dismissal of actions

8/3/2019 Dismissal of Actions

1/25

Dismissal of ActionsRule 17By Plaintiff

Through choice, Rule 17, Sec. 1Section 1. Dismissal upon notice by plaintiff.

A complaint may be dismissed by the plaintiff by filing a notice of

dismissal at any time before service of the answer or of a motion for

summary judgment. Upon such notice being filed, the court shall issue

an order confirming the dismissal. Unless otherwise stated in the

notice, the dismissal is without prejudice, except that a notice

operates as an adjudication upon the merits when filed by a plaintiff

who has once dismissed in a competent court an action based on or

including the same claim.

International Container Terminal Services v. C.A.,214 SCRA 456 (1992)

What is the effect of the dismissal of a complaint ordered at the instance of thedefendant upon a compulsory counterclaim duly raised in its answer?

FACTS-Private respondent SHARP filed a complaint for prohibition with prayer forpreliminary injunction vs. Sec of Transportation and Communications, PPA,E. Razon Inc., and ICTS-tc:vissued WPI after SHARP issued a bond-ANSWER + COMPULSORY COUNTERCLAIM for unfounded and frivolous action

-WPI nullified. SHARP WAS NOT A PROPER PARTY TO STOP THE NEGOTIATION ANDAWARDING OF THE CONTRACT FOR THE DEVELOPMENT, MANAGEMENT ANDOPERATION OF THE CONTAINER TERMINAL AT MANILA PORT + premature: Sharp hasnot exhausted admin remedies-PPA filed MTD based on NOT A PROPER PARTY + FAILURE TO EXHAUST ADMINREMEDIES, MTD adopted by CCTSI-TC: DISMISSED complaint + counterclaim-CCTSI filed MFR for dismissal of counterclaim. DENIED. Compulsory counterclaim sodismissal of the 1st case, the subject matter of which gives rise to the compulsorycounterclaim, should also be dismissed.-CCTSI appealed. (1) actual damages claimed in CCounterclaim ARE NOTRECOVERABLE vs bond; (2) manifestation adopting PPAs MTD did not contain anyreservation; (3) R57.20..

H: DENY PETITIONRatio. We have consistently held that a counterclaim is compulsory where: (1) itarises out of, or is necessarily connected with, the transaction or occurrence that isthe subject matter of the opposing party's claim; (2) it does not require for itsadjudication the presence of third parties of whom the court cannot acquire

jurisdiction; and (3) the court has jurisdiction to entertain the claim.*The counterclaim was not permissive. A counterclaim is permissive if it does notarise out of nor is it necessarily connected with the subject matter of the opposingparty's claim. It is not barred even if not set up in the action. 3 The petitioner'scounterclaim was within the jurisdiction of the trial court. Most importantly, it had noindependent existence, being merely ancillary to the main action. 4 The petitionerknew all this and did not object to the dismissal of the complaint. On the contrary, itactually moved to dismiss that main action, and in so doing also moved, in effect,for the dismissal of its counterclaim.

Reasoning. Tested by these requirements, the petitioner's counterclaim wasclearly compulsory. The petitioner itself so denominated it. There is no doubt thatthe same evidence needed to sustain it would also refute the cause of actionalleged in the private respondent's complaint; in other words, the counterclaimwould succeed only if the complaint did not. It is obvious from the very natureof the counterclaim that it could not remain pending for independentadjudication, that is, without adjudication by the court of the complaintitself on which the counterclaim was based.

Rule 17. Sec. 2

Sec. 2. Dismissal by order of the court. Except as provided in the precedingsection, an action shall not be dismissed at the plaintiff's instance save upon orderof the court and upon such terms and conditions as the court may deem proper. If acounterclaim has been pleaded by a defendant prior to the service upon him of theplaintiff's motion to dismiss, the action shall not be dismissed against thedefendant's objection unless the counterclaim can remain pending for independentadjudication by the court. Unless otherwise specified in the order, a dismissal underthis paragraph shall be without prejudice.

The Court notes that, to begin with, the petitioner itself joined the PPA in moving forthe dismissal of the complaint; or put passively, it d id not object to the dismissal ofthe private respondent's complaint. Secondly, the compulsory counterclaim was sointerwined with the complaint that it could not remain pending for independentadjudication by the court after the dismissal of the complaint which had provokedthe counterclaim in the first place. As a consequence, the dismissal of the complaint

(on the petitioner's own motion) operated to also dismiss the counterclaimquestioning that complaint.

The petitioner is correct in contending that the claim for damages caused by thewrongful issuance of a preliminary injunction can be made in the form of acounterclaim. However, it was the petitioner itself which caused the dismissal of itscounterclaim WHEN IT DID NOT OBJECT TO (AND ACTUALLY MOVED FOR) THEDISMISSAL OF THE COMPLAINT.

Failure to prosecute (non-suited), Rule 17, Sec. 3; Rule 18, Sec. 5

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 complywith 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.

Sec. 5. Effect of failure to appear.

The failure of the plaintiff to appear when so required pursuant to the

next preceding section shall be cause for dismissal of the action. The

dismissal shall be with prejudice, unless otherwise ordered by the

court. A similar failure on the part of the defendant shall be cause to

allow the plaintiff to present his evidence ex parte and the court to

render judgment on the basis thereof.

1


2/25

CONRADO CALALANG v. CA [FILIPINAS MANUFACTURERS BANK]G.R. No. 103185

CAMPOS, JR; January 22, 1993

NATURE:Certiorari

FACTS- On April 29, 1980, FM Bank filed a complaint for collection of a sum of moneyagainst Conrado Calalang, Hugo M. Arca, Rio Arturo Salceda and the Acropolis

Trading Corporation with the CFI of Rizal, 7th Judicial District, Branch 36, Makati

under Judge Segundo M. Zosa.- Calalang, after having been served with summons on May 19, 1980, filed a MTDon June 2, 1980. The other summoned defendant, Hugo M. Arca, filed a Motion forBill of Particulars on June 5, 1980. The two other defendants namely, the Acropolis

Trading Corporation and Rio Arturo Salceda were also summoned but only a clerk-employee of the Acropolis Trading Corporation received the summons while ArturoR. Salceda was no longer residing at his given address.- Over a year after, the Motion for Bill of Particulars was granted on August 24, 1981by Judge Zosa. Meanwhile, the MTD filed by Calalang was left unresolved. The lastpleading filed regarding the MTD was the reply of Calalang to the opposition to theMTD by FM Bank which was filed on August 5, 1980.- BP Blg. 129 was passed and subsequently approved by then Pres. Marcos.- November 27, 1981, Arca filed a MTD which necessitated the filing of variouspleadings in relation thereto by FM Bank, and Arca.- May 25, 1983, a hearing was scheduled under Judge Dela Pea of the Makati RTC,

Br. 134. But then, the case was transferred to the Makati RTC Br. 150, presided overby Judge Puno who DENIED the motions for lack of merit and ordered the movantsto file their answers to the Complaint within the reglementary period.- On October 3, 1986, Alcala and Associates entered its appearance as counsel forFM bank.- On October 30, 1985, Arca filed his answer with compulsory counterclaim to thecomplaint which was received by FM bank's former counsel, Emerito M. Salva andAssociates on November 4, 1985.- It appears that this case has been set several times for pre-trial (November 29,1985, January 29, 1986, May 12,1986, November 19, 1986, January 14, 1987 andFebruary 27, 1987):* For the first two scheduled hearings, respondent bank's counsel failed to appearcausing the dismissal without prejudice of the case (set aside upon respondentbank's motion for reconsideration of the dismissal)* The November 19, 1986 hearing was transferred to January 14, 1987 upon

agreement by both counsels.* For the last two scheduled dates counsel for the defendant Hugo Arca failed toappear.- J. Puno was replaced by J. Alikpala, Jr. as the presiding judge of the Makati RTC,issued an Order:1. Informing the plaintiff that it shall not consider Acropolis Trading Corporation ashaving been properly brought under the jurisdiction of this Court in view of theimproper service of summons on said corporation.2. Directing the plaintiff to inform the Court, within 10 days from its receipt hereof,what steps plaintiff intends to take with respect to the said two defendants so thatthe Court will know whether plaintiff is still interested in the prosecution and/oroutcome of this case.3. To send a copy of the Order dated August 8, 1985 (denying MTD) to defendantConrado T. Calalang through his counsel of record.4. The pre-trial conference was cancelled until further assignment or until any of the

parties shall make the appropriate steps in connection therewith.

- The Order was received by petitioner's counsel on March 13, 1987.- On March 17, 1987, FM bank, in response to that Order filed a manifestationstating that:1. It is very much interested in prosecuting the complaint against the defendantsAcropolis Trading and Salcedo;2. Pursuant to this, counsel has requested the Credit Investigation Department ofplaintiff to verify the correct address of said defendants including all necessary factsfor the proper service of summons on them;3. Upon verification, plaintiff will then move for the issuance of Alias Summons onthe said defendants.

- Thereafter, Calalang MTD the complaint on the ground that respondent bankfailed to prosecute the case for an unreasonable length of time.- RTC issued another Order stating that if plaintiff shall still be unable to causeservice of alias summons on the said defendants within thirty (30) days fromplaintiff's receipts hereof, then this Court will dismiss the complaint as against saiddefendants and proceedings herein shall be limited to the defendants on whomsummons had been served as of the lapse of said 30-days' period.- Thereafter, on May 8, 1987, respondent bank moved for the issuance of aliassummons on defendant Acropolis Trading Corporation through its President/DirectorConrado T. Calalang or through its director Hugo M. Arca.- J. Angeles of the Makati RTC, Branch 58, to whom the case was assigned after J.Alikpala, Jr., then issued an Order, dated July 16, 1987, denying the MTD filed bypetitioner for lack of merit. The motion for alias summons was granted. Entry ofappearance of Atty. Crisostomo J. Danguilan as counsel for respondent bank wasnoted in the same order.

