1. When to file pleadings?

"In this case, however, the counsel for petitioners filed the Notice of Appeal
via a private courier, a mode of filing not provided in the Rules. Though not
prohibited by the Rules, we cannot consider the filing of petitioners Notice of
Appeal via LBC timely filed. It is established jurisprudence that the date of
delivery of pleadings to a private letter-forwarding agency is not to be considered
as the date of filing thereof in court; instead, the date of actual receipt by the
court x x x is deemed the date of filing of that pleading.42 Records show that the
Notice of Appeal was mailed on the 15th day and was received by the court on
the 16th day or one day beyond the reglementary period. Thus, the CA correctly
ruled that the Notice of Appeal was filed out of time."
Case: G.R. No. 179638 ; July 8, 2013
HEIRS OF NUMERIANO MIRANDA, SR.,namely: CIRILA (deceased),
CORNELIO,
NUMERIANO, JR., ERLINDA, LOLITA, RUFINA, DANILO, ALEJANDRO,
FELIMON, TERESITA, ELIZABETH
and ANALIZA, all surnamed MIRANDA, Petitioners, -versus- PABLO R.
MIRANDA, Respondent.

These cases have been consolidated as they involve the same parties and
subject matter (a 21-hectare land in Pawa-Talon and Guintoan, Palauig,
Zambales) and related issues.
G.R. No. 109312 is a petition for review of the decision [1] of the Court of
Appeals, sustaining the dismissal by the Regional Trial Court, Branch 69 at Iba,
Zambales, of a complaint which petitioners had filed for the annulment of the sale
of the land in question to private respondents. On the other hand, G.R. No.
120245 is a petition for review of another decision [2] of the Court of Appeals,
affirming the ejectment of petitioners from the land which is the subject of G.R.
No. 109312.
The facts are as follows:
Placido Miranda and his wife were owners of a parcel of land, consisting of
about 21 hectares, in Pawa-Talon and Guintoan, Palauig, Zambales. Upon their
death,
the
land
was
administered
by
their
son
Maximo
Miranda. On November 5, 1957 Maximo Miranda sold the land to Agerico Miranda,

then Provincial Treasurer of Zambales. On November 15, 1984, Free Patent Title
No. 600198 (OCT No. P-7753), covering the land in question, was issued to
Agerico Mirandas daughter, Charito. Since they acquired it from Maximo Miranda,
Agerico Miranda has been in possession and cultivation of the land in behalf of his
daughter, now a resident of New Jersey, U.S.A.
On December 28, 1991, the heirs of Placido Miranda entered the land and
prevented private respondents from cultivating it, claiming that they were the
rightful owners and possessors because Maximo Miranda was merely the
administrator of Placido Mirandas estate, and that Agerico Miranda, as Provincial
Treasurer, caused the preparation of a tax declaration in which it was made to
appear that Maximo Miranda was the sole owner of the land.
On January 24, 1992 private respondents brought an action for forcible entry
in the Municipal Circuit Trial Court of Masinloc and Palauig, Masinloc, Zambales
against petitioners. The complaint was dismissed by the court on the ground that
it had no jurisdiction over the case, but on appeal the Regional Trial Court at Iba,
Zambales reversed and remanded the case to the MCTC.
On the basis of the parties position papers, the documentary evidence
submitted
by
them
and
their
own
pleadings,
the
MCTC
on August 5, 1993 rendered judgment for private respondents, ordering
petitioners to vacate the land. Its decision was affirmed in toto by the Regional
Trial Court. Petitioners filed a Petition for Review in this Court (G.R. No. 114994)
which referred the case to the Court of Appeals. On February 24, 1995, the
appellate court rendered a decision dismissing the case for lack of
merit. Petitioners filed a motion for reconsideration which was denied. The Court
of Appeals decision is subject of the present petition for review on certiorari
in G.R. No. 120245.
On the other hand, petitioners herein filed on June 2, 1992 a complaint for
Declaration of Nullity, Annulment of Title and Deed of Sale and Cancellation of
Title and Reconveyance with Damages and Partition against private
respondents. Petitioners reiterated their contention that the sale of the land to
Agerico was fraudulent and therefore void. In addition they contended that the
certificate of title issued in the name of Agericos daughter, Charito Miranda, was
null and void because the latter was disqualified from owning lands in
the Philippines, having become a foreign citizen. They argued that in any event

prescription did not set in because actions to declare the inexistence of an

absolutely simulated contract do not prescribe [3] and that if there was an
applicable period of prescription, it would be four (4) years from November 1991,
when they allegedly discovered the fraud committed against them by private
respondents.
In answer, private respondents alleged that since 1957, they had been in
possession and cultivation of the land, planting it to mango and coconut trees.
After Charito Miranda had gone to the U.S.A., the land was administered by her
father, Agerico Miranda. Private respondents complained that petitioners entered
said land and prevented them from going into it.
Upon motion of private respondents, the Regional Trial Court dismissed the
complaint on the ground of prescription. Instead of appealing from the decision,
petitioners filed a special civil action for certiorari in the Court of Appeals, which,
on March 16, 1993, dismissed their action. Its decision is now the subject of
review in G.R. No. 109312.
Procedural and substantive issues are raised in these appeals for the
consideration of this Court. We shall deal with these appeals in inverse order.
In G.R. No. 109312 petitioners contend that because the Court of Appeals
did not set aside the order of the Regional Trial Court which dismissed their action
for the annulment of the sale on the ground of prescription, the appellate court
sanctioned a dismissal based purely on technicalities which deprived petitioners
of the opportunity to present evidence and thus violated their right to due
process.
The contention is without merit. The Regional Trial Court dismissed the
complaint upon motion by the private respondents and after petitioners had been
given full opportunity to oppose the motion to dismiss through the presentation
of argument. As the question was whether petitioners action was barred by
prescription or private respondents had acquired ownership by prescription, there
was no need for the reception of oral evidence. Petitioners themselves stated in
their complaint that the sale, which they were seeking to annul, had been made
onNovember 5, 1957. Since their complaint was filed only on June 2, 1992, after
almost 35 years, it was clear that acquisitive prescription had set in. Prescription
may be effectively pleaded in a motion to dismiss if the complaint shows on its

face that the action had already prescribed at the time it was filed. In fact the
trial court could have dismissed the case motu proprio on this ground even
though the private respondents did not present a motion for the dismissal of the
complaint.[4]
Indeed private respondent Agerico Miranda acquired the land by virtue of a
deed of sale. His daughter, Charito, to whom the land was later transferred, has
in her favor a certificate of title, tax receipts and evidence of possession of the
land for more than 30 years.[5] Tax receipts and declarations of ownership for
taxation, when coupled with proof of actual possession of the property, can be
the basis of claim of ownership through prescription.[6]
Ownership and other real rights over immovable property are acquired by
ordinary prescription through possession for ten years if the adverse possession
is by virtue of a title and it is in good faith. [7] Without need of title or of good
faith, ownership and other real rights over immovables also prescribe through
uninterrupted adverse possession for 30 years.[8] For possession to constitute the
foundation of a prescriptive right, it must be under a claim of title or it must be
adverse or in the concept of owner.[9] In this case, therefore, on the basis alone of
possession for more than 30 years, private respondents ownership, acquired
through extraordinary prescription, is beyond question.
Petitioners contend that under Art. 1391 of the Civil Code they had a period
of four (4) years within which to bring an action for annulment and that this
period commenced to run only from November 1991, when they allegedly
discovered the fraud committed against them. Art. 1391 presupposes, however,
that no acquisitive prescription has set in, for after the favorable effects of
acquisitive prescription have set in, rights of ownership over a property are
rendered indisputable.[10]
Nor is it correct to say that the sale to private respondents is absolutely
simulated and, therefore, the action to declare its nullity is imprescriptible. As
Art. 1345 of the Civil Code provides, a contract is simulated if the parties did not
intend to be bound at all. This is completely the opposite of petitioners theory
that private respondent Agerico Miranda acquired the land from Maximo Miranda
through fraud.

Instead of appealing, petitioners filed a petition for certiorari against the trial
courts order of dismissal. The issue in this case is whether the Court of Appeals
erred in dismissing petitioners action on the ground that certiorari was not the
proper remedy against the order of the trial court. We hold that the appellate
court did not err. The correct procedural recourse was appeal not only because,
as already explained, the trial court did not commit any grave abuse of discretion
in dismissing petitioners action without the presentation of oral testimonies but
also because the order of dismissal was a final order from which petitioners could
have appealed in accordance with Rule 41, 2. Certiorari generally lies only when
there is no appeal nor any other plain, speedy or adequate remedy available to
petitioners. Here appeal was available. It was adequate to deal with any question
whether of fact or of law, whether of error of jurisdiction or grave abuse of
discretion or error of judgment which the trial court might have committed. But
petitioners instead filed a special civil action of certiorari.
A party cannot substitute the special civil action of certiorari under Rule 65 of
the Rules of Court for the remedy of appeal. The existence and availability of the
right of appeal are antithetical to the availability of the special civil action of
certiorari.[11] As this Court held in Fajardo v. Bautista:[12]
Generally, an order of dismissal, whether right or wrong, is a final order, and
hence a proper subject of appeal, not certiorari. The remedies of appeal and
certiorari are mutually exclusive and not alternative or successive. Accordingly,
although the special civil action of certiorari is not proper when an ordinary
appeal is available, it may be granted where it is shown that the appeal would be
inadequate, slow, insuffucient, and will not promptly relieve a party from the
injurious effects of the order complained of, or where appeal is inadequate and
ineffectual. Nevertheless, certiorari cannot be a substitute for the lost or lapsed
remedy of appeal, where such loss is occasioned by the petitioners own neglect
or error in the choice of remedies.

In G.R. No. 120245 petitioners argue that the use of summary procedure in
the MCTC was improper because there was a question of ownership involved and
a hearing should instead have been held according to regular procedure. In
support of their claim petitioners cite the following provision of the Rules on
Summary Procedure:
1. Scope. This Rules shall govern the procedure in the Metropolitan Trial Courts,
the Municipal Trial Courts, and the Municipal circuit Trial Courts in the following
cases:
A. Civil Cases:
(1) Cases of forcible entry and unlawful detainer, except where the question of
ownership is involved, or where the damages or unpaid rentals sought to be
recovered by the plaintiff exceed twenty thousand pesos (P20,000.00) at the
time of the filing of the complaint;
The proceedings below were held, however, pursuant to the Revised Rules on
Summary Procedure which took effect on November 15, 1991, which now
provide:
1. Scope. - This rule shall govern the summary procedure in the Metropolitan
Trial Courts, the Municipal Trial Courts in Cities, the Municipal Trial Courts, and
the Municipal Circuit Trial Courts in the following cases falling within their
jurisdiction:
A. Civil Cases:
(1) All cases of forcible entry and unlawful detainer, irrespective of the amount of
damages or unpaid rentals sought to be recovered. Where attorneys fees are
awarded, the same shall not exceed twenty thousand pesos (P20,000.00).

The Court of Appeals therefore did not err in holding:

The remedy of a petition for certiorari is unavailing. This court possesses no
authority to rule upon non-jurisdictional issues in a certiorari proceeding. A writ
of certiorari may issue only when the tribunal has acted without or in excess of its
jurisdiction, or with grave abuse of discretion and there is no appeal, nor any
plain, speedy and adequate remedy in the ordinary course of law.

All ejectment cases are now covered by the summary procedure regardless
of whether they involve questions of ownership. [13] Under the Revised Rules on
Summary Procedure, the adjudication of cases is done on the basis of affidavits
and position papers.[14] The court is no longer allowed to hold hearings to receive
testimonial evidence. Should the Court find it necessary to clarify certain issues,
it may require the parties instead to submit affidavits or other evidence. The

proceeding is required to be summary so as to promote the speedy disposition of

ejectment cases.[15]
Nor could the pendency of the action for annulment of sale and reconveyance
in the Regional Trial Court be successfully pleaded in abatement of an action for
unlawful detainer or forcible entry. It is now settled that the court in ejectment
cases may determine questions of ownership whenever necessary to decide the
questions of possession. Nor may petitioners, by filing an action involving the
ownership of the land, frustrate the ejectment suit, brought by private
respondent. Inferior courts are not divested of jurisdiction over ejectment cases
just because the defendants assert ownership over the litigated property.[16]
Indeed, the only issue in such cases is physical or material possession or
possession de facto, independent of any claim of ownership set forth by any of
the party litigants. The purpose of the suit is the restoration to the aggrieved
party of the possession of the premises from which he has been forcibly ejected
or which has been withheld from him, and anyone who can prove prior
possession de facto may recover such possession. This rule holds true regardless
of the character of a partys possession, provided that he has in his favor priority
of time which entitles him to stay on the property until he is lawfully ejected. [17]
WHEREFORE, the petitions for review in these cases are DISMISSED and
the decisions of the Court of Appeals are AFFIRMED.
2. Proper Service of papers and judgment
Case: PNB vs Intestae Heirs of de Guzman
Litigants should not be allowed to file identical motions repeatedly,
speculating on the possible change of opinion of the court or of its judges.
[1]
We emphasize this principle in the present case and warn the parties to
desist from the practice of filing several motions to dismiss which allege the
same ground.
This is a petition for review on certiorari of Court of Appeals (CA)
Decision[2] dated October 22, 2007 and Resolution [3] dated April 14, 2008,
which affirmed the denial of petitioners motion to dismiss.
Respondent Gina de Guzman obtained a P300,000.00 loan from petitioner,
Philippine National Bank, secured by a real estate mortgage over a parcel of
land registered in her name. Gina acquired the property from her father,
Francisco de Guzman, through a Deed of Absolute Sale dated August 28,

1978. Ginas sister, Rosalia de Guzman, the beneficiary of the family home
standing on the said lot, gave her consent to the mortgage.
Later, Rosalia filed a Complaint for Declaration of Nullity of Document,
Cancellation of Title, Reconveyance, Cancellation of Mortgage, and
Damages[4] against Gina and petitioner, alleging that the purported sale of the
property by Francisco to Gina was fraudulent. The Complaint was
then amended to replace respondent Intestate Estate of Francisco de Guzman
as plaintiff.[5]
On January 21, 1999, the Regional Trial Court (RTC) dismissed the case due
to plaintiffs failure to comply with its order to pay the legal fees so that alias
summons could be served, thus:
A review of the records discloses that the plaintiffs failed to comply,
despite due notice, with the order of this court dated November 17,
1998, as indicated in the registry return cards addressed to plaintiff
Rosalia de Guzman-Poyaoan and her counsel as attached at the dorsal
side of said order.
WHEREFORE, this court is constrained to dismiss this case on the
ground that plaintiffs failed to comply with the aforementioned order
to pay legal fees to the Clerk of Court within five (5) days from receipt
of the order so that an alias summons can be served by the sheriff of
this court to defendant Gina de Guzman at her new address in Metro
Manila, in consonance with Section 3, Rule 17 of the 1997 Rules of
Civil Procedure.
SO ORDERED.[6]
No appeal was taken from this order; hence, the dismissal became final and
executory.
Thereafter, on April 11, 2000, respondent Intestate Estate filed another
Complaint,[7] also for Declaration of Nullity of Documents, Cancellation of Title,
Reconveyance, Cancellation of Mortgage, and Damages, against Gina and
petitioner, with essentially the same allegations as the former Complaint.
On June 1, 2000, petitioner filed a Motion to Dismiss [8] on the ground of res
judicata, alleging that the Complaint is barred by prior judgment. In an
Order[9] dated October 2, 2000, the RTC denied the motion. The court ruled
that, since there was no determination of the merits of the first case, the
filing of the second Complaint was not barred by res judicata. It also held that
courts should not be unduly strict in cases involving procedural lapses that do
not really impair the proper administration of justice.

On October 25, 2000, petitioner filed a Second Motion to Dismiss [10] on the
ground of forum shopping. Petitioner argued that respondent Intestate Estate
violated the rule against forum-shopping when it filed the Complaint despite
knowing that a similar Complaint had been previously dismissed by the court.
The RTC, in an Order[11] dated March 13, 2001, denied the motion for lack of
merit, and petitioner was directed to file its answer within five days. The court
said that there was forum-shopping if a final judgment in one case would
amount to res judicata in another case, and since it had already ruled in its
previous order that the dismissal of the first complaint did not constitute res
judicata, respondents were not guilty of forum-shopping.

SO ORDERED.[18]

Petitioner filed another Motion to Dismiss, raising the same ground, which was
denied by the RTC in an Order dated May 31, 2001.[12]

SO ORDERED.[19]

Petitioner then filed an Omnibus Motion for Reconsideration [13] of the three
RTC Orders, this time, raising the following grounds: (a) res judicata; (b)
forum-shopping; (c) lack of jurisdiction over the person; and (d) complaint
states no cause of action.
On January 15, 2002, the RTC denied the omnibus motion for lack of merit
and gave petitioner five days within which to file its answer. The court held
that the motion contained a mere rehash of the arguments raised in the three
earlier Motions to Dismiss which had already been passed upon by the court
in its three Orders and which contributed to the undue delay in the disposition
of the case.[14]
Finally, petitioner filed an Answer[15] to the Complaint on February 19, 2002,
again raising therein the issue of res judicata. Thereafter, the case was set for
pre-trial.
Three years later, specifically on February 15, 2005, petitioner filed another
Motion to Dismiss[16] with leave of court, alleging res judicata and forumshopping.
On October 4, 2005, the RTC issued an Order [17] denying the Motion to
Dismiss, declaring:
WHEREFORE, in view of the foregoing, the Motion to Dismiss is hereby
DENIED.
No further Motion to Dismiss shall be entertained by this Court. Parties
are directed to prosecute this case with dispatch.
Set the cross-examination of plaintiff Rosalia de Guzman Poyaoan on
November 18, 2005 at 8:30 oclock in the morning.

On November 6, 2006, the RTC denied petitioners motion for reconsideration.

Petitioner filed a petition for certiorari with the CA, assailing these Orders. On
October 22, 2007, the CA denied the petition, ruling in this wise:
WHEREFORE, the instant petition is hereby DENIED. ACCORDINGLY,
the assailed Orders of Branch 57, Regional Trial Court of San
Carlos City, Pangasinan dated 4 October 2005 and 6 November 2006,
respectively, are AFFIRMED.

