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RULE 17 - Dismissal of Actions

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[G.R. NO. 170354 : June 30, 2006]

EDGARDO PINGA, Petitioner, v. THE HEIRS OF GERMAN, SANTIAGO
represented by FERNANDO SANTIAGO, Respondents.
DECISION
TINGA, J.:
The constitutional faculty of the Court to promulgate rules of practice and
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

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unlawfully entering the coco lands of the respondent, cutting wood and
bamboos and harvesting the fruits of the coconut trees therein. Respondents
prayed that petitioner and Saavedra be enjoined from committing "acts of
depredation" on their properties, and ordered to pay damages.

In their Amended Answer with Counterclaim,7 petitioner and his co-defendant

disputed respondents' ownership of the properties in question, asserting that
petitioner's father, Edmundo Pinga, from whom defendants derived their
interest in the properties, had been in possession thereof since the 1930s.8
They alleged that as far back as 1968, respondents had already been ordered
ejected from the properties after a complaint for forcible entry was filed by the
heirs of Edmundo Pinga. It was further claimed that respondents' application
for free patent over the properties was rejected by the Office of the President
in 1971. Defendants in turn prayed that owing to respondents' forcible re-entry
in the properties and the irresponsible and reckless filing of the case, they be
awarded various types of damages instead in amounts totaling P2,100,000
plus costs of suit.9
By July of 2005, the trial of the case had not yet been completed. Moreover,
respondents, as plaintiffs, had failed to present their evidence. It appears that
on 25 October 2004, the RTC already ordered the dismissal of the complaint
after respondents' counsel had sought the postponement of the hearing
scheduled then.10 However, the order of dismissal was subsequently
reconsidered by the RTC in an Order dated 9 June 2005, which took into
account the assurance of respondents' counsel that he would give priority to
that case.11
At the hearing of 27 July 2005, plaintiffs' counsel on record failed to appear,
sending in his stead a representative who sought the postponement of the
hearing. Counsel for defendants (who include herein petitioner) opposed the
move for postponement and moved instead for the dismissal of the case. The
RTC noted that it was obvious that respondents had failed to prosecute the
case for an unreasonable length of time, in fact not having presented their
evidence yet. On that ground, the complaint was dismissed. At the same time,
the RTC allowed defendants "to present their evidence ex-parte."12
Respondents filed a Motion for Reconsideration13 of the order issued in open
court on 27 July 2005, opting however not to seek that their complaint be
reinstated, but praying instead that the entire action be dismissed and
petitioner be disallowed from presenting evidence ex-parte. Respondents
claimed that the order of the RTC allowing petitioner to present evidence exparte 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
plaintiff's cause of action," and "a conversu, the dismissal of the complaint
carries with it the dismissal of the compulsory counterclaims."19
The matter was elevated to this Court directly by way of a Petition for Review
under Rule 45 on a pure question of law, the most relevant being whether the
dismissal of the complaint necessarily carries the dismissal of the compulsory
counterclaim.
We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Procedure,
the dismissal of the complaint due to the fault of plaintiff does not necessarily
carry with it the dismissal of the counterclaim, compulsory or otherwise. In
fact, the dismissal of the complaint is without prejudice to the right of
defendants to prosecute the counterclaim.
On a prefatory note, the RTC, in dismissing the counterclaim, did not
expressly adopt respondents' argument that the dismissal of their complaint
extended as well to the counterclaim. Instead, the RTC justified the dismissal
of the counterclaim on the ground that "there is no opposition to [plaintiff's]
Motion for Reconsideration [seeking the dismissal of the counterclaim]."20 This
explanation is hollow, considering that there is no mandatory rule requiring
that an opposition be filed to a motion for reconsideration without need for a
court order to that effect; and, as posited by petitioner, the "failure to file an
opposition to the Plaintiff's Motion for Reconsideration is definitely not one
among the established grounds for dismissal [of the counterclaim]."21 Still, the
dismissal of the counterclaim by the RTC betrays at very least a tacit
recognition of respondents' argument that the counterclaim did not survive the
dismissal of the complaint. At most, the dismissal of the counterclaim over the
objection of the defendant (herein petitioner) on grounds other than the merits
of the counterclaim, despite the provisions under Rule 17 of the 1997 Rules of
Civil Procedure, constitutes a debatable question of law, presently meriting
justiciability through the instant action. Indeed, in reviewing the assailed
orders of the RTC, it is inevitable that the Court consider whether the