- Petitioner then filed his answer only on November 10, 1987.- RTC issued an Order setting the pre-trial of the case for January 7, 1988 at 8:30a.m.- At the pre-trial conference, FM bank's counsel arrived 15 minutes late or at 8:45a.m. The case had already been dismissed. Thus, in the Order of January 7, 1988,the court declared that for failure of plaintiff's counsel to appear inspite of noticeand considering that this case has been pending for 7 years, without plaintiff havingtaken positive steps to prosecute the same, it is hereby DISMISSED pursuant toR.17.3, RoC. Defendants' counterclaim is likewise dismissed.- On January 12, 1988, counsel for the FM bank filed a MFR of the order of dismissalciting as reason for his late arrival "the unusually heavy traffic he encounteredalong Kamias Road in Quezon City, which was caused by a stalled jeepney along themain thoroughfare." w/c was denied. The respondent bank appealed the dismissal.-On October 25, 1991, the CA set aside the Order of the RTCdated January 9, 1988dismissing this case and its Order dated January 26, 1988 denying reconsideration

of the first order and ordered the case remanded to the court of origin for furtherproceedings.- CA denied the petitioners MFR.

ISSUES1. WON the Court erred in declaring the January 7, 1988 pre-trial as premature2. WON the Court erred in absolving the respondent bank for failing to prosecute

HELD1.A pre-trial cannot validly be held until the last pleading has been filed, which last

pleading may be the plaintiff's reply, except where the period to file the lastpleading has lapsed.The pre-trial conference scheduled for January 8, 1987 was not premature. Theperiod to appear and file the necessary pleading having expired on the Acropolis

Trading Corporation, the lower court can direct that a pre-trial conference be held

among the answering defendants. However, though it is within the discretion of the2


3/25

trial court to declare a party non-suited for non-appearance in the pre-trialconference, such discretion must not be abused. The precipitate haste of the lowercourt in declaring the respondent bank non-suited was uncalled for and deserved asecond look. Considering the fact that the counsel for the plaintiff/respondent bankdid arrive for the pre-trial conference, though a bit late and that counsel for thedefendant was himself also late, the trial court should have called the case again. Anadmonition to both counsels to be more prompt in appearing before the Court asscheduled would have sufficed, instead of having dismissed the complaint outright.Unless a party's conduct is so negligent, irresponsible, contumacious, or dilatory asto provide substantial grounds for dismissal for non-appearance, the courts should

consider lesser sanctions which would still amount into achieving the desired end.Inconsiderate dismissals, even if without prejudice, do not constitute a panacea nora solution to the congestion of court dockets; while they lend a deceptive aura ofefficiency to records of individual judges, they merely postpone the ultimatereckoning between the parties. In the absence of clear lack of merit or intention todelay, justice is better served by a brief continuance, trial on the merits, and finaldisposition of the cases before the court.And there is authority that an order dismissing a plaintiff's complaint withoutprejudice for failure of his counsel to appear at a pre-trial conference must bereversed as too severe a sanction to visit on a litigant where the record is devoid ofevidence reflecting the litigant's willful or flagrant disregard for the Court'sauthority.

2. The seven-year delay is not attributable to the respondent bank alone but tocircumstances beyond its control. The acts of the respondent bank do not manifest

lack of interest to prosecute, in the absence of proof that it indeed abandoned orintended to abandon its case against petitioner and the other defendants.Admittedly there was delay in this case, but such delay is not the delay warrantingdismissal. To be a sufficient ground for dismissal, delay must not only be lengthy butalso unnecessary and dilatory resulting in the trifling of judicial processes.Citing Marahay vs. Melicor[test for dismissal of a case due to failure to prosecute] towit:While a court can dismiss a case on the ground of non prosequitur, the real test forthe exercise of such power is whether, under the circumstances, plaintiff ischargeable with want of due diligence in failing to proceed with reasonable

promptitude. In the absence of a pattern or scheme to delay the disposition of thecase or a wanton failure to observe the mandatory requirement of the rules on the

part of the plaintiff, as in the case at bar, courts should decide to dispense withrather than wield their authority to dismiss.

Dismissal of a case for failure to prosecute is a matter addressed to the sounddiscretion of the court. That discretion, however, must not be abused. Thus, courtsmay not enter a dismissal which is not warranted by the circumstances of the case.

The availability of this recourse must be determined according to each case'sprocedural history, situation at the time of the dismissal and whether, and under thecircumstances of the particular case, the plaintiff is chargeable with want of duediligence in failing to proceed with reasonable promptitude.

Dispositive: Petition is DISMISSED. CAs decision and Resolution are bothAFFIRMED.

By Court, Rule 17, Sec. 2

Sec. 2. Dismissal upon motion of plaintiff.

Except as provided in the preceding section, a complaint shall not be

dismissed at the plaintiff's instance save upon approval of the court

and upon such terms and conditions as the court deems proper. If a

counterclaim has been pleaded by a defendant prior to the service upon

him of the plaintiff's motion for dismissal, the dismissal shall be

limited to the complaint. The dismissal shall be without prejudice to

the right of the defendant to prosecute his counterclaim in a separate

action unless within fifteen (15) days from notice of the motion he

manifests his preference to have his counterclaim resolved in the same

action. Unless otherwise specified in the order, a dismissal under this

paragraph shall be without prejudice. A class suit shall not be

dismissed or compromised without the approval of the court.

Dismissal of Counterclaims et.al., Rule 17, Sec. 4

Sec. 4. Dismissal of counterclaim, cross-claim, or third-party

complaint.

The provisions of this Rule shall apply to the dismissal of any

counterclaim, cross-claim, or third-party complaint. A voluntary

dismissal by the claimant by notice as in section 1 of this Rule, shall

be made before a responsive pleading or a motion for summary judgment

is served or, if there is none, before the introduction of evidence at

the trial or hearing.

Effect of DismissalMeliton v. C.A. (ZIGA), 216 SCRA 485 (1992)

G.R. No. 101883

REGALADO; December 11, 1992

NATUREAppeal by Certiorari

FACTS- 1ST CASE, June 22, 1988 : private respondent Nelia Ziga (ZIGA) filed a complaintwith the RTC of Naga City against herein petitioner Lydia Meliton (MELITON) forrescission of a contract of lease over a parcel of land situated at Elias AngelesStreet, Naga City, on the following grounds:

MELITONs failure, as lessee, to deposit the one month rental and to paythe monthly rentals due;

her construction of a concrete wall and roof on the site of a demolishedhouse on the leased premises without the lessor's written consent;

and her unauthorized sublease of the leased property to a third party.

- COUNTERCLAIM,

July 29, 1988: MELITON filed an answer to the complaintdenying the material averments thereof and setting up three counterclaims forrecovery of the following values:- demolished kitchenette: P 34,000; improvements: P 10,000; furniture and fixtures:P 23,000; Moral damages: P 20,000; Attorneys fees: P 5,000 (plus P250/appearance); Litigation costs: P1,000.- May 29, 1989: RTC dismissed the complaint, on motion of respondent ZIGAcontending that her cause of action had already become moot and academic by theexpiration of the lease contract on February 7, 1989.- MELITONs counterclaims were also dismissed for non-payment of docket fees, theRTC holding they did not acquire jurisdiction over them.- 2ND CASE, December 6, 1989 : MELITON filed a complaint in the RTC against ZIGAfor recovery of the same amounts involved and alleged in their counterclaims in theprevious case.

3


4/25

- ZIGA filed a motion to dismiss the complaint on the ground that the cause of actiontherein was barred by prior judgment in the first case, the order of dismissal whereinwas rendered on May 29, 1989.- RTC denied the ground that the dismissal of the petitioner's counterclaims in notan adjudication on the merits as the court did not acquire jurisdiction over thecounterclaims for failure of MELITON to pay the docket fees, hence the saiddismissal does not constitute a bar to the filing of the later complaint.- ZIGAs MFR was denied, hence this appeal on Certiorari.

ISSUE(S)

1. WON the counterclaims of petitioners are compulsory in nature;2. WON petitioners, having failed to seek reconsideration of or to take an appealfrom the order of dismissal of their counterclaims, are already barred fromasserting the same in another action.

HELD1. YESRatio Where multiple claims involve many of the same factual issues, or where theyare offshoots of the same basic controversy between the parties, fairness andconsiderations of convenience and of economy require that the counterclaimant bepermitted to maintain his cause of action.Reasoning- A counterclaim is compulsory if:(a) It arises out of, or is necessarily connected with, the transaction or occurrencewhich is the subject matter of the opposing party's claim;

(b) it does not require for its adjudication the presence of third parties of whom thecourt cannot acquire jurisdiction; and(c) the court has jurisdiction to entertain the claim.- The one compelling test to determine if a counterclaim is compulsory or not isthe logical relationship between the claim alleged in the complaint and that in thecounterclaim, that is, where conducting separate trials of the respective claims ofthe parties would entail a substantial duplication of effort and time, as where theyinvolve many of the same factual and/or legal issues.- A counterclaim is logically related to the opposing party's claim where, as alreadystated, separate trials of each of their respective claims would involve a substantialduplication of effort and time by the parties and the courts.- In the first case, all the requisites of a compulsory counterclaim are present. Thecounterclaims, as this term is now broadly defined, are logically related to thecomplaint.- ZIGAs complaint was for rescission of the contract of lease due to petitioner

MELITONs breach of her obligations under the said contract. On the other hand,petitioner's counterclaims were for damages for unlawful demolition of theimprovements she introduced pursuant to her leasehold occupancy of the premises,as well as for the filing of that civil suit which is contended to be clearly unfounded.- Both the claims therein of petitioners and private respondent arose from the samecontract of lease. The rights and obligations of the parties, as well as their potentialliability for damages, emanated from the same contractual relation. The two actionsare but the consequences of the reciprocal obligations imposed by law upon andassumed by the parties under their aforesaid lease contract. That contract of leasepleaded by private respondent constitutes the foundation and basis relied on byboth parties for recovery of their respective claims.NOTE:- In actions for ejectment or for recovery of possession of real property, it is wellsettled that the defendant's claims for the value of the improvements on the

property or necessary expenses for its preservation are required to be interposed in

the same action as compulsory couterclaims.

