September 3, 1985 and accord it the opportunity to cross-examine
KAYAMANAN's witnesses, who had given their testimony ex-parte.
The Court opted to give DENSO time to move formally for reconsideration and reset the hearing (which was again reset because the
Judge was on official leave in November)
DENSO submitted its formal motion for reconsideration praying for the right to cross-examine KAYAMANAN's witnesses
The record does not show that any opposition
DENSO received notice of the Order of the Court dated October 24, 1985 (the date of the hearing), denying its (DENSO's) motion to be
allowed to cross-examine KAYAMANAN's witnesses, and scheduling the initial hearing for the presentation of the defense witnesses on
November 21, 1985. Four days afterwards, the Court promulgated another Order, denying DENSO's MR
"What is important is that defendant is afforded the opportunity to present its evidence and thus enable the Court to see the other side
of the coin, the defendant being offered a chance to present its evidence in the Order
DENSO did not however receive a copy of this Order of November 12, 1985 until January 9, 1986, the day finally set (by the Court) for
the reception of its evidence. (Later received it)
DENSO then asked for deferment of the hearing so that it might elevate this adverse ruling to a higher court. Denied
DENSO declared itself as not ready to proceed with the presentation of evidence, the Court dictated an Order stating that "t his being
the third time that defendant failed to present its evidence notwithstanding the chance given to it, the 'Decision' dated July 1,
1985 is revived." (pay blahblah)
DENSO filed a petition for certiorari with the IAC praying for the annulment of the series of orders of Judge Guadiz limited its review of
the proceedings to the question of whether or not the petitioner was properly denied the right of cross-examination.
IAC: the right of cross-examination is nonetheless waivable; that since petitioner received on September 16, 1985 copy of the order of
September 3, 1985 setting the judgment by default aside and scheduling the case for hearing only for reception of defendant's
evidence without right to cross-examine plaintiff's witnesses but did not move for its reconsideration until October 24, 1985, or after a
lapse of 38 days, such inaction amounted to a waiver of the claimed right to cross-examine; and, moreover, said motion for
reconsideration came too late because the order sought to be reconsidered was by then already final, the applicable period of appeal

being only fifteen (15) days from notice of said order. DENSO was guilty of laches.
WON motion for extension was correctly denied (NO)
RATIO
The error in these pronouncements is immediately apparent. They assume that the order in question is a final and appealable
order, when it is in fact interlocutory. The distinction between final and interlocutory orders is a well-settled one. llcd
"The concept of 'final' judgment, as distinguished from one which has 'become final' (or 'executory' as of right [final and executory]), is
definite and settled.
A 'final' judgment or order is one that finally disposes of a case, leaving nothing more to be done by the Court in respect thereto, e.g.,
an adjudication on the merits which, on the basis of the evidence presented at the trial declares categorically what the rights and
obligations of the parties are and which party is in the right; or a judgment or order that dismisses an action on the ground, for instance,
of res judicata or prescription. Once rendered, the task of the Court is ended, as far as deciding the controversy or determining the
rights and liabilities of the litigants is concerned. Nothing more remains to be done by the Court except to await the parties' next move
(which among others, may consist of the filing of a motion for new trial or reconsideration, or the taking of an appeal) and ultimately, of
course, to cause the execution of the judgment once it becomes 'final' or, to use the established and more distinctive term, 'final and
executory.'
"Conversely, an order that does not finally dispose of the case, and does not end the Court's task of adjudicating the parties'
contentions and determining their rights and liabilities as regards each other, but obviously indicates that other things remain to be done
by the Court, is 'interlocutory,' e.g., an order denying a motion to dismiss under Rule 16 of the Rules, or granting a motion for
extension of time to file a pleading, or authorizing amendment thereof, or granting or denying applications for postponement, or
production or inspection of documents or things, etc. Unlike a 'final' judgment or order, which is appealable, as above pointed out, an
'interlocutory' order may not be questioned on appeal except only as part of an appeal that may eventually be taken from the final
judgment rendered in the case."
CAB: That the order of September 3, 1985 was interlocutory in character is beyond cavil. In setting aside the order of default and the
succeeding judgment by default, it left the case open for further proceedings before the Trial Court, not the least of which was the
reception of evidence for the petitioner. Therefore, it could not become final in the sense that final judgments become "final and
executory." No appeal therefrom would lie except in the context and as part of an appeal from a subsequent final judgment on the
merits, and a motion for reconsideration thereof was not subject to the limiting fifteen-day period of appeal prescribed for final
judgments or orders.
NO LACHES
Neither will the Court consider laches as having set in by reason of petitioner's allowing thirty-eight (38) days to pass before seeking a
reconsideration of the order
such a relatively brief period cannot by any reckoning be deemed an unreasonable length of time,
while laches is a defense which operates independently of the statute of limitations and is subject to no fixed period s, it is also
founded on equity and may be invoked only if the delay in asserting a claim has worked a change in the conditions such as
would render unjust or inequitable the grant of the relief sought.
elements must be present:
(1) conduct
on the part of defendant, or one under whom he claims, giving rise
to the situation complained
of,
(2)
delay in asserting complainant's right after knowledge or notice of
defendant's
conduct
and
an
opportunity to sue,
(3)
lack of knowledge or notice on the part of the defendant that complainant would assert the right on which
he bases suit, and
(4)
injury or prejudice to defendant in the event relief is accorded
unlike prescription, the defense of laches is not dependent on the existence of a statutory period of limitation. It can be invoked
without reckoning any specific or fixed period; it is sufficient that there be an unreasonable and unexplained delay in bringing the action
that its maintenance would already constitute inequity or injustice to the party claiming it.
CAB: No perceivable prejudice would attach to the respondent if the petitioner were allowed to cross-examine the witnesses it
has presented. If said witnesses told the truth, respondent has nothing to fear from their cross-examination, the effect of which would
only be to enhance their credibility.
MOTION FOR EXTENSION OF TIME IMPROPERLY DENIED
Petitioner's motion for reconsideration of the order of September 3, 1985, therefore, hardly deserved the short shrift that it received from
the Intermediate Appellate Court because it was in no sense untimely, and neither lapse of a statutory period nor laches could correctly
be invoked to justify the summary refusal to inquire into the antecedents of said order. What that Court considered to be moot and
academic an inquiry into the merits of Judge Guadiz's separate orders of June 26, 1985 denying the motion for extension of time to
file answer and declaring the petitioner in default lay precisely at the heart of the matter before it and now before this Court. Both
orders were premised on what the Judge perceived to be a failure to comply with the rule that notice of motions must be served by the
movant on all parties concerned at least three (3) days prior to the hearing thereof.
What His Honor evidently overlooked was that the rule on notice is not unqualifiedly applicable to all motions, and that there are
motions which may be heard ex-parte
Among the latter class of motions are precisely those seeking is that they are non-contentiextension of time to plead, and the
reason these are not strictly held to the requirement of noticeous and do not as a rule involve the substantial rights of the