dismissal of the complaint, upon motion of the defendant, on the ground of the
failure to prosecute on plaintiff's part precipitates or carries with it the
dismissal of the pending counterclaims.
Our core discussion begins with Section 3, Rule 17 of the 1997 Rules of Civil
Procedure, which states:
SEC. 3. Dismissal due to fault of plaintiff. If, for no justifiable cause, the
plaintiff fails to appear on the date of the presentation of his evidence in chief
on the complaint, or to prosecute his action for an unreasonable length of
time, or to comply with these Rules or any order of the court, the complaint
may be dismissed upon motion of defendant or upon the court's own motion,
without prejudice to the right of the defendant to prosecute his counterclaim in
the same or in a separate action. This dismissal shall have the effect of an
adjudication upon the merits, unless otherwise declared by the court.
The express qualification in the provision that the dismissal of the complaint
due to the plaintiff's fault, as in the case for failure to prosecute, is without
prejudice to the right of the defendant to prosecute his counterclaim in the
same or separate action. This stands in marked contrast to the provisions
under Rule 17 of the 1964 Rules of Court which were superseded by the 1997
amendments. In the 1964 Rules, dismissals due to failure to prosecute were
governed by Section 3, Rule 17, to wit:
SEC. 3. Failure to prosecute. - If plaintiff fails to appear at the time of the trial,
or to prosecute his action for an unreasonable length of time, or to comply
with these rules or any order of the court, the action may be dismissed upon
motion of the defendant or upon the court's own motion. This dismissal shall
have the effect of an adjudication upon the merits, unless otherwise provided
by court.
Evidently, the old rule was silent on the effect of such dismissal due to failure
to prosecute on the pending counterclaims. As a result, there arose what one
authority on remedial law characterized as "the nagging question of whether
or not the dismissal of the complaint carries with it the dismissal of the
counterclaim."22 Jurisprudence construing the previous Rules was hardly
silent on the matter.
In their arguments before the RTC on the dismissal of the counterclaim,
respondents cited in support City of Manila v.
Ruymann,23 Domingo v. Santos,24 Belleza v. Huntington,25 and Froilan v. Pan
Oriental Shipping Co.,26 all of which were decided more than five decades

ago. Notably though, none of the complaints in these four cases were
dismissed either due to the fault of the plaintiff or upon the instance of the
defendant.27
The distinction is relevant, for under the previous and current incarnations of
the Rules of Civil Procedure, it is Section 3, Rule 17 that governs the
dismissals due to the failure of the plaintiff to prosecute the complaint, as had
happened in the case at bar. Otherwise, it is Section 2, Rule 17, which then,
and still is now, covered dismissals ordered by the trial court upon the
instance of the plaintiff.28 Yet, as will be seen in the foregoing discussion, a
discussion of Section 2 cannot be avoided as the postulate behind that
provision was eventually extended as well in cases that should have properly
been governed by Section 3.
Even though the cases cited by respondents involved different factual
antecedents, there exists more appropriate precedents which they could have
cited in support of their claim that the counterclaim should have been
dismissed even if the dismissal of the complaint was upon the defendants'
motion and was predicated on the plaintiff's fault. BA Finance Corp. v. Co29
particularly stands out in that regard, although that ruling is itself grounded on
other precedents as well. Elucidation of these cases is in order.
On the general effect of the dismissal of a complaint, regardless of cause, on
the pending counterclaims, previous jurisprudence laid emphasis on whether
the counterclaim was compulsory or permissive in character. The necessity of
such distinction was provided in the 1964 Rules itself, particularly Section 2,
Rule 17, which stated that in instances wherein the plaintiff seeks the
dismissal of the complaint, "if a counterclaim has been pleaded by a
defendant prior to the service upon him of the plaintiff's motion to dismiss, the
action shall not be dismissed against the defendant's objection unless the
counterclaim can remain pending for independent adjudication by the court."30
The
vaunted commentaries of Chief Justice Moran, remarking on Section 2, Rule
17, noted that "[t]here are instances in which a counterclaim cannot remain
pending for independent adjudication, as, where it arises out of, or is
necessarily connected with, the transaction or occurrence which is the subject
matter of the opposing party's claim."31
This view expressed in Moran's Commentaries was adopted by the Court in
cases where the application of Section 2, Rule 17 of the 1964 Rules of Court
was called for, such as in Lim Tanhu v. Ramolete,32 and Dalman v. City Court
of Dipolog City.33 The latter case warrants brief elaboration. Therein, the