2. NO, petitioners are not barred.RatioReasoning- Section 4, Rule 9 of the Rules of Court does not apply to the case at bar.- MELITONs claims were duly set up as counterclaims in the prior case but the samewere dismissed by reason of non-payment of docket fees.- Where a compulsory counterclaim is made the subject of a separate suit, it may beabated upon a plea ofauter action pendantor litis pendentia and/or dismissed onthe ground ofres judicata, depending on the stage or status of the other suit.

NOT LITIS PENDENTIA- There is no other pending case between the same parties for the same cause.

NOT RES JUDICATA- The first case was dismissed upon motion of ZIGA, under Section 2 of Rule 17.Dismissal thereunder is without prejudice, except when otherwise stated in themotion to dismiss or when stated to be with prejudice in the order of the court. Theorder of dismissal of the first case was unqualified, hence without prejudice and,therefore, does not have the effect of an adjudication on the merits.- In the same order of dismissal of the complaint, the counterclaims of MELITONwere dismissed by reason of the fact the court a quo had not acquired jurisdictionover the same for non-payment of the docket fees. On that score, the said dismissalwas also without prejudice.- Secondly, a reading of the order of dismissal will show that the trial court, in

dismissing the complaint of private respondent, did not intend to prejudice theclaims of petitioners by barring the subsequent judicial enforcement thereof. Asstated therein, "(t)he court in dismissing the counterclaim(s) has taken into accountthe fact that a counterclaim partakes of the nature of a complaint and/or a cause ofaction against the plaintiffs."- In dismissing private respondent's complaint, the trial court could not but havereserved to petitioners, as a condition for such dismissal, the right to maintain aseparate action for damages.- The act of ZIGA in demolishing the structures introduced by petitioners on theproperty leased and the improvements therein during the existence of the leasecontract is a clear violation by her, as lessor, of her obligation mandated byparagraph 3, Article 1654 of the Civil Code. The said violation gave rise to a cause ofaction for damages in favor of MELITON.- Even assuming arguendo that the bar under the rule on compulsory counterclaimsmay be invoked, the peculiar circumstances of this case irresistibly and justifiedly

warrant the relaxation of such rule.- The failure of petitioners to seek reconsideration of or to take an appeal from theorder of dismissal of the counterclaim should not prejudice their right to file theirclaims in a separate action because they were thereby made to understand andbelieve that their counterclaims were merely permissive and could be the subject ofa separate and independent action. Under the Rules, there is no need to pay docketfees for a compulsory counterclaim. The ruling in Manchester appliesspecifically to permissive counterclaims only, thereby excludingcompulsory counterclaims from its purview.- This is one case where it is necessary to heed the injunction that the rules ofprocedure are not to be applied in a rigid and technical sense. After all, rules ofprocedure are used only to help secure substantial justice.

DISPOSITIVEJudgment of the CA is reversed and set aside. The civil case is reinstated and the

RTC is ordered to proceed with deliberate dispatch to adjudicate.4


5/25

DBP v. Pundagor218 SCRA 118 (1993)

Romero, 1993NATURESpecial Civil Action for Certiorari

FACTS-1955, RA 1396 was enacted authorizing National Shipyards and SteelCorporation (NASSCO) to establish a pig-iron smelting plant. NASSCO

negotiated with US EXIMBANK for a $62.3 M Loan and the latter suggested that themanagement of the project be placed in the hands of the private sector. After apublic bidding,JACINTO STEEL, INC (JSI) was entrusted the implementation of theproject. ILIGAN STEEL MILLS, INC (IISMI) was incorporated with the Jacintos andthe Government (through GSIS, SSS, and NASSCO).-RP, IISMI and EXIMBANK entered into an agreement whereby EXIMBANK wouldprovide funds, then IISMI and RP entered into a collateral agreement whereby RPcommitted to extend equity and non-equity funds to IISMI during the constructionperiod, including P34M. pursuant to a 2ND COLLATERAL AGREEMENT, DBP grantedIISMI additional loans which were secured by real and chattel mortgages over IISMIsassets. IISMI DEFAULTED IN THEIR LOANS.-(1st case: Civil Case 1701)To forestall foreclosure, IISMI instituted an injunctionsuit vs. RP, DBP, CB, BOI, and the Sheriff of Lanao del Norte and IliganCity, alleging that its inability to meet its obligations was due to RPs violations ofits commitments to the Integrated Steel Project which were all done to take over the

management and ownership of IISMI or its properties, plants, or mills.-PI was issued. DBP questioned PI. MTD of RP and BOI (improper venue + non-suability of the State) denied so they also questioned denial of MTD. Courtconsolidated.-pending these cases, Marcos issued Proclamation 1801 DECLARING MARTIAL LAW.He issued 4 letters of instructions directing the Secretary of National Defense to takeover and control the operation of IISMI and other Jacinto-held companies: acts ofIISMI management indicated that IISMI disposed of property by fraudulent meansand that the funds or money earned was not properly accounted for(IISMIALLEGEDLY USED THE FUNDS LOANED TO IT THROUGH THE GOVERNMENT TOSUPPORT THE OTHER JACINTO BUSINESSES)-Court ordered the proceedings to proceed in the 1st case.LC: Lower court then ordered the WPI to be dissolved:1. HELD THERE WAS MISMANAGEMENT: IISMI officials diverted its profits to other

Jacinto-controlled corporations especially to FERRO PRODUCTS INC (FERRO), its

known marketing instrumentality and biggest single buyer, which led to its failure tomeet its different due and demandable obligations to DBP.HOW MISMANAGEMENT: (1) unrealistic pricing scheme: while floating exchangerate jacked up the cost of materials by 50%, selling price of goods sold to FERROonly 25%, FERRO resold goods at prices higher than 30% = additional gross profitsof 5%; (2) gave FERRO extraordinarily long credit terms; (3) unduly postponingFERROs payments2. there were attempts to hide these corporate malpractices by WINDOWDRESSING of the financial statements and records of IISMI and the Jacinto-controlled corporations: understating profits to create impression of losses, paintingfavorable but unreal cash position on the part of IISMI, creating ostensibly favorableasset position3. Rejected claim of IISMI that its failure was due to the floating exchange rate: IISMIcould only claim a loss of P51.9M due to floating rate (ONLY BEFORE FEB 1970):after June 1970, price adjustments could and should have been instituted by IISMI

and IISMI failed to use the proceeds of disposition of processed raw materials to

liquidate its accounts which had ballooned to P40.7M. Since DBP is the guarantor, itassumed payments due to IISMI creditors!4. IISMI cannot pin the blame for delay in payments on alleged delay in the releaseof DBP, SSS and GSIS funds as IISMIs obligations arose from subsequent rawmaterial importations guaranteed by DBP INCURRED BY IISMI AFTER DBP, SSS, ANDGSIS HAD RELEASED THEIR RESPECTIVE FUNDS TO IISMI.-after finality of ORDER, DBP filed an application for extra-judicial foreclosureof IISMI mortgages. Public sale of IISMI plant and assets done, DBP highestbidder. No redemption so DBP consolidated ownership.-(2nd Case)14 YEARS FROM CONSOLIDATION OF OWNERSHIP, IISMI, Fernando

Jacinto and Jacinto Steel Inc filed a COMPLAINT VS. DBP, NDC, DSC praying forthe nullification of the extra-judicial foreclosure in favor of DBP + notice oflis pendens-DBP et al filed MTDs: (1) lack of jurisdiction, (2) failure to state a COA, (3)prescription; (4) res judicata-IISMI filed AMENDED COMPLAINT; MTDs adopted. NSC filed MOTION TOCANCEL NOTICE OF LIS PENDENS opposed by IISMILC: DENIED MTDS. MFRs denied.

I. Procedural Ground: Propriety of Petition for Certiorari for assailingINTERLOCUTORY ORDERSIISMI: proper remedy is to file in the lower court an ANSWER interposing as defensesthe objections raised in the MTD >>> proceed to trial >>>adverse action: Elevateby appealDBP et al: EXCEPTION TO THE RULE: no appeal nor any other plain, speedy and

adequate remedy*H: For DBP: AN EXCEPTION: certiorari becomes available in order to relieve thedefendant of the trouble of undergoing the ordeal and expense of a useless trial.Rghtfully entitled to recourse as it is part of the supervisory authority of the Court tocorrect the error committed. + Order denying MTDs coated the Jacinto claim witha misleading veneer of plausibility which is obstructing and causing inevitabledelays in (i) the government's and NDC's plans to privatize NSC at the earliestpossible time and under optional conditions generating the maximum returns forNDC, the country and the Filipino people; (ii) NSC's Integrated Steel Mill Project and(iii) the development of the nation's steel industry as well as the country'sindustrialization both of which have already suffered an incalculable fall due toIISMI's ruin masterminded and engineered by Jacinto and his family