On April 14, 2008, the CA denied petitioners motion for reconsideration.[20]

Petitioner then filed this petition for review on certiorari, raising the following
issues:
The Court of Appeals erred in holding that an element of res judicata,
i.e., that the disposition of the case must be a judgment or order on
the merits is absent in the case.
The Court of Appeals erred when it ruled that res judicata has not set
in so as to bar the filing of the second case.
The Court of Appeals erred in holding that the respondent had not
violated the rule against forum-shopping.[21]
The petition has no merit.
The Court finds insufferable petitioners repeated filing of Motions to Dismiss
raising the same ground. In the three previous Motions to Dismiss and in an
omnibus motion for reconsideration, petitioner argued that the present case
was barred by prior judgment and that there was forum-shopping.
Correspondingly, the issues had been repetitively passed upon and resolved
by the court a quo.
The motions were apparently filed for no other reason than to gain time and
gamble on a possible change of opinion of the court or the judge sitting on
the case. The Motions to Dismiss were filed in a span of five years, the first
one having been filed on June 1, 2000 and the last the subject motion on
February 15, 2005, three years after petitioner filed its answer. In fact, since
the first Motion to Dismiss, three judges had already sat on the case and
resolved the motions. By filing these motions, petitioner had disrupted the

courts deliberation on the merits of the case. This strategy cannot be

tolerated as it will entail inevitable delay in the disposition of the case.
Although the ground stated in the second Motion to Dismiss was forumshopping and the subsequent motions included other grounds, nonetheless,
all of these motions raised a similar argumentthat since the dismissal in the
first case is already final and executory and there is no reservation made by
the court in its judgment that the dismissal is without prejudice, the filing of
the second case is barred. Therefore, the subsequent motions, being
reiterations of the first motion, technically partook of the nature of a motion
for reconsideration of the interlocutory order denying the first Motion to
Dismiss.
This is not the first time that the Court disallowed the repetitive filing of
identical motions against an interlocutory order. In a parallel case, San Juan,
Jr. v. Cruz,[22] the Court acknowledged that there is actually no rule
prohibiting the filing of a pro forma motion against an interlocutory order as
the prohibition applies only to a final resolution or order of the court. The
Court held, nonetheless, that a second motion can be denied on the ground
that it is merely a rehash or a mere reiteration of the grounds and arguments
already passed upon and resolved by the court.
In San Juan, the Court was also confronted with the question of when the
reglementary
period
for
filing
a
petition
for certiorari shall
be
reckoned. Petitioner therein filed second and third motions for reconsideration
from the interlocutory order and when he filed the petition for certiorari with
the CA, he counted the 60-day reglementary period from the notice of denial
of his third motion for reconsideration. He argued that, since there is no rule
prohibiting the filing of a second or third motion for reconsideration of an
interlocutory order, the 60-day period should be counted from the notice of
denial of the last motion for reconsideration. Having declared that the filing of
a second motion for reconsideration that merely reiterates the arguments in
the first motion is subject to denial, the Court held that the 60-day period for
filing a petition for certiorari shall be reckoned from the trial courts denial of
the first motion for reconsideration, otherwise, indefinite delays will ensue.
Applying the ruling in San Juan, the petition for certiorari was evidently filed
out of time, as its filing was reckoned from the denial of the last motion. The
subject Motion to Dismiss was filed in an attempt to resurrect the remedy of a
petition for certiorari, which had been lost long before its filing.
In any case, we agree with the CAs conclusion that the trial court did not
commit grave abuse of discretion in denying petitioners Motion to Dismiss.
However, we do not agree that the judgment of dismissal in the first case was

not on the merits. A ruling on a motion to dismiss, issued without trial on the
merits or formal presentation of evidence, can still be a judgment on the
merits.[23] Section 3[24] of Rule 17 of the Rules of Court is explicit that a
dismissal for failure to comply with an order of the court shall have the effect
of an adjudication upon the merits. In other words, unless the court states
that the dismissal is without prejudice, the dismissal should be understood as
an adjudication on the merits and is with prejudice.[25]
Nonetheless, bearing in mind the circumstances obtaining in this case, we
hold that res judicata should not be applied as it would not serve the interest
of substantial justice. Proceedings on the case had already been delayed by
petitioner, and it is only fair that the case be allowed to proceed and be
resolved on the merits. Indeed, we have held that res judicata is to be
disregarded if its rigid application would involve the sacrifice of justice to
technicality,[26] particularly in this case where there was actually no
determination of the substantive issues in the first case and what is at stake
is respondents home.
WHEREFORE, premises considered, the petition is DENIED. The Court of
Appeals Decision dated October 22, 2007 and Resolution dated April 14, 2008
areAFFIRMED. Costs against petitioner. The trial court is DIRECTED to
proceed with the trial of the case, and to resolve the same with dispatch.
3. How to construe a treaty; dismissal
Case: Republic vs. Diaz-Enriquez
Before this Court is the 11 March 2008 Petition for Review on Certiorari filed by
petitioner under Rule 45 of the Rules of Court, which assails the 1 October 2007
Order and 25 January 2008 Resolution of the Sandiganbayan (Second Division).1
The facts in this case are not disputed.
On 23 July 1987, the Republic of the Philippines (Republic), represented by the
Presidential Commission on Good Government (PCGG) and the Office of the
Solicitor General (OSG), filed a Complaint against respondents. Docketed as Civil
Case No. 0014, this civil action sought the recovery of ill-gotten wealth from
respondents for the benefit of the Republic. Allegedly, these properties were
illegally obtained during the reign of former President Ferdinand E. Marcos and,
hence, were the subject of sequestration orders.

Thereafter, Civil Case No. 0014 went through a series of inclusions of individual
defendants and defendant corporations. As a result, respondents finished filing
their separate Answers eight years later, or in 1995.

Accordingly, the hearing set for tomorrow is cancelled, and reset to October 1, 2,
29 & 30, 2007, all at 1:30 o'clock in the afternoon.
SO ORDERED.

In May 1996, some of the defendant corporations filed motions for dismissal. Six
years thereafter, the Sandiganbayan resolved the motions. It ruled in favor of
defendant corporations and lifted the sequestration orders against them.2
Aggrieved, the Republic filed a Petition for Certiorari3 before this
Court on 23 August 2002. Docketed as G.R. No. 154560,4 the Rule 65 petition
questioned the lifting of the sequestration orders against defendant corporations.
With these two cases at bay, the counsels for the Republic divided their
responsibilities as follows: Special PCGG Counsel Maria Flora A. Falcon (Falcon)
attended to Civil Case No. 0014, while OSG Senior State Solicitor Derek R.
Puertollano (Puertollano) handled G.R. No. 154560.
After receiving the Answers, the Sandiganbayan scheduled pretrial dates for Civil
Case No. 0014. However, the court failed to conduct pretrial hearings from 2002
to 2007. For five years, it reset the hearings in view of the pending incidents,
which included G.R. No. 154560, and because the case "was not yet ripe for a
pretrial conference."5
On 28 June 2007, Civil Case No. 0014 was called for the initial presentation of
plaintiff's evidence, but the proceedings did not push through. Finally, two
decades after the inception of the case, both parties moved to set the pretrial and
trial hearings on 1, 2, 29, and 30 October 2007. The Sandiganbayan granted
their motions in this wise:6
When this case was called for initial presentation of plaintiff's evidence, both
parties moved for postponement, and considering some issues still pending with
the Supreme Court, but considering also on the other hand, that this case has
been pending for quite a long time, the Court orders parties to submit Joint
Stipulation of Facts, as well as substitution of parties, and by the next hearing,
the Court shall proceed to hear this case.

Following this Resolution, the defendants moved for the extension of the
submission of these requirements. Nevertheless, none of them fully complied,
except petitioner who submitted an "unofficial proposal for stipulation, for
defendants to comment on the same."7
In the interim, the contract of Falcon with the PCGG terminated on 1 July
2007.8 Through a letter dated 21 September 2007, she informed Puertollano that
she was no longer connected with the PCGG. She also turned over to him the
records of Civil Case No. 0014.9 However, Puertollano belatedly received the letter
on 8 October 2007. For all he knew, Falcon had attended the hearings prior to
that date, while he was pursuing G.R. No. 154560.
Thus, on 1 October 2007, no representative appeared on behalf of petitioner.
Consequently, the Sandiganbayan issued its 1 October 2007 Order dismissing the
case without prejudice. The court ruled thus:10
On motion of Atty. Nini Priscilla D. Sison-Ledesma for the dismissal of this case,
since plaintiff's counsel failed to appear despite due notice and there was no
representative from the plaintiff, this case is ordered DISMISSED without
prejudice. The issue of whether the pending incident before the Supreme Court
would affect this case is off tangent.
Accordingly, the hearings set tomorrow, October 2, 2007, and also on October 29
and 30, 2007 are cancelled.
SO ORDERED.
On 5 October 2007, Atty. Mary Charlene Hernandez took over the case from
PCGG's previous special counsel11and only after a while did she learn of the trial
dates. She also knew nothing about the dismissal of the case. Hence, she
proceeded to file an Urgent Motion for Postponement12 of the 30 October 2007
hearing.

The OSG came to know of the dismissal of Civil Case No. 0014 only when it
received the assailed Order on 15 November 2007. On 29 November 2007, it filed
a Motion for Reconsideration13 with a notice for hearing on 7 December 2007.
This motion was served on the Sandiganbayan and respondents on 29 November
2007 via registered mail.14 Unfortunately, the court received the motion only on
10 December 2007.15

Petitioner further avers that the Motion for Reconsideration questioning the
dismissal of Civil Case No. 0014 should not have been denied for supposedly
violating the three-day notice requirement. Rule 15, Section 4 of the Rules of
Court, reads:

Considering the late receipt of the motion, the Sandiganbayan issued its 25
January 2008 Resolution denying it on the ground of failure to observe the threeday notice requirement.16 In effect, it considered the motion as a worthless piece
of paper. With this instant dismissal, the Sandiganbayan no longer considered the
reasons adduced by petitioner to explain the latter's absence in court.

Except for motions which the court may act upon without prejudicing the rights of
the adverse party, every written motion shall be set for hearing by the applicant.

Specifically, petitioner brought to the Sandiganbayan's attention the fact that

Falcon, who was assigned to Civil Case No. 0014, had diligently attended to the
civil action. But since she was no longer connected to the PCGG, and given that
the OSG only learned of this circumstance seven days after the hearing on 1
October 2007, counsels for petitioner failed to appear during the hearing. 17

Sec. 4. Hearing of motion.

Every written motion required to be heard and the notice of the hearing thereof
shall be served in such a manner as to ensure its receipt by the other party at
least three (3) days before the date of hearing, unless the court for good cause
sets the hearing on shorter notice.
Therefore, this Court is tasked to resolve the two issues raised by petitioner as
follows:

Hence, petitioner comes before this Court to seek the reinstatement of the 26year-old case, which has already reached the start of the trial stage.

I. Whether the Sandiganbayan gravely erred in dismissing Civil Case No.

0014 for the failure of petitioner to appear during the 1 October 2007
hearing.

Petitioner argues that its single incidence of absence after Falcon resigned on 1
October 2007 does not amount to failure to prosecute under Rule 17, Section 3 of
the Rules of Court, which states:

II. Whether the Sandiganbayan committed reversible error in denying the

Motion for Reconsideration on the ground that it failed to comply with the
three-day notice rule.

Sec. 3. Dismissal due to fault of plaintiff.

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

RULING OF THE COURT

Dismissal of Civil Case No. 0014 for Petitioner's Failure to Appear
Petitioner asserts that, save for the absence of Falcon due to the termination of
her contract with the PCGG, she was diligent in attending the hearings and in
submitting the requirements of the Sandiganbayan. Likewise, Puertollano was
responsible in pursuing G.R. No. 154560. Thus, their inability to send
representatives for the Republic in the 1 October 2007 hearing can only be
appreciated as mere inadvertence and excusable negligence, which cannot
amount to failure to prosecute.

Petitioner also advances the argument that this Court disfavors judgments based
on non-suits and prefers those based on the merits - especially in Civil Case No.
0014, which contains allegations of ill-gotten wealth. Moreover, petitioner claims
that reasonable deferments may be tolerated if they would not cause substantial
prejudice to any party.

remedial statutes that are known to be construed liberally. Thus, the word "may"
in Rule 17, Section 3 of the Rules of Court, operates to confer on

Lastly, petitioner manifests good reasons to expect the cancellation of the 1

October 2007 hearing, as in the past resetting. At that time, the same
circumstances for postponement were present: (1) G.R. No. 154560 was still
pending before this Court; (2) several incidents18 were also still pending; and (3)
no pretrial order has yet been issued by the Sandiganbayan.

Given the connotation of this procedural rule, it would have been expected that
the Sandiganbayan would look into the body of cases that interpret the provision.
From jurisprudence, it is inevitable to see that the real test of the exercise of
discretion is whether, under the circumstances, the plaintiff is charged with want
of due diligence in failing to proceed with reasonable promptitude.22 In fact, we
have ruled that there is an abuse of that discretion when a judge dismisses a
case without any showing that the party's conduct "is so indifferent,
irresponsible, contumacious or slothful."23

On the other hand, in their Comments,19 respondents stress the letter of the law.
Indeed, Rule 17, Section 3 of the Rules of Court, provides that complaints may be
dismissed if a petitioner fails to be present on the date of presentation of its
evidence in chief.
Additionally, respondents contend that no justifiable cause exists to warrant
petitioner's absence. To support their contention, they cite the following: (1)
Falcon agreed to set the hearing on 1 October 2007; and (2) Puertollano should
have attended the pretrial even if Falcon failed to appear considering that, as
counsels for petitioner, both of them had been notified of the orders and
resolutions of the Sandiganbayan.
Respondents also highlight the fact that the PCGG and the OSG failed to monitor
the proceedings when they filed a Motion for Reconsideration only after 14 days
from the OSG's receipt of the assailed Order of dismissal. Worse, the counsels of
the Republic did not even inform the court beforehand of the reason for their
absence. Because of these circumstances, respondents posit that the
Sandiganbayan did not gravely err in dismissing Civil Case No. 0014.

the court the discretion21 to decide between the dismissal of the case on
technicality vis--vis the progressive prosecution thereof.

Here, the Sandiganbayan appears to have limited itself to a rigid application of

technical rules without applying the real test explained above. The 1 October
2007 Order was bereft of any explanation alluding to the indifference and
irresponsibility of petitioner. The Order was also silent on any previous act of
petitioner that can be characterized as contumacious or slothful.
Verily, the circumstances in Civil Case No. 0014 should have readily convinced the
Sandiganbayan that it would be farfetched to conclude that petitioner lacked
interest in prosecuting the latter's claims.
Firstly, based on the records, petitioner's counsels have actively participated in
the case for two decades. The Sandiganbayan has not made any remark
regarding the attendance of petitioner, save for this single instance. Secondly,
after the latter received the assailed Order, it duly filed a Motion for
Reconsideration. These circumstances should have easily persuaded the
Sandiganbayan that the Republic intended to advance the ill-gotten wealth case.

This Court rules in favor of the Republic.

As worded, Rule 17, Section 3 of the Rules of Court, provides that the court may
dismiss a complaint in case there are no justifiable reasons that explain the
plaintiff's absence during the presentation of the evidence in chief. Generally
speaking, the use of "may" denotes its directory nature,20 especially if used in

More importantly, respondents' imputation of lack of interest to prosecute on the

part of petitioner becomes a hyperbole in the face of its explanation, albeit
belated.
Respondents harp on the fact that since Falcon agreed to set the hearing on 1
October 2007 and Puertollano, being a counsel of record, may have also known of

the schedule, petitioner has no excuse to be absent. But even if we concede to

respondents' arguments, the most that they can say is that petitioner had an
instance of absence without an excuse. Juxtaposing this lapse against its long
history of actively prosecuting the case, it would be the height of rigidity to
require from petitioner complete attendance, at all times.
Similarly, in Perez v. Perez, we held thus:24
The records show that every time the case was set for hearing, the plaintiffs and
their counsel had always been present; however, the scheduled hearings were
either cancelled by the court motu propio and/or postponed by agreement of the
parties, until the case was eventually set for trial on the merits on February 15,
1967. It was only at this hearing where the plaintiffs and their counsel failed to
appear, prompting the court to issue its controversial order of dismissal.
Considering that it was the first time that the plaintiffs failed to appear and the
added fact that the trial on the merits had not as yet commenced, We believe
that it would have been more in consonance with the essence of justice and
fairness for the court to have postponed the hearing on February 15, 1967.
We are not unmindful of the fact that the matter of adjournment and
postponement of trials is within the sound discretion of the court; but such
discretion should always be predicated on the consideration that more than the
mere convenience of the courts or of the parties in the case, the ends of justice
and fairness should be served thereby. Postponements and continuances are part
and parcel of our procedural system of dispensing justice, and when - as in the
present case - no substantial rights are affected and the intention to delay is not
manifest, it is sound judicial discretion to allow them.
This Court further considers that based on the records, the contract of the
handling lawyer, Falcon, with the PCGG terminated without the knowledge of
Puertollano. After Falcon's resignation, it was only on 5 October 2007 that the
case was transferred to the new lawyer. These facts then explain the
nonattendance of petitioner on 1 October 2007, and why it failed to keep abreast
with the succeeding 2, 29, and 30 October 2007 hearings.
Moreover, this Court understands the absence of Puertollano in Civil Case No.
0014. The OSG has explained that he attends to G.R. 154560, as the main case
has been delegated to the PCGG. We find this arrangement sensible, given that

case management is needed to tackle this sensitive case involving a number of

high-profile parties, sensitive issues and, of course, numerous offshoots and
incidents.
Respondents are correct in saying that courts have a right to dismiss a case for
failure of the plaintiff to prosecute. Still, we remind justices, judges and litigants
alike that rules "should be interpreted and applied not in a vacuum or in isolated
abstraction, but in light of surrounding circumstances and attendant facts in order
to afford justice to all."25
We underscore that there are specific rules that are liberally construed, and
among them is the Rules of Court. In fact, no less than Rule 1, Section 6 of the
Rules of Court echoes that the rationale behind this construction is to promote
the objective of securing a just, speedy and inexpensive disposition of every
action and proceeding. Surprisingly, the Sandiganbayan obviated the speedy
disposition of the case when it chose to dismiss the case spanning two decades
over a technicality and, in the same breath, rationalized its cavalier attitude by
saying that a complaint for ill-gotten wealth should be reinstituted all over again.
Here, we find it incongruous to tip the balance of the scale in favor of a
technicality that would result in a complete restart of the 26-year-old civil case
back to square one. Surely, this Court cannot waste the progress of the civil case
from the institution of the complaint to the point of reaching the trial stage. Not
only would this stance dry up the resources of the government and the private
parties, but it would also compromise the preservation of the evidence needed by
them to move forward with their respective cases. Thus, to prevent a miscarriage
of justice in its truest sense, and considering the exceptional and special history
of Civil Case No. 0014, this Court applies a liberal construction of the Rules of
Court.1wphi1
Every party-litigant must be afforded the amplest opportunity for the proper and
just determination of its cause.26"Adventitious resort to technicality resulting in
the dismissal of cases is disfavored because litigations must as much as possible
be decided on the merits and not on technicalities."27 Inconsiderate dismissals,
even if without prejudice to its refiling as in this case, merely postpone the
ultimate reckoning between the parties. In the absence of a clear intention to
delay, justice is better served by a brief continuance, trial on the merits, and final
disposition of the case before the court.28

Denial of Petitioner's Motion for Reconsideration due to Petitioner's Failure to

Observe the Three-day Notice Rule
In its assailed 25 January 2008 Resolution, the Sandiganbayan held that
petitioners failed to comply with the three-day notice rule. It faulted petitioner for
its belated receipt on 1 0 December 2007 of the Motion for Reconsideration set
for hearing on 7 December 2007.
The Sandiganbayan is incorrect. By the very words of Rule 15, Section 4 of the
Rules of Court, the moving party is required to serve motions in such a manner
as to ensure the receipt thereof by the other party at least three days before the
date of hearing. The purpose of the rule is to prevent a surprise and to afford the
adverse party a chance to be heard before the motion is resolved by the trial
court.29 Plainly, the rule does not require that the court receive the notice three
days prior to the hearing date.
Likewise, petitioner mailed the motion to the Sandiganbayan on 29 November
2007. Since Rule 13, Section 3 of the Rules of Court, states that the date of the
mailing of motions through registered mail shall be considered the date of their
filing in court, it follows that petitioner filed the motion to the court 10 days in
advance of the hearing date. In so doing, it observed the 10-day requirement
under Rule 15, Section 5 of the Rules of Court, which provides that the time and
date of the hearing must not be later than ten days after the filing of the motion.
Considering that the Motion for Reconsideration containing a timely notice of
hearing was duly served in compliance with Rule 15, Sections 4 and 5 of the
Rules of Court, the fact that the Sandiganbayan received the notice on 10
December 2007 becomes trivial. The court cannot also blame petitioner for this
belated receipt of the registered mail since it followed the rules.
Therefore, the Sandiganbayan should have given due course to the Motion for
Reconsideration filed by petitioner. If it had done so, Civil Case No. 0014 would
have progressed at the trial court level.
IN VIEW THEREOF, the 11 March 2008 Petition for Review on Certiorari filed by
petitioner is GRANTED. The 1 October 2007 Order and 25 January 2008
Resolution of the Sandiganbayan (Second Division) are REVERSED. Consequently,
Civil Case No. 0014 is hereby REINSTATED.