other parties in the suit.

The motion for extension of time within which a party may plead is not a litigated motion where notice to the adverse party is
necessary to afford the latter an opportunity to resist the application, but an ex-parte motion 'made to the court in behalf of one or
the other of the parties to the action, in the absence and usually without the knowledge of the other party or parties.'
As 'a general rule, notice of motion is required where a party has a right to resist the relief sought by the motion and principles of
natural justice demand that his rights be not affected without an opportunity to be heard . . .'
"It has been said that 'ex-parte motions are frequently permissible in procedural matters, and also in situations and under
circumstances of emergency; and an exception to a rule requiring notice is sometimes made where notice or the resulting delay
might tend to defeat the objection (sic) of the motion.
Upon similar premises, this Court has consistently held, that motions for extension of time to file record on appeal may be filed
and passed upon ex-parte, and the rulings on that point are applicable to motions for extension of time to file answer.
CAB: Petitioner's motion for extension of time to file answer was, therefore, improperly denied for lack of proof of service on the
respondent, said motion having been seasonably filed and, as already fully shown, there being no impediment to its being heard exparte.
No pretense is made that the motion was denied as having been filed merely for delay, but even if that ground were read into the
otherwise clear terms of the order of denial which do not even hint thereat, it would still be belied by the fact that what was sought was
only an extension of the original reglementary period as well as that prima facie meritorious reasons were pleaded for the desired
extension.
The petitioner's answer, alleging defenses which, if established, could defeat the respondent's claim, wholly or in part, was filed well
within the period of extension prayed for.
While the order of default was in fact set aside by the Trial Judge on motion of the petitioner, he failed to afford petitioner the complete
relief that the arbitrary and improper issuance of said order and of the earlier order denying the motion for extension clearly called for.
Ideally, the slate should have been wiped clean by setting aside also the hearing at which the respondent presented its evidence exparte, so that the parties would stand on even terms with neither having the advantage of the other.
instead, the Judge prescribed that the evidence presented by the KAYAMANAN would remain in the record without right on the part of
DENSO to cross-examine the witnesses who had already testified
he should be entitled to relief which should consist not only in the admission of his responsive pleading, but of the right to crossexamine the witnesses presented and to object to the exhibits offered in his absence, if not indeed to have trial commence all over
again.
petition is granted. The Decision of the Intermediate Appellate Court under review is reversed and set aside. Petitioner's answer is
ordered admitted.