II. Substantive GroundsA. Res Judicata

DBP: Final Orders in 1st

case (Civil Case for injunction) bar 2nd

case (nullification ofextra-judicial foreclosure) which questions the same DBP foreclosure upon thevery same claim that FORECLOSURE WAS FRAUDULENT: IISMI DEFAULTEDON ITS LOANS DUE TO GSIS-SSS-DBP-CB CONSPIRACY. Only differentiatedin relief: PROSPECTIVE (threatened DBP foreclosure) vs. RETROSPECTIVE(foreclosure be annulled)IISMI: NO RES JUDICATA: NO JUDGMENTS ON THE MERITS, NO IDENTITY OF COA*H: THERE IS RES JUDICATAELEMENTS:a) the former judgment must be final: contested orders ARE FINAL, no MFR norAPPEALb) the court which rendered it had jurisdiction over the subject matter and theparties: CFI Lanao del Norte had jurisdiction over injunction case as subject propertyis located w/n its territorial jurisdiction.c) it must be a judgment on the merits: considered not only evidence for preliminary

injunction but also additional evidence presented to prove mismanagement;5


6/25

DISMISSAL OF COMPLAINT W/PREJUDICE for failure to appear during the pre-trialdespite due notice (had effect of adjudication upon the merits)d) there must be, between the first and second actions, identity of parties, subjectmatter and causes of action: 1st case filed by IISMI vs. RP, BOI, CB, and DBP. 2nd casefiled by IISMI, Fernando Jacinto and JSI vs. DBP, NDC, NSC. For res judicata to apply,absolute identity of partiesIDENTITY OF PARTIES: 1st case: complaint was filed by IISMI vs. RP, BOI, CB and DBP;2nd Case: IISMI, Fernnado Jacinto and JSI vs. DBP, NDC, NSC (for res judicata toapply, absolute identity of parties is not required because substantialidentity of parties is sufficient. Inclusion of additional parties will not

affect the application of the principle of res judicata.SUBJECT MATTER: both IISMICOA: test of identity of causes of action lies, not in the form of the action,but on whether the same evidence would support and establish the formerand the present causes of action. 1st case: for injunction vs. 2nd case: fornullification of foreclosure proceedings (which was sought to have been prevented inthe 1st case. Theory of IISMI is that foreclosure should be prevented (and nowannulled) as DB P has violated its financial commitments to IISMI and that itconspired with other agencies of the government to cause the latters financial ruin.So same evidence to prove this allegation, which is the basis of both actions.-as to claim of IISMI that amended complaint added several allegations which werenot present in the complaint for injunction: the additional allegations may becategorized into 3: those after filing of 1 st case (declaration of Martial Law, of LOI 27,detention of some of the officers, the cancellation of Jacinto Familys passports,withdrawal of IISMI counsel; 2nd as re: foreclosure; 3rd developments after EDSA

revolution. CFI, when it resumed hearing, was expected to settle not onlyallegations in the complaint, but even those that developed during the pendency ofthe 3 petitions. 1ST CASE DISMISSED FOR FAILURE TO PROSECUTEAND JUDGMENTIS NOT LIMITED ONLY TO THE ALLEGATIONS OF THE COMPLAINT! Additionalallegations can no longer be raised for the 2 nd time as res judicata now operates.R39.49: IN OTHER CASES THE JUDGMENT/ORDER IS, W/RESPECT TO THEMATTER DIRECTLY ADJUDICATED OR AS TO ANY OTHER MATTER THATCOULD HAVE BEEN RAISED IN RELATION THERETO, CONCLUSIVE BETWEENTHE PARTIES AND THEIR SUCCESSORS IN INTEREST BY THE SUBSEQUENTCOMMENCEMENT OF THE ACTION OR SPECIAL PROCEEDING, LITIGATINGFOR THE SAME THING AND UNDER THE SAME TITLE AND IN THE SAMECAPACITY.

B. JURISDICTIONDBP: LC has no jurisdiction to annul ORDERS of same level court (annulment not in

the prayer but implicitly, this would be the effect)IISMI: LC has jurisdiction as this involves reconveyance of real property*H: NO JURISDICTION! If the prayers would be granted, the resultant effect would beto annul the findings of mismanagement made in the CFIs Order and to re-litigatethe same claims which has been earlier dismissed with prejudice. Reconveyance isbut the inevitable consequence once the Orders are annulled.

C. PRESCRIPTIONDBP: 14 y has passed from Order sought to be annulled: 4 yrs if based on Tort, 10y ifbased on constructive trust. BOTH LAPSEDIISMI: prescriptive period SUSPENDED BY MARTIAL LAW = force majeure.Prescriptive period should only begin to run February 25, 1986. + Action seeks torecover immovable property so 30y prescriptive period.Jacinto Familys passports were cancelled (while they were in abroad so theycannot go back), all their resources were taken by Govt; lawyers constrained to

withdraw their appearances; incarceration of executives of IISMI

*H: TAN v. CA, NDC v. CA: martial law is not force majeure: sweeping statement,should be case to case-ruling that martial law prevented Jacintos from pursuing their case would have theeffect of removing from Jacintos the burden of proving why they were unable topresent their case/prosecuteJacintos were not able to prove REFUGEE STATUSON DISSENTING OPINION: Presumes that GOVT acted in arbitrary and unfairmanner when it is not proven yet: centered on DUE PROCESS-Jacintos already ABROAD even before Martial Law: they had opportunity to beheard through their lawyers (they filed 1 st case through their lawyers). HOWEVER,lawyers manifested for leave to withdraw from representation because THEY HAVELOST CONTACT WITH THEIR CLIENTS. They cannot continue their services whentheir client, who has all the resources to continue the case, is not contacting them.-Jacintos had it in their power to remedy the situation! AFTER THEIR COUNSELS HADWITHDREW, THEY SHOULD HAVE ENGAGED THE SERVICES OF OTHER LAWYERS TOREPRESENT THEM before the CFI case.-as to the cancellation of their passports, etc., it was dismissed in the earlier case soit cannot be raised again.-on CONSTRUCTIVE TRUST: constructive trust only when the property is acquiredthrough mistake or fraud. BUT NO MISTAKE OR FRAUD ON PART OF DBP: IISMI failedto pay DBP so DBP foreclosed the assets mortgaged to it.

D. FAILURE TO STATE A COADBP: no COA as Jacintos and JSI were mere stockholders of IISMI, which, as acorporation having a personality distinct and separate from its stockholders, is the

proper party to institute the sameIISMI: derivative suit on behalf of IISMI.*H: THERES A COA! Before a derivative suit can be filed, the stockholder or memberbringing the suit must first exhaust his remedies within the corporation, i.e., hemust have made a demand on the directors or trustees to sue and the latter musthave either failed or refused to do so. This demand, however, is not necessarywhere it would be futile to make it. No demand on the board of directors hereBECAUSE THE BOARD OF DIRECTORS WAS ALREADY DISSOLVED AND NOELECTIONS FOR IT WAS HELD.

****However, a finding that a complaint states a cause of action does not imply thatthe complainant is assured of a ruling in his favor. While a motion to dismiss basedon failure of the complainant to state a cause of action necessarily carries with it theadmission, for purposes of the motion, of the truth of all material facts pleaded inthe complaint, 56 what is submitted for determination therein is the sufficiency of

the allegations in the complaint. 57 Corollarily, the denial of a motion to dismissdoes not necessarily resolve the issues raised in the complaint in favor of thecomplainant inasmuch as, after the trial, the defendant might prove to have a betterright to the subject matter in litigation.Moreover, a motion to dismiss may be based on only one of the groundsenumerated in Sec. 1, Rule 16 of the Rules of Court. That the petitioners were ableto prove the presence of three of the four grounds they raised, viz., res judicata,lack of jurisdiction and prescription, more than warrants the reversal of the Orderbelow denying the petitioners' motion to dismiss.

III. INCIDENTAL ISSUES:A. TERMINATION OF COUNSEL OF DBP-OSGs services was terminated by DBP after OSG agreed that takeover and salewas LEGALLY FLAWED! So ok lang daw sabi ng courtB. TRO

6


7/25

IISMI claims 51% of IISMIs assets theirs but was unable to substantiate claim. DBPalleged it was only 1.1% of the shares. TRO should be lifted

Vallanga v. C.A.,173 SCRA 42 (1989)

Involved in this appeal by certiorari from a decision ** of the Court of Appeals, is acontroversy over possession of a parcel of land, the proper resolution of which calls

for a determination of the ownership thereof.

The more than eleven (11) hectares of agricultural land in dispute is located inBuguey, Cagayan, originally registered on 28 December 1936 in the name of "Heirsof Esteban Billena", and covered by Original Certificate of Title (OCT) No. 1648. In1940, said certificate of title was cancelled and, in lieu thereof, Transfer Certificateof Title (TCT) No. 1005 was issued in the name of Maximiniana Crisostomo and AnaBillena, wife and daughter, respectively of the deceased Esteban Billena. Each of thethen new owners owned an undivided one-half (1/2) portion of, or interest in theland.

Maximiniana Crisostomo died during the Japanese occupation, leaving behind heronly child Ana Billena, then married to Fortunato Vallangca with whom she had three(3) children, namely, Benjamin, Rodolfo and Alfredo, all surnamed Vallangca who arethe petitioners herein.

According to the petition at bar, the following events led to the present controversy:

Upon Fortunato Vallangca's death in 1944, his widow Ana Billena, together with hereldest son Benjamin, went to Centro, Buguey, Cagayan and mortgaged the land indispute to her cousin Nazario Rabanes (private respondent herein) for Eight HundredPesos (P800.00) in Japanese war notes, to cover the burial expenses of her deceasedhusband Fortunato Vallangca. There being no notary public in the place at the time,the agreement was not reduced to writing. At the time of said mortgage of the landto Nazario Rabanes, the land was already mortgaged to the Philippine National Bank(PNB), said first mortgage having been executed on 16 November 1940, andannotated on said TCT No. 1005.

After the Pacific war, Nazario Rabanes went to the residence of Ana Billena on 2February 1946 and made the latter sign a document which Rabanes represented to

Ana Billena as a mortgage contract written in the Ilocano dialect. Billena, being anilliterate and trusting in her cousin (Rabanes), affixed her signature on the documentin the space indicated to her.