Case: SPOUSES VICENTE YU AND DEMETRIA LEE-YU, Petitioners, vs.

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Respondent.
Before the Court is a Petition for Review on Certiorari of the Decision1 dated
November 14, 2000 of the Court of Appeals (CA) in CA-G.R. SP No. 58982 and
the CA Resolution dated April 26, 2001, which denied petitioners Motion for
Reconsideration.
The factual background of the case is as follows:
Under a Real Estate Mortgage dated August 15, 19942 and Amendments of Real
Estate Mortgage dated April 4, 19953 and December 4, 1995,4 spouses Vicente Yu
and Demetria Lee-Yu (petitioners) and spouses Ramon T. Yu and Virginia A. Tiu,
or Yu Tian Hock aka Victorino/Vicente Yu, mortgaged their title, interest, and
participation over several parcels of land located in Dagupan City and Quezon
City, in favor of the Philippine Commercial International Bank (respondent) as
security for the payment of a loan in the amount of P9,000,000.00.5
As the petitioners failed to pay the loan, the interest, and the penalties due
thereon, respondent filed on July 21, 1998 with the Office of the Clerk of Court
and Ex-Officio Sheriff of the Regional Trial Court of Dagupan City a Petition for
Extra-Judicial Foreclosure of Real Estate Mortgage on the Dagupan City
properties.6 On August 3, 1998, the City Sheriff issued a Notice of Extra-Judicial
Sale scheduling the auction sale on September 10, 1998 at 10:00 oclock in the
morning or soon thereafter in front of the Justice Hall, Bonuan, Tondaligan,
Dagupan City.7
At the auction sale on September 10, 1998, respondent emerged as the highest
bidder.8 On September 14, 1998, a Certificate of Sale was issued in favor of
respondent.9 On October 1, 1998, the sale was registered with the Registry of
Deeds of Dagupan City.
About two months before the expiration of the redemption period, or on August
20, 1999, respondent filed an Ex-Parte Petition for Writ of Possession before the
Regional Trial Court of Dagupan City, docketed as Special Proceeding No. 9900988-D and raffled to Branch 43 (RTC Branch 43).10 Hearing was conducted on
September 14, 1999 and respondent presented its evidence ex-parte. 11 The
testimony of Rodante Manuel was admitted ex-parte and thereafter the petition
was deemed submitted for resolution.

On September 30, 1999, petitioners filed a Motion to Dismiss and to Strike Out
Testimony of Rodante Manuel stating that the Certificate of Sale dated September
14, 1998 is void because respondent violated Article 2089 of the Civil Code on
the indivisibility of the mortgaged by conducting two separate foreclosure
proceedings on the mortgage properties in Dagupan City and Quezon City and
indicating in the two notices of extra-judicial sale that petitioners obligation
is P10,437,015.2012 as of March 31, 1998, when petitioners are not indebted for
the total amount of P20,874,031.56.13

contrary to Section 8 of Act No. 3135, (c) the filing of Civil Case No. 99-03169-D
is an afterthought and dilatory in nature, and (d) legally speaking what seems to
exist is litis pendentia and not prejudicial question.18

In the meantime, petitioners filed a complaint for Annulment of Certificate of Sale

before the Regional Trial Court of Dagupan City, docketed as Civil Case No. 9903169-D and raffled to Branch 44 (RTC Branch 44).

Petitioners pose two issues for resolution, to wit:

On February 14, 2000, RTC Branch 43 denied petitioners Motion to Dismiss and
to Strike Out Testimony of Rodante Manuel, ruling that the filing of a motion to
dismiss is not allowed in petitions for issuance of writ of possession under Section
7 of Act No. 3135.14
On February 24, 2000, petitioners filed a Motion for Reconsideration, further
arguing that the pendency of Civil Case No. 99-03169-D in RTC Branch 44 is a
prejudicial issue to Spec. Proc. No. 99-00988-D in RTC Branch 43, the resolution
of which is determinative on the propriety of the issuance of a writ of
possession.15
On May 8, 2000, RTC Branch 43 denied petitioners Motion for Reconsideration,
holding that the principle of prejudicial question is not applicable because the
case pending before RTC Branch 44 is also a civil case and not a criminal case.16
On June 1, 2000, petitioners filed a Petition for Certiorari with the CA.17 On
November 14, 2000, the CA dismissed petitioners Petition for Certiorari on the
grounds that petitioners violated Section 8 of Act No. 3135 and disregarded the
rule against multiplicity of suits in filing Civil Case No. 99-03169-D in RTC Branch
44 despite full knowledge of the pendency of Spec. Proc. No. 99-00988-D in RTC
Branch 43; that since the one-year period of redemption has already lapsed, the
issuance of a writ of possession in favor of respondent becomes a ministerial duty
of the trial court; that the issues in Civil Case No. 99-03169-D are not prejudicial
questions to Spec. Proc. No. 99-00988-D because: (a) the special proceeding is
already fait accompli, (b) Civil Case No. 99-03169-D is deemed not filed for being

Petitioners filed a Motion for Reconsideration19 but it was denied by the CA on

April 26, 2001.20
Hence, the present Petition for Review on Certiorari.

A. Whether or not a real estate mortgage over several properties located

in different locality [sic] can be separately foreclosed in different places.
B. Whether or not the pendency of a prejudicial issue renders the issues in
Special Proceedings No. 99-00988-D as [sic] moot and academic.21
Anent the first issue, petitioners contend that since a real estate mortgage is
indivisible, the mortgaged properties in Dagupan City and Quezon City cannot be
separately foreclosed. Petitioners further point out that two notices of extrajudicial sale indicated that petitioners obligation is P10,437,015.2022 each as of
March 31, 1998 or a total ofP20,874,030.40,23 yet their own computation yields
only P9,957,508.90 as of February 27, 1998.
As to the second issue, petitioners posit that the pendency of Civil Case No. 9903169-D is a prejudicial issue, the resolution of which will render the issues in
Spec. Proc. No. 99-00988-D moot and academic. Petitioners further aver that
they did not violate Section 8 of Act No. 3135 in filing a separate case to annul
the certificate of sale since the use of the word "may" in said provision indicates
that they have the option to seek relief of filing a petition to annul the certificate
of sale in the proceeding involving the application for a writ of possession or in a
separate proceeding.
Respondent contends24 that, with respect to the first issue, the filing of two
separate foreclosure proceedings did not violate Article 2089 of the Civil Code on
the indivisibility of a real estate mortgage since Section 2 of Act No. 3135
expressly provides that extra-judicial foreclosure may only be made in the
province or municipality where the property is situated. Respondent further

submits that the filing of separate applications for extra-judicial foreclosure of

mortgage involving several properties in different locations is allowed by A.M. No.
99-10-05-0, the Procedure on Extra-Judicial Foreclosure of Mortgage, as further
amended on August 7, 2001.
As to the second issue, respondent maintains that there is no prejudicial question
between Civil Case No. 99-03169-D and Spec. Proc. No. 99-00988-D since the
pendency of a civil action questioning the validity of the mortgage and the extrajudicial foreclosure thereof does not bar the issuance of a writ of possession.
Respondent also insists that petitioners should have filed their Petition to Annul
the Certificate of Sale in the same case where possession is being sought, that is,
in Spec. Proc. No. 99-00988-D, and not in a separate proceeding (Civil Case No.
99-01369-D) because the venue of the action to question the validity of the
foreclosure is not discretionary since the use of the word "may" in Section 8 of
Act No. 3135 refers to the filing of the petition or action itself and not to the
venue. Respondent further argues that even if petitioners filed the Petition to
Annul the Certificate of Sale in Spec. Proc. No. 99-00988-D, the writ of
possession must still be issued because issuance of the writ in favor of the
purchaser is a ministerial act of the trial court and the one-year period of
redemption has already lapsed.
Anent the first issue, the Court finds that petitioners have a mistaken notion that
the indivisibility of a real estate mortgage relates to the venue of extra-judicial
foreclosure proceedings. The rule on indivisibility of a real estate mortgage is
provided for in Article 2089 of the Civil Code, which provides:
Art. 2089. A pledge or mortgage is indivisible, even though the debt may be
divided among the successors in interest of the debtor or of the creditor.
Therefore, the debtors heir who has paid a part of the debt cannot ask for the
proportionate extinguishment of the pledge or mortgage as the debt is not
completely satisfied.
Neither can the creditors heir who received his share of the debt return the
pledge or cancel the mortgage, to the prejudice of the other heirs who have not
been paid.

From these provisions is excepted the case in which, there being several things
given in mortgage or pledge, each one of them guarantees only a determinate
portion of the credit.
The debtor, in this case, shall have a right to the extinguishment of the pledge or
mortgage as the portion of the debt for which each thing is specially answerable
is satisfied.
This rule presupposes several heirs of the debtor or creditor25 and therefore not
applicable to the present case. Furthermore, what the law proscribes is the
foreclosure of only a portion of the property or a number of the several properties
mortgaged corresponding to the unpaid portion of the debt where, before
foreclosure proceedings, partial payment was made by the debtor on his total
outstanding loan or obligation. This also means that the debtor cannot ask for the
release of any portion of the mortgaged property or of one or some of the several
lots mortgaged unless and until the loan thus secured has been fully paid,
notwithstanding the fact that there has been partial fulfillment of the obligation.
Hence, it is provided that the debtor who has paid a part of the debt cannot ask
for the proportionate extinguishment of the mortgage as long as the debt is not
completely satisfied.26 In essence, indivisibility means that the mortgage
obligation cannot be divided among the different lots,27 that is, each and every
parcel under mortgage answers for the totality of the debt.28
On the other hand, the venue of the extra-judicial foreclosure proceedings is the
place where each of the mortgaged property is located, as prescribed by Section
2 of Act No. 3135,29 to wit:
SECTION 2. Said sale cannot be made legally outside of the province in which the
property sold is situated; and in case the place within said province in which the
sale is to be made is subject to stipulation, such sale shall be made in said place
or in the municipal building of the municipality in which the property or part
thereof is situated.
A.M. No. 99-10-05-0,30 the Procedure on Extra-Judicial Foreclosure of Mortgage,
lays down the guidelines for extra-judicial foreclosure proceedings on mortgaged
properties located in different provinces. It provides that the venue of the extrajudicial foreclosure proceedings is the place where each of the mortgaged
property is located. Relevant portion thereof provides:

Where the application concerns the extrajudicial foreclosure of mortgages of real

estates and/or chattels in different locations covering one indebtedness, only one
filing fee corresponding to such indebtedness shall be collected. The collecting
Clerk of Court shall, apart from the official receipt of the fees, issue a certificate
of payment indicating the amount of indebtedness, the filing fees collected, the
mortgages sought to be foreclosed, the real estates and/or chattels mortgaged
and their respective locations, which certificate shall serve the purpose of
having the application docketed with the Clerks of Court of the places
where the other properties are located and of allowing the extrajudicial
foreclosures to proceed thereat. (Emphasis supplied)
The indivisibility of the real estate mortgage is not violated by conducting two
separate foreclosure proceedings on mortgaged properties located in different
provinces as long as each parcel of land is answerable for the entire debt.
Petitioners assumption that their total obligation is P20,874,030.40 because the
two notices of extra-judicial sale indicated that petitioners obligation
is P10,437,015.2031 each, is therefore flawed. Considering the indivisibility of a
real estate mortgage, the mortgaged properties in Dagupan City and Quezon City
are made to answer for the entire debt of P10,437,015.29.32
As to the second issue, that is, whether a civil case for annulment of a certificate
of sale is a prejudicial question to a petition for issuance of a writ of possession,
this issue is far from novel and, in fact, not without precedence. In Pahang v.
Vestil,33 the Court said:
A prejudicial question is one that arises in a case the resolution of which is a
logical antecedent of the issue involved therein, and the cognizance of which
pertains to another tribunal. It generally comes into play in a situation where a
civil action and a criminal action are both pending and there exists in the former
an issue that must be preemptively resolved before the criminal action may
proceed, because howsoever the issue raised in the civil action is resolved would
be determinative juris et de jure of the guilt or innocence of the accused in the
criminal case. The rationale behind the principle of prejudicial question is to avoid
two conflicting decisions. 1avvph!l.net
In the present case, the complaint of the petitioners for Annulment of
Extrajudicial Sale is a civil action and the respondents petition for the issuance of
a writ of possession of Lot No. 3-A, Block 1, Psd-07-021410, TCT No. 44668 is

but an incident in the land registration case and, therefore, no prejudicial

question can arise from the existence of the two actions. A similar issue was
raised in Manalo v. Court of Appeals, where we held that:
At any rate, it taxes our imagination why the questions raised in Case No. 980868 must be considered determinative of Case No. 9011. The basic issue in the
former is whether the respondent, as the purchaser in the extrajudicial
foreclosure proceedings, may be compelled to have the property repurchased or
resold to a mortgagors successor-in-interest (petitioner); while that in the latter
is merely whether the respondent, as the purchaser in the extrajudicial
foreclosure proceedings, is entitled to a writ of possession after the statutory
period for redemption has expired. The two cases, assuming both are pending,
can proceed separately and take their own direction independent of each other.34
In the present case, Civil Case No. 99-01369-D and Spec. Proc. No. 99-00988-D
are both civil in nature. The issue in Civil Case No. 99-01369-D is whether the
extra-judicial foreclosure of the real estate mortgage executed by the petitioners
in favor of the respondent and the sale of their properties at public auction are
null and void, whereas, the issue in Spec. Proc. No. 99-00988-D is whether the
respondent is entitled to a writ of possession of the foreclosed properties. Clearly,
no prejudicial question can arise from the existence of the two actions. The two
cases can proceed separately and take their own direction independently of each
other.
Nevertheless, there is a need to correct the CAs view that petitioners violated
Section 8 of Act No. 3135 and disregarded the proscription on multiplicity of suits
by instituting a separate civil suit for annulment of the certificate of sale while
there is a pending petition for issuance of the writ of possession in a special
proceeding.
Section 8 of Act No. 3135 provides:
Sec. 8. Setting aside of sale and writ of possession. The debtor may, in the
proceedings in which possession was requested, but not later than thirty days
after the purchaser was given possession, petition that the sale be set aside and
the writ of possession cancelled, specifying the damages suffered by him,
because the mortgage was not violated or the sale was not made in accordance
with the provisions hereof, and the court shall take cognizance of this petition in

accordance with the summary procedure provided for in section one hundred and
twelve of Act Numbered Four hundred and ninety-six; and if it finds the complaint
of the debtor justified, it shall dispose in his favor of all or part of the bond
furnished by the person who obtained possession. Either of the parties may
appeal from the order of the judge in accordance with section fourteen of Act
Numbered Four hundred and ninety-six; but the order of possession shall
continue in effect during the pendency of the appeal. (Emphasis supplied)
Under the provision above cited, the mortgagor may file a petition to set aside
the sale and for the cancellation of a writ of possession with the trial court which
issued the writ of possession within 30 days after the purchaser mortgagee was
given possession. It provides the plain, speedy, and adequate remedy in opposing
the issuance of a writ of possession.35 Thus, this provision presupposes that the
trial court already issued a writ of possession. In Sps. Ong v. Court of
Appeals,36 the Court elucidated:
The law is clear that the purchaser must first be placed in possession of the
mortgaged property pending proceedings assailing the issuance of the writ of
possession. If the trial court later finds merit in the petition to set aside the writ
of possession, it shall dispose in favor of the mortgagor the bond furnished by the
purchaser. Thereafter, either party may appeal from the order of the judge in
accordance with Section 14 of Act 496, which provides that "every order,
decision, and decree of the Court of Land Registration may be reviewedin the
same manner as an order, decision, decree or judgment of a Court of First
Instance (RTC) might be reviewed." The rationale for the mandate is to allow the
purchaser to have possession of the foreclosed property without delay, such
possession being founded on his right of ownership.37
Accordingly, Section 8 of Act No. 3135 is not applicable to the present case since
at the time of the filing of the separate civil suit for annulment of the certificate of
sale in RTC Branch 44, no writ of possession was yet issued by RTC Branch 43.
Similarly, the Court rejects the CAs application of the principle of litis pendentia
to Civil Case No. 99-03169-D in relation to Spec. Proc. No. 99-00988-D. Litis
pendentia refers to that situation wherein another action is pending between the
same parties for the same cause of actions and that the second action becomes
unnecessary and vexatious. For litis pendentia to be invoked, the concurrence of
the following requisites is necessary: (a) identity of parties or at least such as

represent the same interest in both actions; (b) identity of rights asserted and
reliefs prayed for, the reliefs being founded on the same facts; and, (c) the
identity in the two cases should be such that the judgment that may be rendered
in one would, regardless of which party is successful, amount to res judicatain
the other.38
Applying the foregoing criteria in the instant case, litis pendentia does not obtain
in this case because of the absence of the second and third requisites. The
issuance of the writ of possession being a ministerial function, and summary in
nature, it cannot be said to be a judgment on the merits, but simply an incident
in the transfer of title. Hence, a separate case for annulment of mortgage and
foreclosure sale cannot be barred by litis pendentiaor res judicata.39 Thus, insofar
as Spec. Proc. No. 99-00988-D and Civil Case No. 99-03169-D pending before
different branches of RTC Dagupan City are concerned, there is no litis pendentia.
To sum up, the Court holds that the rule on indivisibility of the real estate
mortgage cannot be equated with the venue of foreclosure proceedings on
mortgaged properties located in different provinces since these are two unrelated
concepts. Also, no prejudicial question can arise from the existence of a civil case
for annulment of a certificate of sale and a petition for the issuance of a writ of
possession in a special proceeding since the two cases are both civil in nature
which can proceed separately and take their own direction independently of each
other.
Furthermore, since the one-year period to redeem the foreclosed properties
lapsed on October 1, 1999, title to the foreclosed properties had already been
consolidated under the name of the respondent. As the owner of the properties,
respondent is entitled to its possession as a matter of right.40 The issuance of a
writ of possession over the properties by the trial court is merely a ministerial
function. As such, the trial court neither exercises its official discretion nor
judgment.41 Any question regarding the validity of the mortgage or its foreclosure
cannot be a legal ground for refusing the issuance of a writ of
possession.42 Regardless of the pending suit for annulment of the certificate of
sale, respondent is entitled to a writ of possession, without prejudice of course to
the eventual outcome of said case.43
WHEREFORE, the petition is DENIED.