In that same year, 1946, Billena was informed by a cousin of Rabanes and anotherwitness to the document that the alleged mortgage contract which she had signedwas actually a deed of absolute sale to Rabanes of the land covered by TCT No.1005. Ana Billena and her son Benjamin, thereupon, went to Rabanes' place for thepurpose of redeeming the land and actually tendered to him the loan amount ofP800.00, this time, in genuine and legal Philippine currency. However, Rabanes toldthem that the land could no longer be redeemed and he drove them out of hishouse.

Since Ana Billena and her three (3) sons were in possession and actual cultivation ofthe land in question, Rabanes filed against them on 7 July 1971 an injunction suit

before the Court of First Instance of Cagayan (Civil Case No. II-14). 1 At the pre-trialof said injunction suit, plaintiff Rabanes was advised by the trial court that injunctionwas not the proper cause of action, because injunction was merely an ancillary orprovisional remedy to a main action. On 11 September 1972, another complaintentitled "Recovery of Possession" (Civil Case No. II-39) 2 was lodged by Rabanesbefore the same court against the same defendants in the action for injunction. Two(2) days later, or on 13 September 1972, the action for injunction was ordereddismissed by the trial court. The order of dismissal reads as follows:

"O R D E R

"As prayed for, the above-entitled case is hereby dismissed.

"SO ORDERED." 3

Respondent Nazario Rabanes (later substituted by his heirs) had another version ofthe events. According to him, Ana Billena knowingly signed a deed of absolute salein his favor on 2 February 1946 as she had actually sold and not merely mortgagedthe land in controversy for P800.00. Rabanes alleged that from then on, his tenants,Serapio dela Cruz and Fernando Gagmante, cultivated the land, until they weredriven out by the three (3) sons of Ana Billena sometime in 1962.

After trial in the second action involving recovery of possession, the Court of FirstInstance of Cagayan, on 24 September 1976, rendered judgment declaring plaintiffRabanes (herein respondent) as the rightful owner of the land and ordered the

defendants (herein petitioners) to vacate the same. 4 The trial court reasoned thus". . . . The only witness of the defendants to prove this vital point is their co-defendant Benjamin Vallangca who is a son of Ana Villena [sic]. He testified that hewas only 14 years old when his mother signed the document under the allegedinfluence of the plaintiff. He also signed it as a witness. With that tender age, wedoubt if he understood the meaning or difference between a mortgage and a sale ofreal property, so how can he say now that his mother was influenced into signingExhibit 'F'. He did not say how Nazario Rabanes influenced his mother. He merelystated that Nazano Rabanes was his uncle, being the cousin of his mother. Theywere not living in the same house and there is no evidence that he was giving themmoney, food or in any manner supporting them so as to exercise influence over her.He did not state the nature of the influence exerted over his mother, whether it wasmoral, physical, spiritual or religious. So the court is at a loss to see how this undueinfluence over his mother existed.

xxx xxx xxx

". . . . The testimonies of Serapio de la Cruz and Fernando Dagmante are strongerand more convincing than the lone testimony of Benjamin Vallangca. . . . ."

The decretal part of the judgment reads

"WHEREFORE, judgment is hereby rendered in favor of the p laintiff and against thedefendants and ordering the defendants to leave the land in question, referring tothe parcel of land described in paragraph 2 of the complaint and declaring hereinthe plaintiff as the rightful owner of said parcel of land; 2) Ordering the defendantsto pay the plaintiff the amount of P640.00 corresponding to the value of the owner'sshare of the land for four (4) years and to pay the costs."

7


8/25

From the above judgment, the defendants appealed to the Court of Appeals 5 wherethe appeal was docketed as CA-G.R. No. 61133-R. On 18 September 1980, theappellate court rendered judgment, affirming in toto the trial court's judgment, afterfinding no reversible error therein.

Hence this petition. 6

Petitioners, invoking the rule on "res judicata," contend that the dismissal of the"Injunction" case filed on 7 July 1971 by Rabanes against them, barred the filing byRabanes against them of the second action for "Recovery of Possession." Petitionersmaintain that the first suit, although styled as for "Injunction", had for its actualprimary purpose the recovery of the land in dispute and, therefore, after itsdismissal, no other action for recovery of possession of the same land and againstthe same parties (herein petitioners) could be pursued by the same complainant(Rabanes). In this connection, petitioners would stress the fact that the dismissal ofthe suit for injunction was not made without prejudice.

It is also petitioners' contention that the respondent's complaint for injunction hadalready prescribed, before its filing on 7 July 1971, under Section 40 of Act 190,which provides that:

"Sec. 40. Period of Prescription as to real estate ---- An action for recovery of title to,or possession of real property, or an interest therein, can only be brought within 10years after the cause of such action accrues."

According to petitioners, from the date private respondent claims to have boughtthe land, that is, 2 February 1946, more than ten (10) years had elapsed whenRabanes filed on 7 July 1971 his action for injunction which, in effect, was an actionfor recovery of possession of the disputed land. Hence, the action was barred byprescription.

It is further urged by petitioners that it was not likely that their mother Ana Billenawould consent to sell the land to Rabanes for only Eight Hundred (P800.00) Pesos,for the entire eleven (11) hectares, forty one (41) areas and thirty three (33)centares comprising its total area, considering that the land was then assessedalready at Two Thousand Six Hundred Twenty (P2,620.00) Pesos as indicated in TaxDeclaration No. 7957. 7 And, even assuming arguendo that there was indeed a sale,petitioners postulate that since the land is registered in the name of bothMaximiniana Crisostomo and Ana Billena, the latter could not outrightly dispose ofthe undivided one-half share of the former (Crisostomo), without first accomplishing

an affidavit of adjudication of Crisostomo's interest or share, and registering saidaffidavit of adjudication.

During this appeal before the Court, Nazario Rabanes died in 1982. An order for hissubstitution by his legal heirs was issued.

The heirs of private respondent Rabanes in turn aver, among others, that the Courtof Appeals was correct in finding petitioners' reliance on res judicata as untenable.We sustain the Rabanes heirs on this point.

In an impressive line of cases, 8 the requisites for res judicata have long beenestablished. They are: (a) that there be an earlier final judgment; (b) that the courtwhich rendered it had jurisdiction over the subject matter and the parties; (c) that itis a judgment on the merits; and (d) that there is between the first and the secondactions, identity of parties, subject matter and causes of action.

When the issue of res judicata is raised, at least two (2) actions before a competentcourt are necessarily involved; one, still pending and the other, already decided withfinality. It is the final judgment that ends the controversy and precludes a re-litigation of the same causes of action.

Coming to the case at bar, it is to be noted that the first action for injunction wasfiled on 7 July 1971, while the second action for recovery of possession was filed on11 September 1972. The order of dismissal of the injunction suit was issued on 13September 1972. The defense of res judicata was invoked by herein petitioners (asdefendants) in their "Answer" dated 6 November 1972 in the action for Recovery ofPossession. 9 Given the abovementioned dates, it is clear that, while the Injunctionsuit had not yet been disposed of with finality when the second action was filed, yet,at the time the defendants interposed res judicata as an affirmative defense in their"Answer" in the second action, the order of dismissal in the injunction case hadalready become final. The dismissal order assumed the character of finality, therebeing no showing that there was an appeal of the order when the "Answer" in thesecond action was filed on 6 November 1972.

The Court of Appeals in holding that the date of the filing of the second complaintdetermines whether or not there existed at that time a prior final judgment,overlooked the date when res judicata was actually set up as a defense in thesecond action. The latter date may also be a proper determining point. In otherwords, when the law says that a prior final judgment is a requisite for res judicata tovalidly apply as a defense, it may refer to a judgment that has become final andexecutory before the second action is instituted or to a judgment that has become

final and executory only after the second action is filed but before the defense isactually set up in the Answer.

Despite the above oversight, the ruling of the Court of Appeals is nonethelesscorrect when it held that the defense of res judicata was unavailing to thepetitioners, because the prior injunction suit against them, which was dismissed,was merely an ancillary and not a main action. Sections 1 & 3, Rule 58 of the Rulesof Court, provide:

"Sec. 1. Preliminary Injunction defined; classes. A preliminary injunction is anorder granted at any stage of an action prior to the final judgment, . . ."

"Sec. 3. Grounds for issuance of preliminary injunction ---- A preliminary injunctionmay be granted at any time after the commencement of the action and before

judgment, when it is established:

"xxx xxx xxx"

From the above provisions, it can be clearly deduced that a writ of injunctionpresupposes the pendency of a principal or main action. There being no main actionwhen the 7 July 1971 suit for injunction was filed, the latter was correctly dismissed.Accordingly, there could be no prior judgment on the merits to speak of thatresulted in res judicata, from such dismissal of the injunction suit on 13 September1972.

Petitioners would also like to impress that the dismissal order of 13 September1972, in the injunction suit, not having been made without prejudice, bars thesecond action for recovery of possession. Under Sec. 2, Rule 17 of the Rules of Courtwhich provides:

8


9/25

"Sec. 2. Dismissal by order of the court. Except as provided in the precedingsection, an action shall not be d ismissed at the plaintiffs instance save upon order ofthe court and upon such terms and conditions as the court deems proper. If acounterclaim has been pleaded by a defendant prior to the service upon him of theplaintiff's motion to dismiss, the action shall not be dismissed against thedefendant's objection unless the counterclaim can remain pending for independentadjudication by the court. Unless otherwise specified in the order, a dismissal underthis paragraph shall be without prejudice."

a dismissal order is generally deemed to be without prejudice to the filing of anotheraction. The only instance when dismissal of an action is with prejudice is, when theorder itself so states. Stated differently, when the court issues, upon the plaintiff'sinstance, a dismissal order that is silent as to whether it is with or without prejudice,such as in the case at bar, the presumption is, that it is without prejudice. The casescited 10 by petitioners to support their contention cannot be made to apply here asthey deal with dismissal orders issued as a result of plaintiff's failure to prosecute,and are covered by Section 3, and not Section 2, Rule 17 which provides:

"Sec. 3. Failure to prosecute. If plaintiff fails to appear at the time of the trial, orto prosecute his action for an unreasonable length of time, or to comply with theserules or any order of the court, the action may be dismissed upon motion of thedefendant or upon the court's own motion. This dismissal shall have the effect of anadjudication upon the merits, unless otherwise provided by court."