Digest: Spouses Yu vs PCIB

FACTS: Petitioners Vicente Yu and Demetria Lee-Yu mortgaged their title,
interest, and participation over several parcels of land located in Dagupan City
and Quezon City, in favor of the Philippine Commercial International Bank,
respondent and highest bidder, as security for the payment of a loan.
As petitioners failed to pay the loan and the interest and penalties due thereon,
respondent filed petition for extra-judicial foreclosure of real estate mortgage on
the Dagupan City properties on July 21, 1998. City Sheriff issued notice of extrajudicial sale on August 3, 1998 scheduling the auction sale on September 10,
1998.
Certificate of Sale was issued on September 14, 1998 in favor of respondent, the
highest bidder. The sale was registered with the Registry of Deeds in Dagupan
City on October 1, 1998. After two months before the expiration of the
redemption period, respondent filed an ex-parte petition for writ of possession
before RTC of Dagupan. Petitioners complaint on annulment of certificate of sale
and motion to dismiss and to strike out testimony of Rodante Manuel was denied
by said RTC. Motion for reconsideration was then filed on February 14, 2000
arguing that the complaint on annulment of certificate of sale is a prejudicial
issue to the filed ex-parte petition for writ of possession, the resolution of which
is determinative of propriety of the issuance of a Writ of Possession.
ISSUE: Whether prejudicial question exist in a civil case for annulment of a
certificate of sale and a petition for the issuance of a writ of possession.
HELD:
Supreme Court held that no prejudicial question can arise from the existence of a
civil case for annulment of a certificate of sale and a petition for the issuance of a
writ of possession in a special proceeding since the two cases are both civil in
nature which can proceed separately and take their own direction independently
of each other.
A prejudicial question is one that arises in a case the resolution of which is a
logical antecedent of the issue involved therein, and the cognizance of which

pertains to another tribunal. It generally comes into play in a situation where a

civil action and a criminal action are both pending and there exists in the former
an issue that must be preemptively resolved before the criminal action may
proceed because issue raised in civil action would be determinative de jure of the
guilt or innocence of the accused in a criminal case.
4. Res Judicata
Case: EDGARDO PINGA, Petitioner, vs. THE HEIRS OF GERMAN, SANTIAGO
represented by FERNANDO SANTIAGO, Respondents.
The constitutional faculty of the Court to promulgate rules of practice and
procedure1 necessarily carries the power to overturn judicial precedents on points
of remedial law through the amendment of the Rules of Court. One of the notable
changes introduced in the 1997 Rules of Civil Procedure is the explicit proviso
that if a complaint is dismissed due to fault of the plaintiff, such dismissal is
"without prejudice to the right of the defendant to prosecute his counterclaim in
the same or in a separate action."2 The innovation was instituted in spite of
previous jurisprudence holding that the fact of the dismissal of the complaint was
sufficient to justify the dismissal as well of the compulsory counterclaim.3
In granting this petition, the Court recognizes that the former jurisprudential rule
can no longer stand in light of Section 3, Rule 17 of the 1997 Rules of Civil
Procedure.
The relevant facts are simple enough. Petitioner Eduardo Pinga was named as
one of two defendants in a complaint for injunction4 filed with Branch 29 of the
Regional Trial Court (RTC)5 of San Miguel, Zamboanga del Sur, by respondent
Heirs of German Santiago, represented by Fernando Santiago. The
Complaint6 dated 28 May 1998 alleged in essence that petitioner and codefendant Vicente Saavedra had been unlawfully entering the coco lands of the
respondent, cutting wood and bamboos and harvesting the fruits of the coconut
trees therein. Respondents prayed that petitioner and Saavedra be enjoined from
committing "acts of depredation" on their properties, and ordered to pay
damages.
In their Amended Answer with Counterclaim,7 petitioner and his co-defendant
disputed respondents ownership of the properties in question, asserting that
petitioners father, Edmundo Pinga, from whom defendants derived their interest

in the properties, had been in possession thereof since the 1930s.8 They alleged
that as far back as 1968, respondents had already been ordered ejected from the
properties after a complaint for forcible entry was filed by the heirs of Edmundo
Pinga. It was further claimed that respondents application for free patent over
the properties was rejected by the Office of the President in 1971. Defendants in
turn prayed that owing to respondents forcible re-entry in the properties and the
irresponsible and reckless filing of the case, they be awarded various types of
damages instead in amounts totaling P2,100,000 plus costs of suit.9
By July of 2005, the trial of the case had not yet been completed. Moreover,
respondents, as plaintiffs, had failed to present their evidence. It appears that on
25 October 2004, the RTC already ordered the dismissal of the complaint after
respondents counsel had sought the postponement of the hearing scheduled
then.10 However, the order of dismissal was subsequently reconsidered by the
RTC in an Order dated 9 June 2005, which took into account the assurance of
respondents counsel that he would give priority to that case.11
At the hearing of 27 July 2005, plaintiffs counsel on record failed to appear,
sending in his stead a representative who sought the postponement of the
hearing. Counsel for defendants (who include herein petitioner) opposed the
move for postponement and moved instead for the dismissal of the case. The RTC
noted that it was obvious that respondents had failed to prosecute the case for
an unreasonable length of time, in fact not having presented their evidence yet.
On that ground, the complaint was dismissed. At the same time, the RTC allowed
defendants "to present their evidence ex-parte."12
Respondents filed a Motion for Reconsideration13 of the order issued in open court
on 27 July 2005, opting however not to seek that their complaint be reinstated,
but praying instead that the entire action be dismissed and petitioner be
disallowed from presenting evidence ex-parte. Respondents claimed that the
order of the RTC allowing petitioner to present evidence ex-parte was not in
accord with established jurisprudence. They cited cases, particularly City of
Manila v. Ruymann14 and Domingo v. Santos,15 which noted those instances in
which a counterclaim could not remain pending for independent adjudication.
On 9 August 2005, the RTC promulgated an order granting respondents Motion
for Reconsideration and dismissing the counterclaim, citing as the only ground
therefor that "there is no opposition to the Motion for Reconsideration of the

[respondents]."16 Petitioner filed a Motion for Reconsideration, but the same was
denied by the RTC in an Order dated 10 October 2005.17 Notably, respondents
filed an Opposition to Defendants Urgent Motion for Reconsideration, wherein
they argued that the prevailing jurisprudential rule18 is that "compulsory
counterclaims cannot be adjudicated independently of plaintiffs cause of action,"
and "a conversu, the dismissal of the complaint carries with it the dismissal of the
compulsory counterclaims."19
The matter was elevated to this Court directly by way of a Petition for Review
under Rule 45 on a pure question of law, the most relevant being whether the
dismissal of the complaint necessarily carries the dismissal of the compulsory
counterclaim.
We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Procedure, the
dismissal of the complaint due to the fault of plaintiff does not necessarily carry
with it the dismissal of the counterclaim, compulsory or otherwise. In fact, the
dismissal of the complaint is without prejudice to the right of defendants to
prosecute the counterclaim.
On a prefatory note, the RTC, in dismissing the counterclaim, did not expressly
adopt respondents argument that the dismissal of their complaint extended as
well to the counterclaim. Instead, the RTC justified the dismissal of the
counterclaim on the ground that "there is no opposition to [plaintiffs] Motion for
Reconsideration [seeking the dismissal of the counterclaim]."20 This explanation is
hollow, considering that there is no mandatory rule requiring that an opposition
be filed to a motion for reconsideration without need for a court order to that
effect; and, as posited by petitioner, the "failure to file an opposition to the
Plaintiffs Motion for Reconsideration is definitely not one among the established
grounds for dismissal [of the counterclaim]."21 Still, the dismissal of the
counterclaim by the RTC betrays at very least a tacit recognition of respondents
argument that the counterclaim did not survive the dismissal of the complaint. At
most, the dismissal of the counterclaim over the objection of the defendant
(herein petitioner) on grounds other than the merits of the counterclaim, despite
the provisions under Rule 17 of the 1997 Rules of Civil Procedure, constitutes a
debatable question of law, presently meriting justiciability through the instant
action. Indeed, in reviewing the assailed orders of the RTC, it is inevitable that
the Court consider whether the dismissal of the complaint, upon motion of the

defendant, on the ground of the failure to prosecute on plaintiffs part precipitates

or carries with it the dismissal of the pending counterclaims.
Our core discussion begins with Section 3, Rule 17 of the 1997 Rules of Civil
Procedure, which states:
SEC. 3. Dismissal due to fault of plaintiff.If, for no justifiable cause, the plaintiff
fails to appear on the date of the presentation of his evidence in chief on the
complaint, or to prosecute his action for an unreasonable length of time, or to
comply with these Rules or any order of the court, the complaint may be
dismissed upon motion of defendant or upon the court's own motion, without
prejudice to the right of the defendant to prosecute his counterclaim in the same
or in a separate action. This dismissal shall have the effect of an adjudication
upon the merits, unless otherwise declared by the court.
The express qualification in the provision that the dismissal of the complaint due
to the plaintiffs fault, as in the case for failure to prosecute, is without prejudice
to the right of the defendant to prosecute his counterclaim in the same or
separate action. This stands in marked contrast to the provisions under Rule 17
of the 1964 Rules of Court which were superseded by the 1997 amendments. In
the 1964 Rules, dismissals due to failure to prosecute were governed by Section
3, Rule 17, to wit:
SEC. 3. Failure to prosecute. If plaintiff fails to appear at the time of the trial,
or to prosecute his action for an unreasonable length of time, or to comply with
these rules or any order of the court, the action may be dismissed upon motion of
the defendant or upon the courts own motion. This dismissal shall have the effect
of an adjudication upon the merits, unless otherwise provided by court.
Evidently, the old rule was silent on the effect of such dismissal due to failure to
prosecute on the pending counterclaims. As a result, there arose what one
authority on remedial law characterized as "the nagging question of whether or
not the dismissal of the complaint carries with it the dismissal of the
counterclaim."22 Jurisprudence construing the previous Rules was hardly silent on
the matter.
In their arguments before the RTC on the dismissal of the counterclaim,
respondents cited in support City of Manila v.

Ruymann,23 Domingo v. Santos,24 Belleza v. Huntington,25 and Froilan v. Pan

Oriental Shipping Co.,26 all of which were decided more than five decades ago.
Notably though, none of the complaints in these four cases were dismissed either
due to the fault of the plaintiff or upon the instance of the defendant.27
The distinction is relevant, for under the previous and current incarnations of the
Rules of Civil Procedure, it is Section 3, Rule 17 that governs the dismissals due
to the failure of the plaintiff to prosecute the complaint, as had happened in the
case at bar. Otherwise, it is Section 2, Rule 17, which then, and still is now,
covered dismissals ordered by the trial court upon the instance of the
plaintiff.28 Yet, as will be seen in the foregoing discussion, a discussion of Section
2 cannot be avoided as the postulate behind that provision was eventually
extended as well in cases that should have properly been governed by Section 3.
Even though the cases cited by respondents involved different factual
antecedents, there exists more appropriate precedents which they could have
cited in support of their claim that the counterclaim should have been dismissed
even if the dismissal of the complaint was upon the defendants motion and was
predicated on the plaintiffs fault. BA Finance Corp. v. Co29 particularly stands out
in that regard, although that ruling is itself grounded on other precedents as well.
Elucidation of these cases is in order.
On the general effect of the dismissal of a complaint, regardless of cause, on the
pending counterclaims, previous jurisprudence laid emphasis on whether the
counterclaim was compulsory or permissive in character. The necessity of such
distinction was provided in the 1964 Rules itself, particularly Section 2, Rule 17,
which stated that in instances wherein the plaintiff seeks the dismissal of the
complaint, "if a counterclaim has been pleaded by a defendant prior to the
service upon him of the plaintiffs motion to dismiss, the action shall not be
dismissed against the defendants objection unless the counterclaim can remain
pending for independent adjudication by the court."30 The
vaunted commentaries of Chief Justice Moran, remarking on Section 2, Rule 17,
noted that "[t]here are instances in which a counterclaim cannot remain pending
for independent adjudication, as, where it arises out of, or is necessarily
connected with, the transaction or occurrence which is the subject matter of the
opposing partys claim."31

This view expressed in Morans Commentaries was adopted by the Court in cases
where the application of Section 2, Rule 17 of the 1964 Rules of Court was called
for, such as in Lim Tanhu v. Ramolete,32 and Dalman v. City Court of Dipolog
City.33 The latter case warrants brief elaboration. Therein, the plaintiff in a civil
case for damages moved for the withdrawal of her own case on the ground that
the dispute had not been referred to the barangay council as required by law.
Over the objection of the defendant, who feared that her own counterclaim would
be prejudiced by the dismissal, plaintiffs motion was granted, the complaint and
the counterclaim accordingly dismissed by the trial court. The Court refused to
reinstate the counterclaim, opining without elaboration, "[i]f the civil case is
dismissed, so also is the counterclaim filed therein."34 The broad nature of that
statement gave rise to the notion that the mandatory
dismissal of the counterclaim upon dismissal of the complaint applied regardless
of the cause of the complaints dismissal.35
Notably, the qualification concerning compulsory counterclaims was provided in
Section 2, Rule 17 of the 1964 Rules, the provision governing dismissals by order
of the court, and not Section 3, Rule 17. As stated earlier, Section 3, which
covered dismissals for failure to prosecute upon motion of the defendant or
upon motu proprioaction of the trial court, was silent on the effect on the
counterclaim of dismissals of such nature.
Spouses Sta. Maria, Jr. v. Court of Appeals,36 decided in 1972, ostensibly supplied
the gap on the effect on the counterclaim of complaints dismissed under Section
3. The defendants therein successfully moved before the trial court for the
dismissal of the complaint without prejudice and their declaration in default on
the counterclaim after plaintiffs therein failed to attend the pre-trial. After
favorable judgment was rendered on the counterclaim, plaintiffs interposed an
appeal, citing among other grounds, that the counterclaim could no longer have
been heard after the dismissal of the complaint. While the Court noted that the
adjudication of the counterclaim in question "does not depend upon the
adjudication of the claims made in the complaint since they were virtually
abandoned by the non-appearance of the plaintiffs themselves," it was also added
that "[t]he doctrine invoked is not available to plaintiffs like the petitioners, who
prevent or delay the hearing of their own claims and allegations." 37 The Court,
through Justice JBL Reyes, noted:

The doctrine that the complaint may not be dismissed if the counterclaim
cannot be independently adjudicated is not available to, and was not
intended for the benefit of, a plaintiff who prevents or delays the
prosecution of his own complaint. Otherwise, the trial of counterclaims would
be made to 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 plaintiffs action and cannot remain
pending for independent adjudication.38
There is no doubt that under the 1964 Rules, the dismissal of a complaint due to
the failure of the plaintiff to appear during pre-trial, as what had happened
in Sta. Maria, fell within the coverage of Section 3, Rule 17. On the other hand,
Section 2 was clearly limited in scope to those dismissals sustained at the
instance of the plaintiff.39Nonetheless, by the early 1990s, jurisprudence was
settling on a rule that compulsory counterclaims were necessarily terminated
upon the dismissal of the complaint not only if such dismissal was upon motion of
the plaintiff, but at the instance of the defendant as well. Two decisions from that
period stand out in this regard,Metals Engineering Resources Corp. v. Court of
Appeals40 and International Container Terminal Services v. Court of Appeals.41
In Metals, the complaint was expunged from the record after the defendant had
filed a motion for reconsideration of a trial court order allowing the filing of an
amended complaint that corrected a jurisdictional error in the original complaint
pertaining to the specification of the amount of damages sought. When the
defendant was nonetheless allowed to present evidence on the counterclaim, the
plaintiff assailed such allowance on the ground that the counterclaim was
compulsory and could no longer remain pending for independent adjudication.
The Court, in finding for the plaintiff, noted that the counterclaim was indeed
compulsory in nature, and as such, was auxiliary to the proceeding in the original
suit and derived its jurisdictional support therefrom.42 It was further explained
that the doctrine was in consonance with the primary objective of a counterclaim,
which was to avoid and prevent circuitry of action by allowing the entire
controversy between the parties to be litigated and finally determined in one
action, and to discourage multiplicity of suits.43 Also, the Court noted that since
the complaint was dismissed for lack of jurisdiction, it was as if no claim was filed

against the defendant, and there was thus no more leg for the complaint to stand
on.44
In International Container, the defendant filed a motion to dismiss which was
granted by the trial court. The defendants counterclaim was dismissed as well.
The Court summarized the key question as "what is the effect of the dismissal of
a complaint ordered at the instance of the defendant upon a compulsory
counterclaim duly raised in its answer."45 Then it ruled that the counterclaim did
not survive such dismissal. After classifying the counterclaim therein as
compulsory, the Court noted that "[i]t is obvious from the very nature of the
counterclaim that it could not remain pending for independent adjudication, that
is, without adjudication by the court of the complaint itself on which the
counterclaim was based."46
Then in 1993, a divided Court ruled in BA Finance that the dismissal of the
complaint for nonappearance of plaintiff at the pre-trial, upon motion of the
defendants, carried with it the dismissal of their compulsory counterclaim.47 The
Court reiterated the rule that "a compulsory counterclaim cannot remain pending
for independent adjudication by the court as it is auxiliary to the proceeding in
the original suit and merely derives its jurisdictional support
therefrom."48 Express reliance was made on Metals, International Container, and
evenDalman in support of the majoritys thesis. BA Finance likewise advised that
the proper remedy for defendants desirous that their counterclaims not be
dismissed along with the main complaint was for them to move to declare the
plaintiffs to be "non-suited" on their complaint and "as in default" on their
compulsory counterclaim, instead of moving for the dismissal of the complaint.49
Justice Regalado, joined by Chief Justice Narvasa, registered a strong objection to
the theory of the majority. They agreed that the trial court could no longer hear
the counterclaim, but only on the ground that defendants motion to be allowed
to present evidence on the counterclaim was filed after the order dismissing the
complaint had already become final. They disagreed however that the compulsory
counterclaim was necessarily dismissed along with the main complaint, pointing
out that a situation wherein the dismissal of the complaint was occasioned by
plaintiffs failure to appear during pre-trial was governed under Section 3, Rule
17, and not Section 2 of the same rule. Justice Regalado, who ironically penned
the decision in Metals cited by the majority, explained:

Turning back to Rule 17, it is readily apparent that Sections 2 and 3 thereof
envisage different factual and adjective situations. The dismissal of the complaint
under Section 2 is at the instance of plaintiff, for whatever reason he is minded to
move for such dismissal, and, as a matter of procedure, is without prejudice
unless otherwise stated in the order of the court or, for that matter, in plaintiff's
motion to dismiss his own complaint. By reason thereof, to curb any dubious or
frivolous strategy of plaintiff for his benefit or to obviate possible prejudice to
defendant, the former may not dismiss his complaint over the defendant's
objection if the latter has a compulsory counterclaim since said counterclaim
would necessarily be divested of juridical basis and defendant would be deprived
of possible recovery thereon in that same judicial proceeding.
Section 3, on the other hand, contemplates a dismissal not procured by plaintiff,
albeit justified by causes imputable to him and which, in the present case, was
petitioner's failure to appear at the pre-trial. This situation is also covered by
Section 3, as extended by judicial interpretation, and is ordered upon motion of
defendant or motu proprio by the court. Here, the issue of whether defendant has
a pending counterclaim, permissive or compulsory, is not of determinative
significance. The dismissal of plaintiff's complaint is evidently a confirmation of
the failure of evidence to prove his cause of action outlined therein, hence the
dismissal is considered, as a matter of evidence, an adjudication on the merits.
This does not, however, mean that there is likewise such absence of evidence to
prove defendant's counterclaim although the same arises out of the subject
matter of the complaint which was merely terminated for lack of proof. To hold
otherwise would not only work injustice to defendant but would be reading a
further provision into Section 3 and wresting a meaning therefrom although
neither exists even by mere implication. Thus understood, the complaint can
accordingly be dismissed, but relief can nevertheless be granted as a matter of
course to defendant on his counterclaim as alleged and proved, with or without
any reservation therefor on his part, unless from his conduct, express or implied,
he has virtually consented to the concomitant dismissal of his counterclaim.50
Justice Regalado also adverted to Sta. Maria and noted that the objections raised
and rejected by the Court therein were the same as those now relied upon by the
plaintiff. He pointed out that Dalman and International Container, both relied
upon by the majority, involved the application of Section 2, Rule 17 and not
Section 3, which he insisted as the applicable provision in the case at bar.51

The partial dissent of Justice Regalado in BA Finance proved opportune, as he

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

approved the revisions now contained in the 1997 Rules of Civil Procedure, not
only did Justice Regalados amendment to Section 3, Rule 17 remain intact, but
the final version likewise eliminated the qualification formerly offered under
Section 2 on "counterclaims that can remain pending for independent
adjudication by the court."53 At present, even Section 2, concerning dismissals on
motion of the plaintiff, now recognizes the right of the defendant to prosecute the
counterclaim either in the same or separate action notwithstanding the dismissal
of the complaint, and without regard as to the permissive or compulsory nature
of the counterclaim.