Dismissals of actions (under Section 3) which do not expressly state whether theyare with or without prejudice are held to be with prejudice or on the merits.

Next, the respondent Court of Appeals was correct in holding that the action forrecovery of possession of the land in question was timely filed, citing Art. 1141 ofthe Civil Code which provides that real actions over immovables prescribe afterthirty (30) years. Here, the Court of Appeals found that Rabanes was dispossessedby the petitioners in 1962, and the action for recovery of possession was filed on 11September 1972, or more or less ten (10) years after dispossession. 11

Coming now to the main issue as to who is the rightful owner of the property inquestion, the parties to this case have presented two (2) entirely different versionsof the antecedents. We will not weigh all over again the entire evidence, because ina petition for review, such as the case at bar, generally, this Court's duty is to acceptthe findings of fact of the Court of Appeals and pass only on questions of law.

The trial court and the Court of Appeals arrived at the conclusion that the deed ofsale of 2 February 1946 was indeed one of sale and not of mortgage. We, however,conclude differently. Under Art. 1602 and Art. 1604 of the Civil Code, a contract shallbe presumed to be an equitable mortgage in any of the following cases:

"Art. 1602

1) When the price of a sale with right to repurchase is unusually inadequate;

2) When the vendor remains in possession as lessee or otherwise;

xxx xxx xxx

"Art. 1604. The provisions of Art. 1602 shall also apply to a contract purporting tobe an absolute sale."

These articles embody decisional rules laid down even before the effectivity of theCivil Code (30 August 1950) so that it is of no moment that the 2 February 1946deed of sale was executed before the effectivity of the Civil Code. 12

There was gross inadequacy of price, because the land was sold for P800.00 inJapanese war notes at that, or for barely thirty percent (30%) of its total assessedvalue of P2,620.00. The Court can take judicial notice of the fact that real estate,including agricultural land, usually commands a market value much higher thanassessed value.

The other factor to consider is the continuous physical possession by the petitionersof the property for almost nine (9) long years, or from 1962 to the filing of theinjunction case by respondent Rabanes in 1971. Even assuming for the sake ofargument, as the Court of Appeals believed, that Rabanes acquired possession ofthe land thru his tenants in 1946 and continued such possession till 1962, whenthey were allegedly dispossessed by the petitioners, one nevertheless can notignore the unrefuted fact that, from 1962 until the filing of said injunction case in1971, it was the petitioners Vallangcas who were in actual and physical possessionof the property. Why did it take Rabanes nine (9) years more or less to take actionto recover possession of the property he claimed to have been forcibly andunlawfully taken from his tenants?

Apart from the foregoing considerations is still one fact that the trial court and theCourt of Appeals failed to appreciate. We refer to the fact that the land in disputewas acquired under a free patent in the year 1936 as shown on Transfer Certificateof Title No. 1005, its covering title, which states

"It is further certified that said land was originally registered on 28th day ofDecember, in the year nineteen hundred and thirty-six, in Registration Book No. 1-7,page 55, of the Province of Cagayan, pursuant to a Free patent granted by thePresident of the Philippines, on the 5th day of December, in the year nineteenhundred and thirty-six, under Act Nos. 2874 & 496." 13

Consequently, not to be ignored are the provisions of Act No. 2874 (an Act to amendand compile the laws relative to lands of the public domain) and Act No. 496 (TheLand Registration Act), which govern the said free patent.

Sections 116 and 117 of Act No. 2874 provide:

"Section 116. Lands acquired under the free patent or homestead provisions shallnot be subject to encumbrance or alienation from the date of the approval of the

application and for a term of five years from and after the date of issuance of thepatent or grant, nor shall they become liable to the satisfaction of any debtcontracted prior to the expiration of said period; . . ." 14

"Section 117. Every conveyance of land acquired under the free patent orhomestead provisions, when proper, shall be subject to repurchase by the applicant,his widow or legal heirs, for a period of five years from the date of the conveyance."15

Restrictions are thus imposed on the conveyance of patented lands within five (5)years from the date of the issuance of the free patent; the owner of the land isprecluded from subjecting the same to any encumbrance or alienation. After thelapse of five (5) years, such prohibition is lifted, but the owner-vendor is entitled torepurchase the property from the vendee within five (5) years from the date of theexecution of the deed of sale or conveyance.

9


10/25

Applying the foregoing rules in the instant case, it is to be noted that the free patentwas issued to the heirs of Esteban Billena on 5 December 1936. From this date anduntil 5 December 1941, any transfer, conveyance or alienation of the propertycovered by TCT 1005 was not allowed. Assuming then that what Ana Billena andNazario Rabanes actually agreed upon in 1944 was indeed a sale of the land, whichtransaction was formally put in writing on 2 February 1946, the said sale, while valid---- because it occurred after the period of five (5) years when sale was prohibited---- yet, the sale was subject to Billena's light to repurchase within five (5) yearsfrom 2 February 1946. For, notwithstanding the absence of any stipulation in thedeed of sale of the vendor's right to repurchase the land, Billena or her heirs aregranted such right by operation of law. The restrictions and qualifications attachedto every alienation of these lands are mandatory, with the primordial aim topreserve land grants to the family of the applicant for free patent. 16

Now, did Ana Billena repurchase in time the land in dispute? It is worth noting thatprivate respondents did not refute petitioners' averment that Billena, together withher son Benjamin, went to Rabanes' residence in 1946 to redeem the property andtendered to him (Rabanes) the amount of P800.00 in Philippine currency, but thelatter made a statement that the land could no longer be redeemed. By AnaBillena's act of tendering to Rabanes the P800.00, she had in effect exercised herright to repurchase. In fact, in Peralta, et al. vs. Alipio, 17 it was held that since thePublic Land Law is silent as to the form and manner in which the right to repurchasea homestead or land acquired under a free patent may be exercised, any act whichamounts to a demand for reconveyance should be sufficient.

In effect, if the 2 February 1946 deed was actually intended to evidence a sale ofthe disputed land, made by Ana Billena to Nazario Rabanes, as found by the trialcourt and the Court of Appeals, it was a sale with pacto de retro wherein title of thevendees-Rabanes to the property was to become absolute and irrevocable only uponthe failure of Billena or her heirs to repurchase the same within five (5) years from 2February 1946. As earlier stated, Billena exercised her right to repurchase the land,also in 1946, and her heirs are up to the present time in actual and physicalpossession of the land. With these as premises, it can be said that Rabanes' title tothe property remains to this date revocable and unconsolidated.

WHEREFORE, the appealed decision of the Court of Appeals in CA-G.R. No. 61133-Ris REVERSED and SET ASIDE. Petitioners may redeem the property covered by TCTNo. 1005 upon the return of the amount of Eight Hundred Pesos (P800.00) to privaterespondents, with interest at the rate of twelve percent (12%) per annum from 1

January 1962 until fully paid.

SO ORDERED.

DefaultsRule 9, Sec. 3Sec. 3. Default; declaration of.

If the defending party fails to answer within the time allowed

therefor, the court shall, upon motion of the claiming party with

notice to the defending party, and proof of such failure, declare the

defending party in default. Thereupon, the court shall proceed to

render judgment granting the claimant such relief as his pleading may

warrant, unless the court in its discretion requires the claimant to

submit evidence. Such reception of evidence may be delegated to the

clerk of court.

(a) Effect of order of default. - A party in default shall be entitled

to notice of subsequent proceedings but not to take part in the trial.

(b) Relief from order of default. - A party declared in default may at

any time after notice thereof and before judgment file a motion under

oath to set aside the order of default upon proper showing that his

failure to answer was due to fraud, accident, mistake or excusable

negligence and that he has a meritorious defense. In such case, the

order of default may be set aside on such terms and conditions as the

judge may impose in the interest of justice.

(c) Effect of partial default. - When a pleading asserting a claim

states a common cause of action against several defending parties, some

of whom answer and the others fail to do so, the court shall try the

case against all upon the answers thus filed and render judgment upon

the evidence presented.(d) Extent of relief to be awarded. - A judgment rendered against a

party in default shall not exceed the amount or be different in kind

from that prayed for nor award unliquidated damages.

(e) Where no defaults allowed. - If the defending party in an action

for annulment or declaration of nullity of marriage or for legal

separation fails to answer, the court shall order the prosecuting

attorney to investigate whether or not a collusion between the parties

exists, and if there is no collusion, to intervene for the State in

order to see to it that the evidence submitted is not fabricated.

Nature in General, Rule 9, Sec. 3, first parLim Tanhu v. Ramolete, 66 SCRA 425 (1975)

See previous notes under COMPULSORY JOINDER OF PARTIES

When allowed, Rule 9, Sec. 3 first par.Failure to answerPre Trial, Rule 18, Sec. 5, failure to appear

Sec. 5. Effect of failure to appear.

The failure of the plaintiff to appear when so required pursuant to the

next preceding section shall be cause for dismissal of the action. The

dismissal shall be with prejudice, unless otherwise ordered by the

court. A similar failure on the part of the defendant shall be cause to

allow the plaintiff to present his evidence ex parte and the court to

render judgment on the basis thereof.

Bayog v. Natino258 SCRA 378DAVIDE, July 5, 1996

NATURERule 65 Petition for Certiorari

FACTS-Bayog and Magdato entered into an AGRICULTURAL LEASEHOLD CONTRACT: Bayogas Landowner-Lessor and Magdato as Tenant. The contract commenced with cropyear 1975-1976. It expressly provided that matters NOT STIPULATED THEREIN wouldbe governed by RA 3844-1983: Marcos, pursuant to PD 27 and RA 3844 and PD 1425, issued a Certificate ofAgricultural Leasehold to Magdato, declaring the latter had complied with all therequirements to become the agricultural lessee. The Certificate provided that he

shall not be ejected from his farmholding EXCEPT when his disposition has been10


11/25

authorized by the proper court, that he shall have the right to peaceful possession ofthe farmholding, and shall have the right against conversion of the farmholding intoany non-agricultural use by the landowner.-1990: Bayog executed a DEED OF EQUITABLE MORTGAGE in favor of Pesayco, withright of redemption w/n 5yrs over 4 parcels of the land.-1992: Bayog wrote to Magdato, asking him to remove his house from the land as itwas said to be an obstacle to the cultivation of the land by the brother of theMortgagee Pesayco. As Magdato did not comply, Bayog and Pesayco filed with MCTCa COMPLAINT FOR EJECTMENT AND ABATEMENT OF NUISANCE WITH PRAYER FORDEMOLITION. MCTC declared case to be under Rules on Summary Procedure anddirected issuance of summons. Summons + Complaint served on Magdato on Jan11, 1993-Magdato had only until Jan22 to file his answer (10d) BUT filed his answer only onthe 25th, admitting Bayogs ownership but asserting that he was the agriculturallessee as evidenced by the Agricultural Leasehold Contact. Magdato also alleged asdefenses that court had no jurisdiction (agrarian dispute) and he had not been ableto cultivate the land because of Pesaycaos threats to shoot anyone who did so.-MCTC: Magdatos Answer was filed LATE. Allegedly under Section 5 of the Rule onSummary Procedure, the court rendered judgment in favor of Bayog, needless toresolve all pleadings subsequently filed. Order of Execution issued, commandingProvincial Sheriff to eject Magdato from parcel of land and to demolish and destroyMagdatos house.-Sheriffs Return of Service reported that Magdato was ejected, his house wasdemolished but monetary judgment not satisfied: Magdato refused to give theamount nor has he any real/personal property to be levied on-Magdato filed a PETITION FOR RELIEF FROM JUDGMENT WITH INJUNCTION + prayerto litigate as a pauper w/ RTC, alleging: (1) late filing was due to mistake orexcusable neglect (had pulmonary TB, illiteracy limited understanding of English sounaware of unextendible 10d period); (2) had good, valid and strong evidence tocounteract Bayogs claim if given a chance to be heard; (3) As MCTC judgmentpartly executed, he was bereft other avenues to protect his rights-Bayog filed a MTD: (a) lack of jurisdiction on the part of the RTC (prohibitedpleading under Rules on Summary Procedure + no affidavit of merit); (b) failure ofthe petition to state a cause of action (no statement of facts constituting FAMEN);and (c) prescription and/or laches (petition for relief from judgment should be filedw/n 60d after the petitioner learns of the judgment, and not more than 6m aftersuch judgment was entered). Magdato filed OPPOSITION TO MTD-Bayog filed another MTD: not with CNFS Magdato filed his Comment, Bayog filedReply to comment-RTC: denied ALL of Bayogs MTDs: (1) petition for relief from judgment norprohibited pleading under Rule of Summary Procedure (Jakihaca v. Aquino); theresa COA (tenant farmer entitled to protection against ejectment); (3) issue ofprescription must yield to the fact that there was violation of law; (4) Bayog andPesayco did not come to court with clean hands (did not reveal that Magdato is aholder of a certificate of agricultural leasehold; (5) MCTC should not havedisregarded Magdatos answer contesting MCTCs jurisdiction (6)Admin Circular 04-94 took effect before the filing of petition for relief from judgment so should not begiven retroactive effect. Bayogs MR DENIED

ISSUES1. WON the Answer belatedly filed by Magdato should have been given due courseby the MCTC2. WON the Petition for relief from judgment is not a prohibited ruling under RevisedRule on Summary Procedure (Jakihaca Ruling)

3. OBITER (not raised by Bayog) WON the RTC properly denied MTD then remandedthe case

HELD1. YES-Magdatos Answer, which asserts the lack of jurisdiction of the MCTC, though didnot automatically divest MCTC of jurisdiction, should still have been heard andreceived TO DETERMINE WON MCTC DID HAD JURISDICTION OVER THE CASE. Andupon such hearing, if tenancy was shown to be at issue, the MCTC should havedismissed the case for lack of jurisdiction. 38 Verily, if indeed MAGDATO were anagricultural lessee under agrarian law, then the MCTC was devoid of jurisdictionover the ejectment case.-There is nothing in BP 129, nor in the Revised Rule on Summary Procedure, thatprovides that an answer filed after the reglementary period should be expungedfrom the records. As a matter of fact, there is no provision for an entry of default if adefendant fails to file his answer. It must likewise be pointed out that MAGDATO'sdefense of lack of jurisdiction may have even be raised in a motion to dismiss as anexception to the rule on prohibited pleadings in the Revised Rule on SummaryProcedure.-Order of MCTC to remove Magdatos house before judgment becomes final andexecutory was obviously intended to render futile any appeal which Magdato couldinterpose pursuant to Section 21 of Revised Rule on Summary Procedure; Order wasa clear abuse of authority or misuse of the strong arm of the law. No demolition ofMAGDATO's house could have been validly effected on the day of service of theorder of execution. MAGDATO should have been afforded a reasonable period of thetime to remove his house, and only after he failed to comply within the given periodcould a demolition order have been issued by the court, pursuant to Section 14,Rule 39 of the Rules of Court.

2. No. Petition for Relief IS PROHIBITED (Section 19). But in this case,Petition for Relief should be allowed as an exception to the rule-Why prohibit: These petitions are cognizable by RTC AND NOT BY MTC, MTC ORMCTC. No petition for relief from judgment nor a special civil action of certiorari,prohibition, or mandamus arising from cases covered by the Revised Rule onSummary Procedure may be filed with a superior court. This is but consistent withthe mandate of Section 36 of B.P. Blg. 129 to achieve an expeditious andinexpensive determination of the cases subject of summary procedure.- in view of the unusual and peculiar circumstances of this case, unless some formof relief is made available to MAGDATO, the grave injustice and irreparable injurythat visited him through no fault or negligence on his part will only be perpetuated.

Thus, the petition for relief from judgment which he filed may be allowed or treated,pro hac vice, either as an exception to the rule, or a regular appeal to the RTC, oreven an action to annul the order (decision) of the MCTC-Also, Petition for Relief filed on time. Magdato ONLY learned of the Order

January 24, 1994 then filed petition for relief on February 9 the same year (15d fromtime he learned of judgment). Magdatos lawyer received the notice on October 1,1993 BUT DID NOT ACT ON IT so under what can be considered as the unusual andpeculiar circumstances of the case, Magdatos, notice to the irresponsible lawyer isnot considered notice to his clients. Moreover, the petition for relief from judgmentunder consideration, may even be considered as one for relief from the order ofexecution, which was filed within the reglementary period, inasmuch as Section 2of Rule 88, Revised Rules, does not only refer to judgments, but also toorders, or any other proceedings.-on 6m period: it had not even begun to run as the records do not disclose that theMCTC Order had been entered. R38.3 speaks of ENTRY of Judgment, not rendition

nor finality.11


12/25

-on absence of affidavit of merit: NOT FATAL, petition itself, under oath, recitesthe circumstances or facts which constitute the grounds for the petition. Such beingthe case, a separate affidavit reiterating the grounds already laid bare in the petitionwould be superfluous. Elsewise stated, the absence of the affidavit is of de minimisimportance, as the oath elevates the petition to the same category as the affidavit.

The petition may even be considered as Magdatos APPEAL-HOW TO SET ASIDE A FINAL AND EXECUTORY JUDGMENT: (1) by a petition forrelief from judgment under Rule 38; (2) when the judgment is void for want of

jurisdiction, by direct action, as certiorari, or by collateral attack; and (3) when thejudgment was obtained by fraud and Rule 38 cannot be applied, by civil action underArticle 1114 of the Civil Code. The fraud must be extrinsic or collateral. In the instantcase, the unconscionable failure of MAGDATO's lawyer to inform MAGDATO of hisreceipt of the Order of 20 September 1993 and the motion for execution and to takethe appropriate action against either or both to protect MAGDATO's rights amountedto connivance with the prevailing party for MAGDATO's defeat, which constitutedextrinsic fraud.

3. Should have DENIED MTD BUT should not have remanded the case. But sincefollowing the proper proceedings would unduly delay the resolution of the issue, oklang.-RTC should have SIMPLY DENIED MTD, then Bayog would just have filed his answerwithin the period prescribed by Rule 11, computed from the time he received noticeof the denial or deferment, unless court provides different period.-NO NEED TO REMAND: there is nothing more the parties can offer on the issue ofthe jurisdiction of the MCTC. There is then absolutely no acceptable reason to awaitthe end of the tedious procedural rituals above indicated since that issue can nowbe resolved in view of the foregoing considerations. It serves no useful purpose towithhold our verdict and remand this case to the MCTC, only for it to order thedismissal of the ejectment case. The resultant further delay which may accompany alikely appeal therefrom by BAYOG and Pesayco must be forestalled to serve theends of justice. 54 Plainly, the greater interest of justice, especially to MAGDATO,whose rights as an agricultural leaseholder were trampled upon, demands that wedispose of the issue of the MCTC's jurisdiction over the ejectment case.