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

In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado

expounds on the effects of the amendments to Section 2 and 3 of Rule 17:

Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not the action
that is dismissed but the complaint. He asked whether there is any distinction
between "complaint" and "action." Justice Regalado opined that the action of the
plaintiff is initiated by his complaint.
Justice Feria then suggested that the dismissal be limited to the
complaint[.] Thus, in the 1st line of Sec. 1, the words "An action" will be
changed to "a complaint"; in the 2nd line of Sec. 2, the words "an action"
will be changed to "a complaint" and in Sec. 3, the word "action" on the
5th line of the draft will be changed to "complaint." The Committee
agreed with Justice Ferias suggested amendments.
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.
Justice Regalado opined that there is no need of making a clarification
because it is already understood that it covers both counterclaims. 52
It is apparent from these minutes that the survival of the counterclaim despite
the dismissal of the complaint under Section 3 stood irrespective of whether the
counterclaim was permissive or compulsory. Moreover, when the Court itself

2. Under this revised section [2], where the plaintiff moves for the dismissal of
his complaint to which a counterclaim has been interposed, the dismissal shall be
limited to the complaint. Such dismissal shall be without prejudice to the right of
the defendant to either prosecute his counterclaim in a separate action or to have
the same resolved in the same action. Should he opt for the first alternative, the
court should render the corresponding order granting and reserving his right to
prosecute his claim in a separate complaint. Should he choose to have his
counterclaim disposed of in the same action wherein the complaint had been
dismissed, he must manifest such preference to the trial court within 15 days
from notice to him of plaintiffs 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
thedefendant or, in the latter instance, also by the court motu proprio.
xxxx
2. The second substantial amendment to [Section 3] is with respect to the
disposition of the defendants counterclaim in the event the plaintiffs complaint is
dismissed. As already observed, he is here granted the choice to prosecute that
counterclaim in either the same or a separate action. x x x x
3. With the aforestated amendments in Secs. 2 and 3 laying down
specific rules on the disposition of counterclaims involved in the

dismissal actions, the controversial doctrine in BA Finance Corporation

vs. Co, et al., (G.R. No. 105751, June 30, 1993) has been abandoned,
together with the apparent confusion on the proper application of said
Secs. 2 and 3. Said sections were distinguished and discussed in the authors
separate opinion in that case, even before they were clarified by the present
amendments x x x.54
Similarly, Justice Feria notes that "the present rule reaffirms the right of the
defendant to move for the dismissal of the complaint and to prosecute his
counterclaim, as stated in the separate opinion [of Justice Regalado in BA
Finance.]"55 Retired Court of Appeals Justice Herrera pronounces that the
amendment to Section 3, Rule 17 settles that "nagging question" whether the
dismissal of the complaint carries with it the dismissal of the counterclaim, and
opines that by reason of the amendments, the rulings
in Metals Engineering, International Container, and BA Finance "may be deemed
abandoned."56 On the effect of amendment to Section 3, Rule 17, the
commentators are in general agreement,57 although there is less unanimity of
views insofar as Section 2, Rule 17 is concerned.58
To be certain, when the Court promulgated the 1997 Rules of Civil Procedure,
including the amended Rule 17, those previous jural doctrines that were
inconsistent with the new rules incorporated in the 1997 Rules of Civil Procedure
were implicitly abandoned insofar as incidents arising after the effectivity of the
new procedural rules on 1 July 1997. BA Finance, or even the doctrine that a
counterclaim may be necessarily dismissed along with the complaint, clearly
conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA
Finance as doctrine extends as far back as 1997, when the Court adopted the
new Rules of Civil Procedure. If, since then, such abandonment has not been
affirmed in jurisprudence, it is only because no proper case has arisen that would
warrant express confirmation of the new rule. That opportunity is here and now,
and we thus rule that the dismissal of a complaint due to fault of the plaintiff is
without prejudice to the right of the defendant to prosecute any pending
counterclaims of whatever nature in the same or separate action. We confirm
that BA Finance and all previous rulings of the Court that are inconsistent with
this present holding are now abandoned.
Accordingly, the RTC clearly erred when it ordered the dismissal of the
counterclaim, since Section 3, Rule 17 mandates that the dismissal of the

complaint is without prejudice to the right of the defendant to prosecute the

counterclaim in the same or separate action. If the RTC were to dismiss the
counterclaim, it should be on the merits of such counterclaim. Reversal of the
RTC is in order, and a remand is necessary for trial on the merits of the
counterclaim.
It would be perfectly satisfactory for the Court to leave this matter at that. Still,
an explanation of the reason behind the new rule is called for, considering that
the rationale behind the previous rule was frequently elaborated upon.
Under Act No. 190, or the Code of Procedure in Civil Actions promulgated in
1901, it was recognized in Section 127(1) that the plaintiff had the right to seek
the dismissal of the complaint at any time before trial, "provided a counterclaim
has not been made, or affirmative relief sought by the cross-complaint or answer
of the defendant."59 Note that no qualification was made then as to the nature of
the counterclaim, whether it be compulsory or permissive. The protection of the
defendants right to prosecute the counterclaim was indeed unqualified. In City of
Manila, decided in 1918, the Court explained:
By paragraph 1 [of Section 127], it will be seen that, where the defendant has
interposed a counterclaim, or is seeking affirmative relief by a cross-complaint,
that then, and in that case, the plaintiff cannot dismiss the action so as to affect
the right of the defendant in his counterclaim or prayer for affirmative relief. The
reason for that exception is clear. When the answer sets up an independent
action against the plaintiff, it then becomes an action by the defendant
against the plaintiff, and, of course, the plaintiff has no right to ask for a
dismissal of the defendants action.60
Nonetheless, a new rule was introduced when Act No. 190 was replaced by the
1940 Rules of Court. Section 2, Rule 30 of the 1940 Rules specified that if a
counterclaim is pleaded by a defendant prior to the service of the plaintiffs
motion to dismiss, the action shall not be dismissed against the defendants
objection unless the counterclaim can remain pending for independent
adjudication by the court. This qualification remained intact when the 1964 Rules
of Court was introduced.61 The rule referred only to compulsory counterclaims, or
counterclaims which arise out of or are necessarily connected with the transaction
or occurrence that is the subject matter of the plaintiffs claim, since the rights of
the parties arising out of the same transaction should be settled at the same

time.62 As was evident in Metals, International Container and BA Finance, the rule
was eventually extended to instances wherein it was the defendant with the
pending counterclaim, and not the plaintiff, that moved for the dismissal of the
complaint.
We should not ignore the theoretical bases of the rule distinguishing compulsory
counterclaims from permissive counterclaims insofar as the dismissal of the
action is concerned. There is a particular school of thought that informs the broad
proposition in Dalman that "if the civil case is dismissed, so also is the
counterclaim filed therein,"63 or the more nuanced discussions offered
in Metals, International Container, and BA Finance. The most potent statement of
the theory may be found in Metals,64 which proceeds from the following
fundamental premisesa compulsory counterclaim must be set up in the same
proceeding or would otherwise be abated or barred in a separate or subsequent
litigation on the ground of auter action pendant, litis pendentia or res judicata; a
compulsory counterclaim is auxiliary to the main suit and derives its jurisdictional
support therefrom as it arises out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the complaint;65and that if
the court dismisses the complaint on the ground of lack of jurisdiction, the
compulsory counterclaim must also be dismissed as it is merely ancilliary to the
main action and no jurisdiction remained for any grant of relief under the
counterclaim.
The first point is derived from Section 4, Rule 9, of the 1964 Rules of Court, while
the two latter points are sourced from American jurisprudence. There is no
disputing the theoretical viability of these three points. In fact, the requirement
that the compulsory counterclaim must be set up in the same proceeding remains
extant under the 1997 Rules of Civil Procedure.66 At the same time, other
considerations rooted in actual practice provide a counterbalance to the abovecited 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 plaintiffs 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 defendants rights. Yet even in such
an instance, it remains debatable whether the dismissal or withdrawal of
the complaint is sufficient to obviate the pending cause of action
maintained by the defendant against the plaintiff. 67
These considerations persist whether the counterclaim in question is permissive
or compulsory. A compulsory counterclaim arises out of or is connected with the
transaction or occurrence constituting the subject matter of the opposing partys
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.68 The fact that the culpable acts on which the counterclaim is
based are founded within the same transaction or occurrence as the complaint, is
insufficient causation to negate the counterclaim together with the complaint. The
dismissal or withdrawal of the complaint does not traverse the boundaries of time
to undo the act or omission of the plaintiff against the defendant, or vice versa.
While such dismissal or withdrawal precludes the pursuit of litigation
by the plaintiff, either through his/her own initiative or fault, it would be
iniquitous to similarly encumber the defendant who maintained no such initiative
or fault. If the defendant similarly moves for the dismissal of the counterclaim or
neglects to timely pursue such action, let the dismissal of the counterclaim be
premised on those grounds imputable to the defendant, and not on the
actuations of the plaintiff.
The other considerations supplied in Metals are anchored on the premise that the
jurisdictional foundation of the counterclaim is the complaint itself. The theory is
correct, but there are other facets to this subject that should be taken into
account as well. On the established premise that a counterclaim involves separate
causes of action than the complaint even if derived from the same transaction or

series of transactions, the counterclaim could have very well been lodged as a
complaint had the defendant filed the action ahead of the complainant.69 The
terms "ancillary" or "auxiliary" may mislead in signifying that a complaint innately
possesses more credence than a counterclaim, yet there are many instances
wherein the complaint is trivial but the counterclaim is meritorious. In truth, the
notion that a counterclaim is, or better still, appears to be merely "ancillary" or
"auxiliary" is chiefly the offshoot of an accident of chronology, more than
anything else.
The formalistic distinction between a complaint and a counterclaim does not
detract from the fact that both of them embody causes of action that have in
their end the vindication of rights. While the distinction is necessary as a means
to facilitate order and clarity in the rules of procedure, it should be remembered
that the primordial purpose of procedural rules is to provide the means for the
vindication of rights. A party with a valid cause of action against another party
cannot be denied the right to relief simply because the opposing side had the
good fortune of filing the case first. Yet this in effect was what had happened
under the previous procedural rule and correspondent doctrine, which under their
final permutation, prescribed the automatic dismissal of the compulsory
counterclaim upon the dismissal of the complaint, whether upon the initiative of
the plaintiff or of the defendant.
Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more
equitable disposition of the counterclaims by ensuring that any judgment thereon
is based on the merit of the counterclaim itself and not on the survival of the
main complaint. Certainly, if the counterclaim is palpably without merit or suffers
jurisdictional flaws which stand independent of the complaint, the trial court is
not precluded from dismissing it under the amended rules, provided that the
judgment or order dismissing the counterclaim is premised on those defects. At
the same time, if the counterclaim is justified, the amended rules now
unequivocally protect such counterclaim from peremptory dismissal by reason of
the dismissal of the complaint.
WHEREFORE, the petition is GRANTED. The Orders dated 9 August 2005 and 10
October 2005 of Branch 29, Regional Trial Court of San Miguel, Zamboanga del
Sur in Civil Case No. 98-012 are SET ASIDE. Petitioners counterclaim as
defendant in Civil Case. No. 98-012 is REINSTATED. The Regional Trial Court is
ORDERED to hear and decide the counterclaim with deliberate dispatch.

5. How to Construe an unqualified order

Case: G.R. No. 170026
SHIMIZU PHILIPPINES CONTRACTORS, INC.,Petitioner vs. MRS. LETICIA
B. MAGSALIN

We resolve the petition for review on certiorari[1] filed by Shimizu

Philippines Contractors, Inc. (petitioner) to challenge the twin resolutions of the
Court of Appeals (CA)[2] in CA-G.R. CV No. 83096 which dismissed the appeal of
the petitioner on the ground of lack of jurisdiction [3] and denied the petitioners
subsequent motion for reconsideration.[4] The appeal in CA-G.R. CV No. 83096
had sought to nullify the December 16, 2003 order[5] of the Regional Trial Court
(RTC) dismissing the petitioners complaint for sum of money and damages on the
ground of non prosequitur.
THE ANTECEDENTS
The antecedent facts of the petition before us are not disputed.
An alleged breach of contract was the initial event that led to the present
petition. The petitioner claims that one Leticia Magsalin, doing business as Karens
Trading, had breached their subcontract agreement for the supply, delivery,
installation, and finishing of parquet tiles for certain floors in the petitioners
Makati City condominium project called The Regency at Salcedo. The breach
triggered the agreements termination. When Magsalin also refused to return the
petitioners unliquidated advance payment and to account for other monetary
liabilities despite demand, the petitioner sent a notice to respondent FGU
Insurance Corporation (FGU Insurance) demanding damages pursuant to the
surety and performance bonds the former had issued for the subcontract.
On April 30, 2002, the petitioner filed a complaint docketed as Civil Case
No. 02-488 against both Magsalin and FGU Insurance. It was raffled to Branch 61
of the RTC of Makati City. The complaint sought Two Million Three Hundred
Twenty-Nine Thousand One Hundred Twenty Four Pesos and Sixty Centavos
(P2,329,124.60) as actual damages for the breach of contract.
FGU Insurance was duly served with summons. With respect to Magsalin,
however, the corresponding officers return declared that both she and Karens
Trading could not be located at their given addresses, and that despite further
efforts, their new addresses could not be determined.

In August 2002, FGU Insurance filed a motion to dismiss the complaint.

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

With the above procedural events presented by both parties as the only
backdrop,
on
December
16,
2003
the
RTC
issued
a
tersely
worded order[9] dismissing Civil Case No. 02-488. For clarity, we quote the
dismissal order in full:

In October 2002, in an effort to assist the RTC in acquiring jurisdiction

over Magsalin, the petitioner filed a motion for leave to serve summons on
respondent Magsalin by way of publication. In January 2003, the petitioner filed
its reply to FGU Insurances answer.

ORDER

In February 2003, FGU Insurance filed a motion for leave of court to file a
third-party complaint. Attached to the motion was the subject complaint, [6] with
Reynaldo Baetiong, Godofredo Garcia and Concordia Garcia named as third-party
defendants. FGU Insurance claims that the three had executed counterguaranties over the surety and performance bonds it executed for the
subcontract with Magsalin and, hence, should be held jointly and severally liable
in the event it is held liable in Civil Case No. 02-488.
The RTC admitted the third-party complaint and denied the motion to
serve summons by publication on the ground that the action against respondent
Magsalin was in personam.
In May 2003, the RTC issued a notice setting the case for hearing on June
20, 2003. FGU Insurance filed a motion to cancel the hearing on the ground that
the third-party defendants had not yet filed their answer. The motion was
granted.
In June 2003, Baetiong filed his answer to the third-party complaint. He
denied any personal knowledge about the surety and performance bonds for the
subcontract with Magsalin.[7] Of the three (3) persons named as third-party
defendants, only Baetiong filed an answer to the third-party complaint; the
officers returns on the summons to the Garcias state that both could not be
located at their given addresses. Incidentally, the petitioner claims, and Baetiong
does not dispute, that it was not served with a copy of Baetiongs answer. The
petitioner now argues before us that FGU Insurance, which is the plaintiff in the
third-party complaint, had failed to exert efforts to serve summons on the
Garcias. It suggests that a motion to serve summons by publication should have
been filed for this purpose. The petitioner also asserts that the RTC should have
scheduled a hearing to determine the status of the summons to the third-party
defendants.[8]
THE ORDER OF DISMISSAL

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

DISMISSED.
SO ORDERED.
The RTC denied the petitioners motion for reconsideration,[10] prompting
the latter to elevate its case to the CA via a Rule 41 petition for review.[11]
The Ruling of the Appellate Court
FGU Insurance moved for the dismissal of the appeal on the ground of
lack of jurisdiction. It argued that the appeal raised a pure question of law as it
did not dispute the proceedings before the issuance of the December 16, 2003
dismissal order.
The petitioner, on the other hand, insisted that it had raised questions of
fact in the appeal.[12] Thus While, the instant appeal does not involve the merits of the
case, the same involves questions of fact based on the records
of the case. It must be emphasized that the lower courts
dismissal of the case based on alleged failure to prosecute on the
part of plaintiff-appellant was too sudden and precipitate. This
being the case, the facts [sic] to be determined is whether based
on the records of the case, was there a definite inaction on the part
of plaintiff-appellant? A careful examination of all pleadings filed as
well as the orders of the lower court vis--vis the rules should now
be made in order to determine whether there was indeed a failure
to prosecute on the part of plaintiff-appellant[.] [13] (emphases
supplied)
The CA agreed with FGU Insurance and dismissed the appeal, and denied
as well the subsequent motion for reconsideration.[14] The petitioner thus filed the
present petition for review on certiorari.
The Present Petition

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

THE APPELLATE COURT HAS JURISDICTION

TO DETERMINE THE MERITS OF THE APPEAL AS THE
MATTERS THEREIN INVOLVE BOTH QUESTIONS OF
LAW AND FACT.

II.

THE LOWER COURT ERRED IN DECLARING

THAT PETITIONER FAILED TO PROSECUTE THE CASE
DESPITE THE FACT THAT PETITIONER NEVER
RECEIVED A COPY OF THE ANSWER OF THIRDPARTY
DEFENDANT-RESPONDENT
REYNALDO
BAETIONG.

III.

THE LOWER COURT ERRED IN DECLARING

THAT PETITIONER FAILED TO PROSECUTE THE CASE
DESPITE THE FACT THAT THERE IS NO JOINDER OF
INDISPENSABLE PARTIES AND ISSUES YET BECAUSE
DEFENDANT-RESPONDENT LETICIA B. MAGSALIN AS
WELL AS THIRD-PARTY DEFENDANT-RESPONDENTS
GODOFREDO
AND
CONCORDIA
GARCIAS
WHEREABOUTS WERE UNKNOWN, HENCE NO
SERVICE YET ON THEM OF THE COPY OF THE
SUMMONS AND COMPLAINT WITH ANNEXES[.]

IV.

THE LOWER COURT ERRED IN DECLARING

THAT PETITIONER FAILED TO PROSECUTE THE CASE
DESPITE THE FACT
THAT IT WAS PARTY
RESPONDENT
FGU
WHICH
CAUSED
THE
CANCELLATION OF THE HEARING.

V.

IT IS EVIDENT THAT THE LOWER COURTS

DISMISSAL OF THE CASE IS A CLEAR DENIAL OF
DUE PROCESS.[15]

In our Resolution dated February 13, 2006,[16] we required the respondents to

comment. FGU Insurances comment[17] alleges that the present petition is fatally

defective for being unaccompanied by material portions of the record. It

reiterates that the appeal in CA-G.R. CV No. 83096 was improperly filed under
Rule 41 and should have been filed directly with this Court under Rule 45 of the
Rules of Court. Baetiong, in his comment,[18] asserts that the dismissal of the
appeal was in accord with existing laws and applicable jurisprudence.
THE RULING OF THE COURT
Preliminarily, we resolve the claim that the petition violates Rule 45 of the Rules
of Court on the attachment of material portions of the record. We note that FGU
Insurance fails to discharge its burden of proving this claim by not specifying the
material portions of the record the petitioner should have attached to the
petition. At any rate, after a careful perusal of the petition and its attachments,
the Court finds the petition to be sufficient. In other words, we can judiciously
assess and resolve the present petition on the basis of its allegations and
attachments.
After due consideration, we resolve to grant the petition on the ground
that the December 16, 2003 dismissal order is null and void for violation of due
process. We are also convinced that the appeal to challenge the dismissal order
was properly filed under Rule 41 of the Rules of Court. We further find that the
dismissal of Civil Case No. 02-488 for failure to prosecute is not supported by
facts, as shown by the records of the case.
The Dismissal Order is Void
The nullity of the dismissal order is patent on its face. It simply states its
conclusion that the case should be dismissed for non prosequitur, a legal
conclusion, but does not state the facts on which this conclusion is based.
Dismissals of actions for failure of the plaintiff to prosecute is authorized under
Section 3, Rule 17 of the Rules of Court. A plain examination of the December 16,
2003dismissal order shows that it is an unqualified order and, as such, is deemed
to be a dismissal with prejudice. Dismissals of actions (under Section 3) which do
not expressly state whether they are with or without prejudice are held to be with
prejudice[.][19] As a
prejudicial
dismissal,
the December
16,
2003 dismissal order is also deemed to be a judgment on the merits so that the
petitioners complaint in Civil Case No. 02-488 can no longer be refiled on the
principle of res judicata. Procedurally, when a complaint is dismissed for failure to
prosecute and the dismissal is unqualified, the dismissal has the effect of an
adjudication on the merits.[20]
As an adjudication on the merits, it is imperative that the dismissal order
conform with Section 1, Rule 36 of the Rules of Court on the writing of valid
judgments and final orders. The rule states:

RULE 36
Judgments, Final Orders and Entry Thereof
Section 1. Rendition of judgments and final orders. A
judgment or final order determining the merits of the case shall be
in writing personally and directly prepared by the judge, stating
clearly and distinctly the facts and the law on which it is based,
signed by him, and filed with the clerk of the court.

Court is vested with ample authority to review an unassigned error if it finds that
consideration and resolution are indispensable or necessary in arriving at a just
decision in an appeal.[26] In this case, the interests of substantial justice warrant
the review of an obviously void dismissal order.

The December 16, 2003 dismissal order clearly violates this rule for its
failure to disclose how and why the petitioner failed to prosecute its complaint.
Thus, neither the petitioner nor the reviewing court is able to know the particular
facts that had prompted the prejudicial dismissal. Had the petitioner perhaps
failed to appear at a scheduled trial date? Had it failed to take appropriate actions
for the active prosecution of its complaint for an unreasonable length of time?
Had it failed to comply with the rules or any order of the trial court? The
December 16, 2003 dismissal order does not say.
We have in the past admonished trial courts against issuing dismissal
orders similar to that appealed in CA-G.R. CV No. 83096. A trial court should
always specify the reasons for a complaints dismissal so that on appeal, the
reviewing court can readily determine the prima facie justification for the
dismissal.[21] A decision that does not clearly and distinctly state the facts and the
law on which it is based leaves the parties in the dark and is especially prejudicial
to the losing party who is unable to point the assigned error in seeking a review
by a higher tribunal.[22]
We thus agree with the petitioner that the dismissal of Civil Case No. 02488 constituted a denial of due process. Elementary due process demands that
the parties to a litigation be given information on how the case was decided, as
well as an explanation of the factual and legal reasons that led to the conclusions
of the court.[23] Where the reasons are absent, a decision (such as the December
16, 2003 dismissal order) has absolutely nothing to support it and is thus a
nullity.[24]
For this same reason, we are not moved by respondent FGU Insurances
statement that the disposition of the present petition must be limited to the issue
of whether the CA had correctly dismissed the appeal in CA-G.R. CV No. 83096.
[25]
This statement implies that we cannot properly look into the validity of
the December 16, 2003 dismissal orderin this Rule 45 petition. A void decision,
however, is open to collateral attack. While we note that the validity of
the dismissal order with respect to Section 1, Rule 36 of the Rules of Court was
never raised by the petitioner as an issue in the present petition, the Supreme

The appeal was properly filed

under Rule 41 of the Rules of Court
While the nullity of the December 16, 2003 dismissal order constitutes
the ratio decidendi for this petition, we nevertheless rule on the contention that
the appeal was erroneously filed.[27]

In dismissing the appeal, the CA relied on the premise that since the facts
presented in the petitioners appeal were admitted and not disputed, the appeal
must thereby raise a pure question of law proscribed in an ordinary appeal. This
premise was effectively the legal principle articulated in the case of Joaquin v.
Navarro,[28] cited by the CA in its April 8, 2005 resolution. Respondent FGU
Insurance thus contends that the proper remedy to assail the dismissal of Civil
Case No. 02-488 was an appeal filed under Rule 45 of the Rules of Court.
The reliance on Joaquin is misplaced as it is based on the conclusion the
appellate court made in its April 8, 2005 resolution i.e., that the pleading of
undisputed facts is equivalent to a prohibited appeal. The reliance is inattentive
to both the averments of the subject appeal and to the text of the cited case. The
operative legal principle in Joaquinis this: [W]here a case is submitted upon an
agreement of facts, or where all the facts are stated in the judgment and the
issue is the correctness of the conclusions drawn therefrom, the question is one
of law which [is properly subject to the review of this Court.] [29] In this case, as
already pointed out above, the facts supposedly supporting the trial courts
conclusion of non prosequitur were not stated in the judgment. This defeats the
application of Joaquin.
At any rate, we believe that the filing of the appeal in CA-G.R. CV No.
83096 under Rule 41 of the Rules of Court was proper as it necessarily involved
questions of fact.
An authority material to this case is the case of Olave v. Mistas.[30] Directly
addressed in Olave was the CAs jurisdiction over an ordinary appeal supported
by undisputedfacts and seeking the review of a prejudicial order of dismissal. In
this case, a complaint was filed before the RTC in Lipa City to nullify an
instrument titled Affidavit of Adjudication By The Heirs of the Estate of Deceased
Persons With Sale. The RTC dismissed the complaint, with prejudice, after the
plaintiffs had moved to set the case for pre-trial only after more than three (3)
months had lapsed from the service and filing of the last pleading in the case.
The plaintiffs thereafter went to the CA on a Rule 41 petition, contending, among
others, that the trial court had erred and abused its discretion. As in the present
case, the defendants moved to dismiss the appeal on the ground that the issues
therein were legal; they pointed out that the circumstances on record were
admitted.[31] They argued that the proper remedy was a petition for review
on certiorari under Rule 45 of the Rules of Court.
The CA denied the motion and entertained the appeal. It rendered a
decision reinstating the complaint on the ground that there was no evidence on
record that the plaintiffs had deliberately failed to prosecute their complaint.

When the case was elevated to this court on a Rule 45 petition, we

squarely addressed the propriety of the plaintiffs appeal. Though mindful that the
circumstances pleaded in the appeal were all admitted, we categorically held
in Olave that the appeal was correctly filed. We observed that despite undisputed
records, the CA, in its review, still had to respond to factual questions such as the
length of time between the plaintiffs receipt of the last pleading filed up to the
time they moved to set the case for pre-trial, whether there had been any
manifest intention on the plaintiffs part not to comply with the Rules of Court,
and whether the plaintiffs counsel was negligent.
Significantly, in Olave, we agreed with the plaintiffs that among the critical
factual questions was whether, based on the records, there had been factual
basis for the dismissal of the subject complaint. This same question is particularly
significant in the present case given that the order appealed from in CA-G.R. CV
No. 83096 does not even indicate the factual basis for the dismissal of Civil Case
No. 02-488. Due to the absence of any stated factual basis, and despite the
admissions of the parties, the CA, in CA-G.R. CV No. 83096, still had to delve into
the records to check whether facts to justify the prejudicial dismissal even exist.
Since the dismissal of Civil Case No. 02-488 appears to have been rendered motu
proprio (as the December 16, 2003 dismissal order does not state if it was issued
upon the respondents or the trial courts motion), the facts to be determined by
the CA should include the grounds specified under Section 3, Rule 17 of the Rules
of Court. A court could only issue a motu proprio dismissal pursuant to the
grounds mentioned in this rule and for lack of jurisdiction over the subject matter.
[32]
These grounds are matters of facts. Thus, given that the dismissal order does
not disclose its factual basis, we are thus persuaded that the petitioner had
properly filed its appeal from the dismissal order under Rule 41 of the Rules of
Court.
The Dismissal of Civil Case No. 02-488 is
not Supported by the Facts of the Case
We also find that the dismissal of Civil Case No. 02-488 is not warranted. Based
on available records and on the averments of the parties, the following events
were chronologically proximate to the dismissal of Civil Case No. 02-488: (a) on
March 24, 2003, the court admitted FGU Insurances third-party complaint; (b)
the trial court cancelled the June 20, 2003 hearing upon FGU Insurances motion;
and (c) on June 16, 2003, Baetiong filed his Answer to the thirdparty complaint but did not serve it upon the petitioner.
None of these events square with the grounds specified by Section 3, Rule
17 of the Rules of Court for the motu proprio dismissal of a case for failure to
prosecute. These grounds are as follows:

(a)

Failure of the plaintiff, without justifiable reasons, to appear

on the date of the presentation of his evidence in chief;

(b)

Failure of the plaintiff

unreasonable length of time;

to

prosecute

his

action

for

(c)

Failure of the plaintiff to comply with the Rules of Court; or

(d)

Failure of the plaintiff to obey any order of the court.

an

In our view, the developments in the present case do not satisfy the
stringent standards set in law and jurisprudence for a non prosequitur.[33] The
fundamental test for non prosequitur is whether, under the circumstances, the
plaintiff is chargeable with want of due diligence in failing to proceed
with reasonable promptitude.[34] There must be unwillingness on the part of the
plaintiff to prosecute.[35]
In this case, the parties own narrations of facts demonstrate the
petitioners willingness to prosecute its complaint. Indeed, neither respondents
FGU Insurance nor Baetiong was able to point to any specific act committed by
the petitioner to justify the dismissal of their case.
While it is discretionary on the trial court to dismiss cases, dismissals of
actions should be made with care. The repressive or restraining effect of the rule
amounting to adjudication upon the merits may cut short a case even before it is
fully litigated; a ruling of dismissal may forever bar a litigant from pursuing
judicial relief under the same cause of action. Hence, sound discretion demands
vigilance in duly recognizing the circumstances surrounding the case to the end
that technicality shall not prevail over substantial justice.[36]
This court is thus of the opinion that the dismissal of Civil Case No. 02-488 is not
warranted. Neither facts, law or jurisprudence supports the RTCs finding of failure
to prosecute on the part of the petitioner.
WHEREFORE,
premises
considered,
the
instant
petition
is GRANTED. The resolutions of the Court of Appeals dated April 8, 2005 and
October 4, 2005 are REVERSED andSET ASIDE. The order dated December 16,
2003 of the Regional Trial Court, Branch 61, Makati City, in Civil Case No. 02-488
is declared NULL and VOID, and the petitioners complaint therein is
ordered REINSTATED for further proceedings. No costs.
Case: NPC vs Adiong

Before us is an administrative complaint[1] filed by the National Power

Corporation (NPC) through its president Cyril C. Del Callar, charging respondent
Judge Santos B. Adiong, Presiding Judge of the Regional Trial Court (RTC), Branch
8, Marawi City, with gross ignorance of the law, manifest partiality and conduct
unbecoming a member of the Judiciary.
The complaint arose in connection with the following cases:
a.

Civil Case No. 1918-03 entitled Ibrahim Abdo, et al. v.

National Power Corporation for Damages;
b.
Civil Case No. 1322-95 entitled Pacalna Sanggacala v.
National Power Corporation for Damages;
c.

Civil Case No 1332-95 entitled Ali Macaraya Mato v. National

Power Corporation for Damages;

d.

Civil Case No. 1367-95 entitled Camar Dipatuan v. National

Power Corporation for Damages;

e.

Civil Case No. 1361-95 entitled Casimra Sultan v. National

Power Corporation for Damages; and

f.

Civil Case No. 1355-95 entitled Mualam Dimatingcal v.

National Power Corporation for Damages.

In Civil Case No. 1918-03, plaintiffs Ibrahim Abdo, et al. who styled
themselves as a group of farmers, fishermen, laborers, workers, vendors,
household members, and businessmen, collectively sought to hold NPC liable for
damages for operating seven Hydroelectric Power plants allegedly without due
regard to the health and safety of the plaintiffs and other residents of Marawi City
and the province of Lanao del Sur. The plaintiffs alleged that they and several
others suffered ecological and economic disasters brought about by the operation
of regulatory dams which affected the natural flow of Lake Lanao and destroyed
their farms, properties, businesses and sources of livelihood. In addition to
damages, the plaintiffs also sought the refund of millions of pesos from the
Purchase Power Adjustment (PPA) collected by NPC from its electric consumers
through the Lanao Del Sur Electric Cooperative.[2]
On October 21, 2003, said plaintiffs filed an ex-parte Motion for the
Release of P640,000,000 worth of PPA and other generation charges. Judge
Adiong granted the motion on November 9, 2004, but later set aside his order

on November 24, 2005[3] after NPC filed a motion for reconsideration on the
ground of lack of notice and due process.Judge Adiong then required the parties
to present their respective evidence on December 8, 2005.
Subsequently, Judge Adiong issued a Resolution on February 28, 2006,
ordering NPC to refund the amount of P114,000,000, representing the Fuel
Compensating Cost, Foreign Exchange, and Incremental Cost Charges collected
from April 1991 to December 1995; to refund the amount of P176,000,000,
representing the Fuel and Power Cost Adjustment and PPA collected from January
1996 to April 2003; and to pay the amount of P97,537,000 as attorneys fees.[4]
NPC sought reconsideration of the order alleging that no pre-trial was
conducted and yet respondent judge already passed upon the merits of the
case. NPCs motion, however, was denied by Judge Adiong. Judge Adiong
reasoned that before issuing the questioned resolution, full-blown hearings were
conducted and NPC was afforded all the opportunities to present its evidence and
to participate actively in the hearings. Having done so, NPC has submitted itself
to the courts jurisdiction and could no longer claim that no pre-trial was
conducted. Later, Judge Adiong also directed Sheriff Otto Gomampong to
implement the February 28, 2006 Resolution ratiocinating that the same has
already become final.[5]
Thus, NPC filed the present administrative complaint, asserting that the
issuance of the February 28, 2006 Resolution is contrary to and violative of
the Rules of Courtbecause said resolution was issued by respondent judge
without first conducting the requisite pre-trial conference and despite the fact
that no formal offer of exhibits was made by plaintiffs in support of their
allegations. Also, NPC complains of respondent judges failure to lay down the
basis for granting the plaintiffs ex-parte motion to release the PPA refunds, and in
awarding the exorbitant amount of P97,537,000.00 as attorneys fees.[6]
NPC further states that while it admits that judges are not to be
administratively charged for acts committed in the exercise of their judicial
functions, respondent judge had acted in violation of elementary rules that was
equivalent to intolerable and inexcusable gross ignorance of the law.
As regards Civil Case Nos. 1322-95, 1332-95, 1367-95, 1361-95, and
1355-95, said cases involve identical causes of action arising from the same facts
and raising common issues. The plaintiffs in said cases sought to hold NPC liable
for damages for its refusal to open the Agus regulation dams causing perennial
flooding on their rice farmlands in 1979, 1984, 1986, 1989, 1993, 1994, 1995 and
1996. In all of these cases, respondent judge rendered judgments in favor of the

plaintiffs. Later, respondent judge also issued Joint Special Order[7] dated January
25, 2006 granting the Joint Motion for the Issuance of the Writ of Execution
Pending Appeal[8] filed by the plaintiffs in Civil Case Nos. 1367-95, 1361-95, and
1355-95 on January 2, 2006.[9]
A similar Order[10] granting execution pending appeal was likewise issued
in the two other cases, Civil Case Nos. 1322-95 and 1332-95, on January 17,
2006. Nine days later, on January 26, 2006, a Joint Writ of Execution [11] for the
two cases was issued.
NPC alleges that Judge Adiongs act of granting execution pending appeal
failed to conform strictly to the rigid criteria outlined by jurisprudence for
executions pending appeal. There was no special reason for the issuance of the
writ, and the grant of the writ was whimsical and clearly manifested the partiality
of respondent judge. Further, Judge Adiongs evident bias and unexplained interest
to execute the decisions manifested when he immediately set for hearing a motion
to cite in contempt a Land Bank personnel who allegedly refused to comply with
the notice of garnishment despite the fact that the motion lacked the required
notice of hearing and the failure of the plaintiffs to comply with Rule 71 of
the Rules of Court.[12]
In his Comment[13] dated June 1, 2006, respondent judge raised the
following in his defense. With regard to the lack of pre-trial conference,
respondent judge asserts that he has set the case for hearing on December 8 and
15, 2005, and January 12, 13, and 27, 2006. In all these hearings, the parties
were allowed to present whatever evidence they had to support their claims. He
also claims that the lack of pre-trial was never raised by NPC since the time it
filed its answer on May 15, 2003 up to the time plaintiffs started presenting their
evidence on December 8, 2005. It was only on February 14, 2006 that NPC
belatedly filed a manifestation calling the courts attention to the lack of pre-trial,
without formally asking or praying for the setting of one. In addition, the records
show that the plaintiffs filed their pre-trial brief while defendant NPC did
not. Thus, he argues that NPC is deemed to have waived the holding of a pre-trial
conference. Perforce, Judge Adiong argues that he should not be held
administratively liable for not conducting pre-trial.[14]
On the charge that he was biased and has unexplained interest to execute
the Decisions in Civil Case Nos. 1322-95, 1332-95, 1367-95, 1361-95 and 135595, respondent judge denied the allegations and explained that he complied with
the requirements for allowing an execution pending appeal. He asserts there was
good reason for its issuance and there was evidence substantiating the need to
issue the writ of execution which were clearly spelled out and stated in the
Special Orders dated January 17, 2006 and January 25, 2006. Further, there is no