Disposition. WHEREFORE, in view of the foregoing, the instant petition isDISMISSED for want of merit. That part of the dispositive portion of the Order of 18October 1994 of the Regional Trial Court of Antique, Branch 12, in Civil Case No.2708 setting aside the Order of 20 September 1993 of the Third Municipal Circuit

Trial Court of Patnongon-Bugasong-Valderama, Antique, in Civil Case No. 262 isAFFIRMED, and the Order of Execution of 16 December 1993 in Civil Case No. 262 isANNULLED and SET ASIDE and the said case is ordered DISMISSED. Furthermore,Honorable Judge DEOGRACIAS K. DEL ROSARIO of the Third Municipal Circuit TrialCourt of Patnongon-Bugasong-Valderama, Antique, and Atty. MARCELO C. JOSUE aredirected TO SHOW CAUSE, within ten (10) days from receipt of a copy of thisDecision, why they should not be disciplinarily dealt with for gross ignorance of lawand violation of Canon 18 of the Code of Professional Responsibility, respectively.Let copies of this Decision be furnished Judge Deogracias K. del Rosario and Atty.Marcelo C. Josue. Costs against the petitioners. SO ORDERED.

Malanyaon v. Sunga208 SCRA 436

NOCON; May 7, 1992

NATURE

- On March 15, 1977, private respondents (Bona, Garchitorena, Alferez, Sierra, Lima,Bulao, Tesorero, Malang, Alepante and Caubang), who are members of theCamarines Sur I Teachers Association (CASTEA I) and Camarines Sur II Public School

Teachers Association (CASTEA II), filed a Petition for Annulment of Proceedings,Injunction with Application for Preliminary Injunctions and Restraining Order with theCFI in Civil Case No. 164 against petitioner Malanyaon. On that same afternoon,about 35 minutes after filing said petition, respondent Judge Sunga issued thecorresponding restraining order against Malanyaon. Malanyaon then filed an urgentmotion to disqualify Judge Sunga from further sitting in judgment over the Civil CaseNo. 164 alleging that there is a client-lawyer relationship between said judge andprivate respondent's counsel Atty. Vicente de Lima. Judge Sunga denied the motion.- On October 5, 1978, Malanyaon was personally served in his office a notice ofhearing on the pre-trial and contempt proceedings set on October 9, 1978 at 8:30A.M. However, at around 8:10 A.M. of October 9, Malanyaon felt chilly and went tosee his doctor who ordered him to stay in bed for a couple of days. Malanyaonimmediately sent a letter to Judge Sunga requesting for the deferment of hisappearance on the scheduled hearing. But the said letter was only filed at 10:05A.M. of that same morning due to the stormy weather. Consequently, upon hisfailure to appear at the scheduled hearing, he was declared in default and orderedarrested. In the afternoon of the same day, Malanyaon's counsel filed a motion tolift the Order of Arrest. But the motion was denied.- On October 18, 1978, petitioner was airlifted and confined at the VeteransMemorial Medical Center in Quezon City where he was operated for a gall bladderdysfunction.- On November 17, 1978, Malanyaon filed an Omnibus Motion to Lift his Order ofArrest, to set aside the order of default and to reset the hearingon account of hisillness and subsequent surgical operation. Judge Sunga, acting on the motion, liftedthe order of arrest but denied the motion to set aside the order of default and theresetting of the scheduled hearing. Malanyaon filed a MFR but it was denied as well.Hence, this petition alleging grave abuse of discretion on the part of the respondent

judge in denying his motion to lift the order of default

ISSUEWON Judge Sunga acted in grave abuse of discretion in denying to set aside theorder of default in spite of the fact that he had already lifted the order of arrestagainst petitioner after finding that his absence was excusable due to the severityof his illness.

HELD:Yes.

-

To begin with, the respondent court's act of ordering petitioner's arrest ispatently illegal. There is nothing in the Rules which authorizes the trial court toorder the arrest of the party in default. A party declared in default merelyloses the right to be notified of subsequent proceedings and the rightto take part in the trial, until the order of default is lifted.- With regard to the lifting of the order of default, Section 3, Rule 18 of theRevised Rules of Court provides that:

A party declared in default may at any time after discovery thereof and beforejudgement filed a motion under oath to set aside the order of default upon propershowing that his failure to answer was due to fraud, accident, mistake or excusableneglect and that he has a meritorious defense. In such case the order of defaultmay be set aside on such terms and conditions as the judge may impose in theinterest of justice.

12


13/25

- Where the failure to appear at the pre-trial hearing was

uncontrovertedly due to illness, the default order may be set aside onthe ground of accident over which petitioner had no control as in thecase at bar.- Inasmuch as the respondent judge had already lifted the order of arrestafter finding petitioner's absence excusable, it therefore follows that said judgeshould have also set aside the order of default. Thus, the basis for liftingpetitioner's order of arrest should also apply to the order of default since bothorders were issued on petitioner's non-appearance on October 9, 1978.

DISPOSITIVEWHEREFORE, the petition for certiorari is hereby GRANTED and the order of defaultis hereby annulled and lifted. The respondent court is ordered to set Civil Case No.164 for pre-trial and trial with notice to petitioner.

Lesaca v. C.A.215 SCRA 17 (1992)GRIO-AQUINO, J.:

NATUREThis is an appeal by certiorari, under Rule 45 of the Revised Rules of Court, from thedecision dated November 29, 1990 of the Court of Appeals which sets aside thedecisions of the Metropolitan Trial Court (MeTC) and the Regional Trial Court (RTC)

of Manila, Branch III, and remands the case to the MeTC for further proceedings andreception of the parties' evidence as provided in the Summary Procedure.

FACTSOn February 23, 1990, the petitioner, as plaintiff, filed in the Metropolitan Trial Courtof Manila (MeTC) a complaint for ejectment against the private respondent,Alfredo Ravelo, to oust him from the commercial premises located at 671 SalesStreet, Sta. Cruz, Manila, on the grounds of: (1) expiration of the month-to-monthlease contract between the parties; and (2) non-payment of rentals. Ravelo filed ananswer to the complaint.During the first preliminary conference on April 19, 1990, all the parties werepresent and duly represented by their respective counsel. However, the preliminaryconference was reset to May 3, 1990, upon request of both parties, to give themtime to explore the possibility of an amicable settlement and submit a compromiseagreement.

On the scheduled date of the next conference, May 3, 1990, only the plaintiff (nowpetitioner) appeared. On motion of plaintiff's counsel, the MeTC declared defendantRavelo "as in default" for failure to appear at the preliminary conference despiteprevious notice. The court considered the case submitted for decision "as warrantedby the facts alleged in the complaint." (p. 35 Rollo).On May 23, 1990, the MeTC rendered a decision ordering the defendant, Ravelo, tovacate the premises in question.Said defendant appealed to the Regional Trial Court (RTC) of Manila. After thesubmission of the parties' respective memoranda, the RTC promulgated a decisionaffirming in toto the decision of the MeTC.Ravelo filed a petition in the court of Appeals for annulment of the decision of theMeTC and RTC and to remand the case to the MeTC for reception of evidence.On November 29, 1990, the Court of Appeals rendered a decision, the dispositiveportion of which reads as follows:PREMISES CONSIDERED, the Metropolitan Trial Court decision and the respondents

court's decision are hereby SET ASIDE. The case is remanded to the Metropolitan

Trial Court, Manila, Branch III for further proceedings and reception of the evidenceof the parties as provided in the Rule on Summary Procedure. (p. 21, Rollo.)

Hence, the present petition for review alleging that the Court of Appeals erred:1. when it ruled that the only instance (when) Section 5 of the Summary Rule can beapplied is when the defendant fails to answer.2. when it ruled that should a party fail to attend/comply with the preliminaryconference mandated under Section 6 of the Summary Rule, the court below ispowerless and has no discretion but to still proceed under Section 6 of same rule toissue an order clarifying and defining the issues of the case and to proceed underSection 7 of same Rule for submission of affidavit of parties.3. when it ruled that "as in default" declaration is prohibited by the Rule onSummary Procedure.

HELD: We find no merit in the petition for review.Section 6 of the Rule on Summary Procedure provides:Sec. 6. Preliminary conference Not later than thirty (30) days after the last answeris filed, the case shall be calendared for a preliminary conference. Among othermatters, should the parties fail to arrive at an amicable settlement, the court mustclarify and define the issues of the case, which must be clearly and distinctly setforth in the order to be issued immediately after such preliminary conferencetogether with the other matters taken up during the same.

As found by the Court of Appeals, when the private respondent (thedefendant) and his counsel failed to appear at the pre-trial conference andno compromise agreement was reached by the parties despite theopportunity given them by the court, the situation similar to that providedin Section 6 of the Summary Rule above quoted. The Court should haveissued a "preliminary conference order" defining the issues in the case asprovided in Section 6. Thereafter the parties should have submitted theiraffidavits and other evidence as provided in Section 7 of the Rule onSummary Procedure, to wit:Sec. 7. Submission of affidavits. Within ten (10) days from receipt of the ordermentioned in the next preceding section, the parties shall submit the affidavits ofwitnesses and other evidence on the factual issues defined therein, together with abrief statement of their positions setting forth the law and the facts relied upon bythem.Only when the defendant failed to answer the complaint may the Court proceed to

judgment. Thus does Section 5 provide:Sec. 5. Effect of failure to answer. Should the defendant fail to answer complaint,crossclaim or permissive counterclaim within the reglementary 10-day period hereinprovided, the court motu proprio, or on motion of the plaintiff, shall render judgmentas may be warranted by the facts alleged in the complaint and limited to what isprayed for therein except as to the amount of damages which the Court may reducein its discretion.

In this case, since Ravelo did file an answer to the complaint, the trial court may notdeclare him as in default (despite his absence and that of his counsel at the pre-trialconference on May 3, 1990) because a motion to declar

dismissal of actions

Documents