reason to complain about the bank personnel being held for contempt, as said
bank personnel was not even adjudged guilty of contempt.[15]
Respondent judge adds that he should be absolved from the charges
against him. He argues that mere suspicion that a judge is partial to one of the
parties to the case is not enough; there should be evidence to support the
charge.[16] Also, he asserts that a judge cannot be held administratively liable for
errors in the appreciation of evidence unless the errors are gross or made in bad
faith.[17] When such errors of judgment are committed, complainants may avail
themselves of the remedy of appeal or certiorari and not the filing of
administrative charges against the judge who rendered the challenged decision.
On October 2, 2007, this Court referred the present complaint to the
Court of Appeals, Cagayan De Oro City, for investigation, report and
recommendation. Pursuant to theRules of Court, now retired Associate Justice
Ruben C. Ayson, to whom this case was assigned, sent notices to the parties
informing them of the schedule of investigation and hearings. The case was heard
for five days, from May 25 to 29, 2009, and the parties were required to present
oral, as well as documentary evidence in support of their respective allegations
and counter-allegations.
On July 10, 2009, Justice Ayson submitted his report finding respondent
judge administratively liable. Justice Ayson did not delve into the correctness of
the Resolution dated February 28, 2006, granting the refund of millions of pesos
representing the PPA charges, as the resolution is now the subject of an appeal
with this Court, docketed as G.R. No. 177288 entitled, Ibrahim Abdo, et al. v.
Court of Appeals and National Power Corporation. Neither did he delve into the
merits of all the other cases from which the administrative cases filed by NPC
against Judge Adiong arose, for the reason that the proper venue for their review
would be through the usual judicial process of review by appellate courts. [18]
The Investigating Justice also noted the well-entrenched rule that a judge
may not be held administratively liable for every erroneous decision he renders,
for no person called upon to determine the facts or interpret the law in the
administration of justice can be infallible. However, he also noted that there is a
prominent exception to the rule, that is, when the law is so elementary that not
to know it constitutes gross ignorance of the law.[19] In said cases, a judge
committing such error may face administrative sanctions.
Specifically, Justice Ayson noted that in Civil Case No. 1918-03, Judge
Adiong failed to conduct a pre-trial conference and erred in conducting the series
of hearings in the case without determining the existence of necessary pre-

conditions before the court could take cognizance of the case. Records revealed
that Judge Adiong failed to resolve (1) the issue on the insufficiency of the
complaint as a class suit; (2) the issue of nonpayment of docket fees necessary
to vest the court with jurisdiction over the case; (3) the issue on forum-shopping
allegedly committed by therein plaintiffs; and (4) the question regarding the
alleged failure of therein plaintiffs to state with particularity their respective
residences. Justice Ayson noted that without a proper resolution of these
threshold jurisdictional questions, any decision in the case is premature and
without factual and legal basis. In other words, the court would only be engaged
in a useless exercise and would merely be wasting the time and resources of the
parties.[20]
Further, the Investigating Justice stressed that the conduct of a pre-trial is
mandatory. He explained that pre-trial is a procedural device whereby the court is
called upon to compel the parties and their lawyers to appear before it and
negotiate an amicable settlement or otherwise make a formal statement and
embody in a single document the issues of fact and law involved in the action.
Respondent judge asserts that NPC only called the attention of the court in
passing in one of its hearings held sometime in December 8, 2005and January
27, 2006. Judge Adiong alleges that he then advised NPC to file the appropriate
pleading, but it was only after the case was terminated that NPC made a
manifestation on the lack of pre-trial. Judge Adiong adds that the conduct of a
pre-trial conference would have been a mere superfluity, and claims that the
absence of pre-trial did not cause substantial prejudice or injury to the parties as
the purpose of expediting the proceedings has been attained. However, Justice
Ayson opined that under the circumstances, Judge Adiong should have scheduled
the case for pre-trial as he was already aware of the procedural defect. His act of
not minding the setting of pre-trial, when he had every opportunity and
reasonable time to do so, can be characterized as negligent and imprudent,
according to Justice Ayson. Justice Ayson added that respondent judge
apparently failed to comply with the rules and failed to exercise the required
initiative to set the case for pre-trial. Considering Judge Adiongs long years of
service, a total of thirty-nine (39) years in the Judiciary, more than anyone else,
he should be presumed to be conversant with the law and the rules. The law
involved in this case being elementary, failure to consider it or to act as if he does
not know it, constitutes gross ignorance of the law. Justice Ayson said,
x x x Indeed, when the inefficiency springs from a failure to
consider so basic and elemental a rule, a law or a principle in the
discharge of his duties, a judge is either too incompetent and
undeserving of the position and the title he holds or is too vicious
that the oversight or omission was deliberately done in bad faith
and in grave abuse of judicial authority.[21]

As to the granting of the motions for execution pending appeal, Justice

Ayson pointed out that respondent judge gave flimsy and unsupported reasons to
support his order to issue the writ of execution pending appeal.
In Civil Case No. 1367-95, respondent judge granted the execution pending
appeal on the ground that the plaintiff therein suffered a stroke and allegedly needed
to undergo an operation costing millions of pesos. However, said allegations were
based only on the self-serving testimony of the plaintiffs sister whose testimony was
uncorroborated by any other evidence.
In Civil Case Nos. 1361-95 and 1355-95, Judge Adiong granted the motion
for execution pending appeal based on the testimony of the plaintiff who testified
on his medical condition as stated in his medical certificate. Said medical
certificate, however, was never verified by the doctor who allegedly issued
it. Hence, it was unreliable and was merely hearsay evidence.
Meanwhile, in Civil Case No. 1322-95, the motion for execution pending
appeal was granted based on the plaintiffs claim that he is getting old and
needed money to support his family of four wives and twenty-nine (29)
children. But the plaintiffs allegation was not corroborated by any competent
evidence.
In all these cases, respondent judge found justification that the financial
conditions of the plaintiffs warranted the issuance of the writ of execution pending
appeal. Justice Ayson, however, opined that while the power to grant or deny
immediate or advance execution is addressed to the sound discretion of the court,
it is required that good reason exists for granting execution pending appeal as
provided under Section 2,[22] Rule 39 of the Rules of Court. Absent any such good
reason, the special order of execution must be struck down for having been issued
with grave abuse of discretion.
Standing alone, the alleged dire financial distress of the plaintiffs in Civil
Case Nos. 1918-03, 1322-95, 1332-95, 1367-95, 1361-95, 1355-95 cannot be
taken as good reason for the immediate execution of respondent judges
decisions, according to Justice Ayson. Justice Ayson opined that indeed, when
respondent judge acted hastily in granting the execution of his Decision pending
appeal, his actuation did not indicate zeal to his duty but a clear disservice to the
cause of justice. Indubitably, respondent judge showed poor judgment and gross
ignorance of basic legal principles, added Justice Ayson.

After careful review of the records of this case, we find the above
observations and findings of the Investigating Justice well taken.
Judge Adiong failed to conduct a pre-trial conference in Civil Case No.
1918-03 contrary to elementary rules of procedure which he should have known
all too well considering his long years of service in the bench. The mandatory
character of pre-trial is embodied in Administrative Circular No. 399[23] dated January 15, 1999, and found its way in Section 2, [24] Rule 18 of
the Rules of Court, which imposes a duty upon the plaintiff to promptly move ex
parte that the case be set for pre-trial. To further implement the pre-trial
guidelines, this directive was reiterated in Administrative Matter No. 03-1-09SC[25] entitled Guidelines to be Observed by Trial Court Judges and Clerks of
Court in the Conduct of Pre-Trial and Use of Deposition-Discovery
Measures which recognized the importance of pre-trial and the depositiondiscovery measures as vital components of case management in trial courts.[26]
To further show that the Court is serious in implementing the rules on pretrial, in Alviola v. Avelino[27] the Court imposed the penalty of suspension on a
judge who merely failed to issue a pre-trial order within ten (10) days after the
termination of the pre-trial conference as mandated by Paragraph 8,[28] Title I (A)
of A.M. No. 03-1-09-SC.
Here, respondent judge failed to conduct the pre-trial conference itself. It
is elementary and plain that the holding of such a pre-trial conference is
mandatory and failure to do so is inexcusable. When the law or procedure is so
elementary, such as the provisions of the Rules of Court, not to know it or to act
as if one does not know it constitutes gross ignorance of the law. [29] Such
ignorance of a basic rule in court procedure, as failing to conduct pre-trial, sadly
amounts to gross ignorance and warrants a corresponding penalty.
As to the allegations of poor judgment and gross ignorance of basic legal
principles in granting the motions for execution pending appeal for flimsy and
unsupported reasons, we find that the particular reasons relied upon by
respondent judge for issuing the writ of execution pending appeal are so
unreliably weak and feeble that it highlights the lack of knowledge of respondent
judge with regard to the proper appreciation of arguments.
In Florendo v. Paramount Insurance Corp.,[30] the Supreme Court held:
x x x Good reasons, it has been held, consist of compelling
circumstances that justify immediate execution lest the judgment
becomes illusory. The circumstances must be superior, outweighing

the injury or damages that might result should the losing party
secure a reversal of the judgment. Lesser reasons would make of
execution pending appeal, instead of an instrument of solicitude
and justice, a tool of oppression and inequity.
Good reason as required by Section 2, Rule 39 of the Rules of Court does
not necessarily mean unassailable and flawless basis but at the very least, it
must be on solid footing. Dire financial conditions of the plaintiffs supported by
mere self-serving statements as good reason for the issuance of a writ of
execution pending appeal does not stand on solid footing. It does not even stand
on its own.
Section 8, Rule 140 of the Rules of Court, as amended, classifies gross
ignorance of the law as a serious charge and Section 11 thereof penalizes it with
any of the following sanctions:
1. Dismissal from the service, forfeiture of all or part of the benefits as the
Court may determine, and disqualification from reinstatement or
appointment to any public office, including government-owned or
controlled corporations. Provided, however, That the forfeiture of benefits
shall in no case include accrued leave credits;
2. Suspension from office without salary and other benefits for more than
three (3) but not exceeding six (6) months; or
3. A fine of more than P20,000[.00] but not exceeding P40,000.00.[31]
Considering, however, that in A.M. No. RTJ-04-1826, this Court has
already dismissed Judge Adiong, the penalties of suspension from office without
salary and dismissal from the service are no longer possible. Hence, the penalty
of fine is more appropriate.
WHEREFORE, the now dismissed respondent Judge Santos B. Adiong of
the Regional Trial Court of Marawi City, Branch 8 is, for gross ignorance of the
law, FINED in the amount of P40,000.00 to be deducted from his
retained/withheld accrued leave credits.
6. Absent of Notice of Pre-trial
Case: PNB vs. Perez
Pre-trial Notice is Mandatory

Spouses Perez further contend that the Order dated January 8, 2006 setting the
case for hearing cannot be interpreted any other way except as a notice for pretrial. They assert that the Amended Decision of the CA dated April 14, 2005
remanded the case to the lower court to conduct a pre-trial; therefore, the
hearing in question was just following the order of the CA to set the case for a
pre-trial.
We do not agree.
Section 3, Rule 18 of the 1997 Rules on Civil Procedure unequivocally requires
that "[t]he notice of pre-trial shall be served on counsel, or on the party who has
no counsel." [32] It is elementary in statutory construction that the word "shall"
denotes the mandatory character of the rule. Thus, it is without question that the
language of the rule undoubtedly requires the trial court to send a notice of pretrial to the parties.
More importantly, the notice of pre-trial seeks to notify the parties of the date,
time and place of the pre-trial and to require them to file their respective pre-trial
briefs within the time prescribed by the rules. Its absence, therefore, renders the
pre-trial and all subsequent proceedings null and void. [33]
In Pineda v. Court of Appeals, [34] the Court therein discussed the importance of
the notice of pre-trial. It pointed out that the absence of the notice of pre-trial
constitutes a violation of a person's constitutional right to due process. Further,
the Court ruled that all subsequent orders, including the default judgment, are
null and void and without effect, viz:
Reason and justice ordain that the court a quo should have notified the parties in
the case at bar. Otherwise, said parties without such notice would not know when
to proceed or resume proceedings. With due notice of the proceedings, the fate
of a party adversely affected would not be adjudged ex parte and without due
process, and he would have the opportunity of confronting the opposing party,
and the paramount public interest which calls for a proper examination of the
issues in any justiciable case would be subserved. The absence, therefore, of
the requisite notice of pre-trial to private respondents through no fault
or negligence on their part, nullifies the order of default issued by the
petitioner Judge for denying them their day in court -- a constitutional
right. In such, the order suffers from an inherent procedural defect and is null
and void. Under such circumstance, the granting of relief to private respondents
becomes a matter of right; and the court proceedings starting from the
order of default to the default judgment itself should be considered null
and void and of no effect. (Emphasis supplied.)

More recently, in Agulto, [35] this Court again had the chance to rule upon the
same issue and reiterated the importance of the notice of pre-trial, to wit:
The failure of a party to appear at the pre-trial has adverse consequences. If the
absent party is the plaintiff, then he may be declared non-suited and his case
dismissed. If it is the defendant who fails to appear, then the plaintiff may be
allowed to present his evidence ex parte and the court to render judgment on the
basis
thereof.
Thus, sending a notice of pre-trial stating the date, time and place of
pre-trial is mandatory. Its absence will render the pre-trial and
subsequent proceedings void. This must be so as part of a party's right
to due process. (Emphasis supplied.)
In the case at bar, the order issued by the trial court merely spoke of a "hearing
on March 8, 2006"[36] and required PNB "to prepare and complete x x x a
statement of account." [37] The said order does not mention anything about a pretrial to be conducted by the trial court.
In contrast, the Notice of Pre-trial dated August 22, 2002 issued by the trial court
categorically states that a pre-trial is to be conducted, requiring the parties to
submit their respective pre-trial briefs. It reads:
NOTICE OF PRE-TRIAL
You are hereby notified that the Pre-trial of this case will be held on
September
19,
2002
at
8:30
o'clock
in
the
morning.
Pursuant to the Supreme Court Circular No. 1-89, you are requested to submit
Pre-trial brief, at least three (3) days before said date, containing the following:
A. Brief Statement of the parties respective claims and defenses;
B. The number of witnesses to be presented;
C. An abstract of the testimonies of witnesses to be presented by the parties
and approximate number of hours that will be required for the
presentation of their respective evidence;
D. Copies of all document intended to be presented;

E. Admission;
F. Applica[ble] laws and jurisprudence;
G. The parties['] respective statement of the issues; and
H. The available trial dates of counsel for complete evidence presentation,
which must be within a period of three (3) months from the first day of
trial.

You are further warned that the failure to submit said brief could be a ground for
non-suit
or
declaration
of
default.
Cauayan City, Isabela, this 19th day of August 2002.

[38]

(Emphasis supplied.)

What is more, PNB even claims that it failed to receive a copy of the said order.
Clearly, no amount of reasoning will logically lead to the conclusion that the trial
court issued, or that PNB received, a notice of pre-trial.
As such, We find that the CA aptly held that the Order dated March 8, 2006,
which declared the hearing to be a pre-trial and allowed Spouses Perez to adduce
evidence ex parte, is void. Similarly, its ruling that the Decision dated July 5,
2006 and all subsequent orders [39] issued pursuant to the said judgment are also
null and void, is proper.
In Padre v. Badillo, it was held that "[a] void judgment is no judgment at all. It
cannot be the source of any right nor the creator of any obligation. All acts
performed pursuant to it and all claims emanating from it have no legal
effect." [40]
Necessarily, it follows that the nullity of the Writ of Execution carries with it the
nullity of all acts done which implemented the writ. This includes the garnishment
of Php 2,676,140.70 from PNB's account. Its return to PNB's account is but a
necessary consequence of the void writ.
Similarly, the nullity of the Order dated August 17, 2006, [41] which cancelled
PNB's fourteen (14) titles and directed the issuance of new titles to Spouses
Perez, has the effect of annulling all the fourteen (14) titles issued in the name of
Spouses Perez. The titles should revert back to PNB.
The argument that the subject properties were sold to certain innocent
purchasers for value cannot stand. First of all, such allegation is a question of

fact, not a question of law. Time and again, this Court has pronounced that the
issues that can be raised in a petition for review on certiorari under Rule 45 are
limited only to questions of law. [42] The test of whether the question is one of law
or of fact is whether the appellate court can determine the issue raised without
reviewing or evaluating the evidence, in which case, it is a question of law;
otherwise, it is a question of fact. [43]
Furthermore, it is settled that matters not raised in the trial court or lower courts
cannot be raised for the first time on appeal. "They must be raised seasonably in
the proceedings before the lower courts. Questions raised on appeal must be
within the issues framed by the parties; consequently, issues not raised before
the trial court cannot be raised for the first time on appeal." [44] Spouses Perez
never raised this issue before the CA. Hence, they cannot raise it before this
Court now.
WHEREFORE, the petition in G.R. No. 187640 is GRANTED. The Decision of
the Court of Appeals (CA) in CA-G.R. SP No. 96534 dated October 23, 2008
is AFFIRMED with the MODIFICATION that the July 5, 2006 Decision of the
Regional Trial Court of Isabela in Civil Case No. 20-1155 isNULLIFIED and SET
ASIDE, the titles issued to Spouses Angelito Perez and Jocelyn Perez by virtue of
the aforesaid August 17, 2006 Order and all derivative titles emanating thereon
are cancelled and declared null and void and directing the Register of Deeds of
Isabela to issue new certificates of title in the name of the Philippine National
Bank (PNB) to replace the fourteen (14) titles previously issued to Spouses
Angelito and Jocelyn Perez pursuant to the August 17, 2006 Order and for
Spouses Angelito and Jocelyn Perez to pay to PNB the amount of PhP
2,676,140.70 representing the amount garnished from PNB's account with
Equitable PCI Bank (EPCIB) by virtue of the August 15, 2006 Writ of Execution
issued pursuant to the July 5, 2006 Decision.
As modified, the CA Decision shall read:
WHEREFORE, in view of the foregoing, the petition is GRANTED. The following
orders and writ issued by the Regional Trial Court of Isabela in Civil Case No. 201155 are declared null and void:
a. Order dated March 8, 2006 which allowed the presentation of [Spouses
Perez's] evidence ex parte;
b. Order of Execution dated August 14, 2006;
c. Writ of Execution dated August 15, 2006;

d. Order dated August 16, 2006 which denied PNB's application for
TRO/preliminary injunction; and
e. the Order of August 17, 2006 which annulled PNB's fourteen (14) titles
and directed issuance of new titles to herein private respondents;

The July 5, 2006 Decision of the Isabela RTC is nullified and set aside.
The fourteen (14) new titles issued to Spouses Angelito Perez and Jocelyn Perez
by virtue of the August 17, 2006 Order and all derivative titles issued therefrom
are declared null and void and cancelled. The Register of Deeds of Isabela are
directed to cancel said titles issued to Spouses Perez and issue new certificates of
titles in the name of Philippine National Bank (PNB) which shall contain a
memorandum of the annulment of the outstanding duplicate certificates issued to
said spouses.
Spouses Angelito Perez and Jocelyn Perez are ordered to pay PNB the amount of
P2,767,140.70 representing the amount illegally garnished from PNB's account
with Equitable PCI Bank (EPCIB) by virtue of the August 15, 2006 writ of
execution with interest thereon at six percent (6%) per annum from August 15,
2006 up to the finality of judgment and at twelve percent (12%) per annum from
the date of finality of judgment until paid.
The trial court is directed to conduct further proceedings in Civil Case No. 201155 with dispatch.
HELD: The petition in G.R. No. 187687 is DENIED for lack of merit.No costs.
Before Us are two Petitions for Review on Certiorari under Rule 45 docketed
as G.R. No. 187640and G.R. No. 187687, seeking the review of the Decision
and Resolution of the Court of Appeals (CA) dated October 23, 2008 and April 28,
2009, respectively, in CA-G.R. SP No. 96534. We consolidated the two cases as
they involve identical parties, arose from the same facts, and raise interrelated
issues.

The Facts
In 1988, spouses Angelito Perez and Jocelyn Perez (Spouses Perez) obtained a
revolving credit line from Philippine National Bank's (PNB's) branch in Cauayan
City, Province of Isabela. The credit line was secured by several chattel
mortgages over palay stocks inventory and real estate mortgages over real
properties.

Sometime in 2001, Spouses Perez defaulted on their financial obligations,

prompting PNB to institute extra-judicial foreclosure proceedings over the
aforementioned securities on November 13 of that year. On November 19, 2001,
the sheriff instituted a Notice of Extra-Judicial Sale for the mortgaged properties
by public auction on December 20, 2001.
Meanwhile, on November 26, 2001, Spouses Perez filed an Amended Complaint
for Release or Discharge of Mortgaged Properties, Breach of Contract, Declaration
of Correct Amount of Obligation, Injunction, Damages, Annulment of Sheriff's
Notice of Extra-Judicial Sale, with a Prayer for the Issuance of a Preliminary
Mandatory Injunctive Writ and a Temporary Restraining Order docketed as Civil
Case No. 20-1155. [1]
At the hearing of the application for the issuance of a writ of preliminary
mandatory injunction on April 19, 2002, Spouses Perez and their counsel failed to
appear. As a result, the prayer for injunctive relief was denied.
Similarly, at the pre-trial conference scheduled on September 19, 2002, Spouses
Perez and their counsel again failed to appear. Spouses Perez alleged that they
previously filed a Motion for Postponement dated August 28, 2002. On the same
date, the trial court issued an Order denying the Motion for Postponement and,
accordingly, dismissed the case.
Spouses Perez then filed a Motion for Reconsideration which was subsequently
denied. They also filed a Second Motion for Reconsideration dated January 16,
2003 which was also denied by the trial court.
After this, Spouses Perez filed a Notice of Appeal. It was also denied by the trial
court in an Order dated April 11, 2003 for being filed out of time. Spouses Perez
then filed a Motion for Reconsiderationdated April 29, 2003 seeking the
reconsideration of the Order dismissing the appeal.
The Motion for Reconsideration dated April 29, 2003 was originally set for hearing
on July 30, 2003. However, Spouses Perez filed five (5) motions to postpone the
hearing. The trial court granted the first four (4) motions but denied the fifth one.
Spouses Perez filed a Motion for Reconsideration of the Order denying the
fifth Motion for Postponement which was also subsequently denied.
Consequently, Spouses Perez appealed the denial of their Motion for
Reconsideration to the CA. The petition was docketed as CA-G.R. SP No. 85491.
On January 25, 2005, the CA rendered a Decisiondenying the petition filed by
Spouses Perez. It reasoned:

Neither did respondent court gravely abuse its discretion in resolving to dismiss
Civil Case No. 20-1155 for failure of the plaintiffs and their time, allegedly
because their counsel had to attend a pre-trial hearing in another case. True is it
that procedural rules may be relaxed to relieve a litigant of an injustice not
commensurate with the degree of his noncompliance with the procedure required.
But equally true is it that the law mandates that the appearance of parties at the
pre-trial conference is mandatory. Here, as borne out by the records of this case,
counsel for petitioners received the notice of pre-trial conference in another case
a long while before they were notified of the pre-trial conference in the case at
bench. As shown in the notice dated August 15, 2002, counsel already knew that
the pre-trial conference in the present case was set for September 19, 2002. By
the time he received the notice of pre-trial hearing in the case at bench on
August 22, 2002, counsel thus must have seen and realized the obvious conflict
in schedules between the two cases. However, instead of taking timely measures
to prevent an impending snafu, it took counsel more than a week to file a motion
for postponement of the pre-trial conference in Civil Case No. 20-1155. Worse,
although received by respondent court on September 3, 2002, that motion did
not contain any request that said motion be scheduled for hearing. Equally
distressing, it is not clearly shown that the requirement on notice to the other
party was likewise complied with. Counsel evidently failed to take into account
the fact that, just like him, the court must need also to calendar its own cases.
Further, as stressed by respondent court in its challenged order of September 19,
2002, petitioners' counsel works for a law firm staffed by several lawyers, and
any of these lawyers could have represented petitioners at the pre-trial
conference in this case. That counsel had to allegedly appear in another case
(which purportedly explained his inability to appear in the present case) is a
stale, banal, and prosaic excuse. Some such flimsy ratiocination, added to
counsel's filing of an erroneous pleading (the second motion for reconsideration),
which because it is a prohibited pleading, unfortunately did not toll the running of
the prescriptive period for filing a notice of appeal, did prove fatal to petitioner's
cause. Settled is the rule that parties are bound by the action or inaction of their
counsel; this rule extends even to the mistakes and simple negligence committed
by
their
counsel.
Simply put, petitioners trifled with the mandatory character of a pre-trial
conference in the speedy disposition of cases. Petitioners should have known that
pre-trial in civil actions has been peremptorily required these many years. It is a
procedural device intended to clarify and limit the basic issues between the
parties and paves the way for a less cluttered trial and resolution of the case. Its
main objective is to simplify, abbreviate and expedite the trial, or, propitious
circumstance permitting (as when the parties can compound or compromise their
differences), even to totally dispense with it altogether. Thus, it should never be

taken

lightly

or

for

granted!

party

trifles

with

it

at

his

peril.

UPON THE VIEW WE TAKE OF THIS CASE, THUS, the petition at bench must be,
as it hereby, is DENIED and consequently DISMISSED, for lack of merit. Costs
shall
be
assessed
against
the
petitioners.
SO ORDERED.
7. Purpose of mediation
Case: Sandoval Shipyard vs. PMMA
In this Petition for Review on Certiorari1 under Rule 45, petitioners come before
us seeking a reversal of the Decision2 dated 26 February 2009 and
Resolution3 dated 06 July "2009 of the Court of Appeals (CA) in CA-G.R. CV No.
88094. The CA Decision partly granted the appeal of petitioners by deleting the
attorney's fees awarded to respondent by the Regional Trial Court, Branch 146,
Makati City (RTC) in Civil Case No. 99-052.4 The CA Resolution denied their
Motion for Reconsideration of its Decision.5chanroblesvirtualawlibrary
Philippine Merchant Marine Academy (respondent) entered into a Ship Building
Contract (contract) with Sandoval Shipyards, Inc. through the latter's agent,
Rimport Industries, Inc. (petitioners) on 19 December 1994. The contract states
that petitioners would construct two units of 9.1 0-meter lifeboats (lifeboats) to
be used as training boats for the students of respondent. These lifeboats should
have 45-HP Gray Marine diesel engines and should be delivered within 45
working days from the date of the contract-signing and payment of the
mobilization/organization fund. Respondent, for its part, would pay
petitioners P1,685,200 in installments based on the progress accomplishment of
the work as stated in the contract.6chanroblesvirtualawlibrary
As agreed upon, respondent paid petitioners P236,694.00 on 08 March 1995 as
mobilization fund for the lifeboats; P504,947.20 on 15 March 1995 for its first
progress billing; and P386,600.00 on 25 March 1995 as final payment for the
lifeboats.7 On 10 August 1995, Angel Rosario (Rosario), a faculty member of
respondent who claimed to have been verbally authorized by its president,
allegedly received the lifeboats at the Philippine Navy Wharf in good order and
condition.8chanroblesvirtualawlibrary
In November 1995, respondent sent an inspection team to where the two
lifeboats were docked to check whether the plans and work specifications had
been complied with. The team found that petitioners had installed surplus Japan-

made Isuzu C-240 diesel engines with plates marked "Isuzu Marine diesel engine"
glued to the top of the cylinder heads instead of the agreed upon 45-HP Gray
Marine diesel engines; that for the electric starting systems of the engines, there
was no manual which was necessary in case the systems failed; and that the
construction of the engine compartment was not in conformity with the approved
plan. For these reasons, respondent's dean submitted a report and
recommendation to the president of petitioners stating the latter's construction
violations and asking for rectification.
Consequently, a meeting was held between representatives of respondent and
petitioners on 01 December 1995. The latter were reminded that they should
strictly comply with the agreed plan and specifications of the lifeboats, as there
were no authorized alterations thereof. Petitioners were also advised to put into
writing their request for an extension of time for the delivery of the lifeboats.9 In
compliance, they wrote a letter dated 18 December 1995, requesting an
extension of time for the delivery, from 01 December 1995 to January
1996.10chanroblesvirtualawlibrary
On 18 July 1996, the Commission on Audit (COA), through its technical audit
specialist Benedict S. Guantero (Guantero), conducted an ocular inspection of the
lifeboats. His report indicated that the lifeboats were corroded and deteriorating
because of their exposure to all types of weather elements; that the plankings
and the benches were also deteriorating, as they were not coated with fiberglass;
that the lifeboats had no mast sails or row locks installed on the boats; that the
installed prime mover was an Isuzu engine, contrary to the agreed plans and
specifications; and that the lifeboats had been paid in full except for the 10
percent retention.11chanroblesvirtualawlibrary
Despite repeated demands from respondent, petitioners refused to deliver the
lifeboats that would comply with the agreed plans and specifications. As a result,
respondent filed a Complaint for Rescission of Contract with Damages against
petitioners before the RTC,12 and trial ensued.
The RTC in its Decision13 dated 10 April 2006 held that although the caption of
the Complaint was "Rescission of Contract with Damages," the allegations in the
body were for breach of contract. Petitioners were found to have violated the
contract by installing surplus diesel engines, contrary to the agreed plan and
specifications. Thus, petitioners were made jointly and severally liable for actual

damages in the amount of P1,516,680 and were awarded a penalty of one

percent of the total contract price for every day of delay. The RTC also directed
petitioners to pay P200,000 as attorney's fees plus the costs of suit, because
their unjustified refusal to pay respondent compelled it to resort to court action
for the protection and vindication of its rights. It also ruled that petitioners were
estopped from questioning respondent's noncompliance with mediation
proceedings, because they nevertheless actively participated in the trial of the
case.14chanroblesvirtualawlibrary
As a result, petitioners brought an ordinary appeal to the CA via Rule 41.15 They
opined that the RTC committed reversible errors when it ruled that, first, the case
was one for breach of contract and not for rescission; second, when it did not
dismiss the case as a sanction for respondent's deliberate failure to attend the
mediation session; third, when it found that petitioners had not fully complied
with their obligations in the contract; and fourth, when it awarded attorney's fees
without explanation.16chanroblesvirtualawlibrary
The CA ruled that petitioners indeed committed a clear substantial breach of the
contract, which warranted its rescission. Rescission requires a mutual restoration
of benefits received. However, petitioners failed to deliver the lifeboats; their
alleged delivery to Rosario was invalid, as he was not a duly authorized
representative named in the contract. Hence, petitioners could not compel
respondent to return something it never had possession or custody of.
Nonetheless, the CA deleted the award of attorney's fees, as it found that the
RTC failed to cite any specific factual basis to justify the
award.17chanroblesvirtualawlibrary

Additionally, documentary and testimonial evidenced proffered by both parties

established that the lifeboats remained docked at Navotas in the possession of
petitioners.23chanroblesvirtualawlibrary
Hence, this Rule 45 Petition before us. Petitioners rehash the arguments they
posited before the CA with the additional contention that the judge who wrote the
Decision was not present during the trial and did not have the advantage of
firsthand assessment of the testimonies of the witnesses. For this reason, the
Court should reconsider Rosario's testimony and progress report, as well as the
delivery receipt for the lifeboats. We required respondent to comment, 24 which it
did.25 Thereafter, petitioners filed their Reply.26chanroblesvirtualawlibrary
The issues brought before us by petitioners are as
follows:chanroblesvirtualawlibrary
I. Whether a factual review is warranted, considering that the trial judge who
penned the Decision was different from the judge who received the evidence of
the parties;cralawlibrary
II. Whether the case is for rescission and not damages/breach of
contract;cralawlibrary
III. Whether failure to attend mediation proceedings warrants a dismissal of the
case.
We deny the Petition.

Dissatisfied, petitioners filed a Motion for Reconsideration18 dated 20 March 2009,

arguing that respondent had agreed to substitute engines of equivalent quality in
the form of surplus engines that were not secondhand or used, but were rather
old stock kept in their warehouse.19 Furthermore, they asserted that the
acceptance of the lifeboats was implied by the act of respondent's president, who
christened them with the names MB Amihan and MB
Habagat.20chanroblesvirtualawlibrary

In a Rule 45 Petition, parties may only raise questions of law, because this Court
is not a trier of facts.27 Generally, this court will not review findings of fact of
lower courts, unless the case falls under any of the following recognized
exceptions:chanroblesvirtualawlibrary

In its Resolution21 dated 06 July 2009 the CA denied petitioners' Motion, ruling
that the fact that the engines installed were different from what had been agreed
was a breach of the specifications in the contract.22chanroblesvirtualawlibrary

(2) When the inference made is manifestly mistaken, absurd or

impossible;cralawlibrary

(1) When the conclusion is a finding grounded entirely on speculation, surmises

and conjectures;cralawlibrary

(3) Where there is a grave abuse of discretion;cralawlibrary

(4) When the judgment is based on a misapprehension of facts;cralawlibrary
(5) When the findings of fact are conflicting;cralawlibrary
(6) When the Court of Appeals, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both appellant and
appellee;cralawlibrary
(7) When the findings are contrary to those of the trial court;cralawlibrary
(8) When the findings of fact are conclusions without citation of specific evidence
on which they are based;cralawlibrary
(9) When the facts set forth in the petition as well as in the petitioners' main and
reply briefs are not disputed by the respondents; and
(10) When the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on
record.28chanroblesvirtualawlibrary
The fact that the trial judge who penned the Decision was different from the one
who received the evidence is not one of the exceptions that warrant a factual
review of the case. Petitioners cannot carve out an exception when there is none.
We have already addressed this matter in Decasa v. CA,29 from which we
quote:chanroblesvirtualawlibrary
x x x we have held in several cases that the fact that the judge who heard the
evidence is not the one who rendered the judgment; and that for the same
reason, the latter did not have the opportunity to observe the demeanor of the
witnesses during the trial but merely relied on the records of the case does not
render the judgment erroneous. Even though the judge who penned the decision
was not the judge who heard the testimonies of the witnesses, such is not
enough reason to overturn the findings of fact of the trial court on the credibility
of witnesses. It may be true that the trial judge who conducted the hearing would
be in a better position to ascertain the truth or falsity of the testimonies of the
witnesses, but it does not necessarily follow that a judge who was not present

during the trial cannot render a valid and just decision. The efficacy of a decision
is not necessarily impaired by the fact that its writer only took over from a
colleague who had earlier presided at the trial. That a judge did not hear a case
does not necessarily render him less competent in assessing the credibility of
witnesses. He can rely on the transcripts of stenographic notes of their testimony
and calibrate them in accordance with their conformity to common experience,
knowledge and observation of ordinary men. Such reliance does not violate
substantive and procedural due process of law.30 (Citations omitted)
Petitioners also claim that the CA erred in upholding the RTC's substitution of
respondent's cause of action from rescission to breach of contract. Had it not
done so, then it would have merely ordered mutual restoration of what each of
them received the two lifeboats in exchange for P1,516.680.
The RTC did not substitute the cause of action. A cause of action is an act or
omission which violates the rights of another.31 In the Complaint before the RTC,
the respondent alleged that petitioners failed to comply with their obligation
under the Ship Building Contract. Such failure or breach of respondent's
contractual rights is the cause of action. Rescission or damages are part of the
reliefs.32Hence, it was but proper for the RTC to first make a determination of
whether there was indeed a breach of contract on the part of petitioners; second,
if there was a breach, whether it would warrant rescission and/or damages.
Both the RTC and the CA found that petitioners violated the terms of the contract
by installing surplus diesel engines, contrary to the agreed plans and
specifications, and by failing to deliver the lifeboats within the agreed time. The
breach was found to be substantial and sufficient to warrant a rescission of the
contract. Rescission entails a mutual restitution of benefits received.33 An injured
party who has chosen rescission is also entitled to the payment of
damages.34 The factual circumstances, however, rendered mutual restitution
impossible. Both the RTC and the CA found that petitioners delivered the lifeboats
to Rosario. Although he was an engineer of respondent, it never authorized him
to receive the lifeboats from petitioners. Hence, as the delivery to Rosario was
invalid, it was as if respondent never received the lifeboats. As it never received
the object of the contract, it cannot return the object. Unfortunately, the same
thing cannot be said of petitioners. They admit that they received a total amount
of P1,516,680 from respondent as payment for the construction of the lifeboats.
For this reason, they should return the same amount to respondent.

Petitioners are likewise mistaken in their assertion that the trial court should have
dismissed the Complaint for respondent's failure to attend the mediation session.
In Chan Kent v. Micarez,35 in which the trial court dismissed the case for failure of
the plaintiff and her counsel to attend the mediation proceedings, this Court
held:chanroblesvirtualawlibrary
To reiterate, A.M. No. 01-10-5-SC-PHILJA regards mediation as part of pre-trial
where parties are encouraged to personally attend the proceedings. The personal
non-appearance, however, of a party may be excused only when the
representative, who appears in his behalf, has been duly authorized to enter into
possible amicable settlement or to submit to alternative modes of dispute
resolution. To ensure the attendance of the parties, A.M. No. 01-10-5-SC-PHILJA
specifically enumerates the sanctions that the court can impose upon a party who
fails to appear in the proceedings which includes censure, reprimand, contempt,
and even dismissal of the action in relation to Section 5, Rule 18 of the Rules of
Court. The respective lawyers of the parties may attend the proceedings and, if
they do so, they are enjoined to cooperate with the mediator for the successful
amicable settlement of disputes so as to effectively reduce docket congestion.
Although the RTC has legal basis to order the dismissal of Civil Case No. 13-2007,
the Court finds this sanction too severe to be imposed on the petitioner where

the records of the case is devoid of evidence of willful or flagrant disregard of the
rules on mediation proceedings. There is no clear demonstration that the absence
of petitioner's representative during mediation proceedings on March 1, 2008 was
intended to perpetuate delay in the litigation of the case. Neither is it indicative of
lack of interest on the part of pe.titioner to enter into a possible amicable
settlement of the case.36 (Citations omitted)
Here, there was no finding that the absence of respondent was in willful or
flagrant disregard of the rules on mediation, that the absence was intended to
effect a delay in litigation, or that respondent lacked interest in a possible
amicable settlement of the case. In fact, the CA found that all efforts had been
exerted by the parties to amicably settle the case during the pretrial.37 Thus,
RTC's nondismissal of respondent's Complaint was but appropriate.
WHEREFORE, in view of the foregoing, we DENY the Petition for Review
on Certiorari dated 21 August 2009 and AFFIRM the Decision dated 26 February
2009 and Resolution dated 06 July 2009 of the Court of Appeals in CA-G.R. CV
No. 88094.