plaintiff in a civil case for damages moved for the withdrawal of her own case
on the ground that the dispute had not been referred to the barangay council
as required by law. Over the objection of the defendant, who feared that her
own counterclaim would be prejudiced by the dismissal, plaintiff's motion was
granted, the complaint and the counterclaim accordingly dismissed by the trial
court. The Court refused to reinstate the counterclaim, opining without
elaboration, "[i]f the civil case is dismissed, so also is the counterclaim filed
therein."34 The broad nature of that statement gave rise to the notion that the
mandatory
dismissal of the counterclaim upon dismissal of the complaint applied
regardless of the cause of the complaint's dismissal.35
Notably, the qualification concerning compulsory counterclaims was provided
in Section 2, Rule 17 of the 1964 Rules, the provision governing dismissals by
order of the court, and not Section 3, Rule 17. As stated earlier, Section 3,
which covered dismissals for failure to prosecute upon motion of the
defendant or upon motu proprio action of the trial court, was silent on the
effect on the counterclaim of dismissals of such nature.
Spouses Sta. Maria, Jr. v. Court of Appeals,36 decided in 1972, ostensibly
supplied the gap on the effect on the counterclaim of complaints dismissed
under Section 3. The defendants therein successfully moved before the trial
court for the dismissal of the complaint without prejudice and their declaration
in default on the counterclaim after plaintiffs therein failed to attend the pretrial. 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 plaintiff's action and cannot remain pending for independent
adjudication.38
There is no doubt that under the 1964 Rules, the dismissal of a complaint due
to the failure of the plaintiff to appear during pre-trial, as what had happened
in Sta. Maria, fell within the coverage of Section 3, Rule 17. On the other
hand, Section 2 was clearly limited in scope to those dismissals sustained at
the instance of the plaintiff.39 Nonetheless, by the early 1990s, jurisprudence
was settling on a rule that compulsory counterclaims were necessarily
terminated upon the dismissal of the complaint not only if such dismissal was
upon motion of the plaintiff, but at the instance of the defendant as well. Two
decisions from that period stand out in this regard, Metals Engineering
Resources Corp. v. Court of Appeals40 and International Container Terminal
Services v. Court of Appeals.41
In Metals, the complaint was expunged from the record after the defendant
had filed a motion for reconsideration of a trial court order allowing the filing of
an amended complaint that corrected a jurisdictional error in the original
complaint pertaining to the specification of the amount of damages sought.
When the defendant was nonetheless allowed to present evidence on the
counterclaim, the plaintiff assailed such allowance on the ground that the
counterclaim was compulsory and could no longer remain pending for
independent adjudication. The Court, in finding for the plaintiff, noted that the
counterclaim was indeed compulsory in nature, and as such, was auxiliary to
the proceeding in the original suit and derived its jurisdictional support
therefrom.42 It was further explained that the doctrine was in consonance with
the primary objective of a counterclaim, which was to avoid and prevent
circuitry of action by allowing the entire controversy between the parties to be
litigated and finally determined in one action, and to discourage multiplicity of
suits.43 Also, the Court noted that since the complaint was dismissed for lack
of jurisdiction, it was as if no claim was filed against the defendant, and there
was thus no more leg for the complaint to stand on.44
In International Container, the defendant filed a motion to dismiss which was
granted by the trial court. The defendant's counterclaim was dismissed as
well. The Court summarized the key question as "what is the effect of the
dismissal of a complaint ordered at the instance of the defendant upon a
compulsory counterclaim duly raised in its answer."45 Then it ruled that the
counterclaim did not survive such dismissal. After classifying the counterclaim
therein as compulsory, the Court noted that "[i]t is obvious from the very
nature of the counterclaim that it could not remain pending for independent

adjudication, that is, without adjudication by the court of the complaint itself on
which the counterclaim was based."46
Then in 1993, a divided Court ruled in BA Finance that the dismissal of the
complaint for nonappearance of plaintiff at the pre-trial, upon motion of the
defendants, carried with it the dismissal of their compulsory counterclaim.47
The Court reiterated the rule that "a compulsory counterclaim cannot remain
pending for independent adjudication by the court' as it is auxiliary to the
proceeding in the original suit and merely derives its jurisdictional support
therefrom."48 Express reliance was made on Metals, International Container,
and even Dalman in support of the majority's thesis. BA Finance likewise
advised that the proper remedy for defendants desirous that their
counterclaims not be dismissed along with the main complaint was for them to
move to declare the plaintiffs to be "non-suited" on their complaint and "as in
default" on their compulsory counterclaim, instead of moving for the dismissal
of the complaint.49
Justice Regalado, joined by Chief Justice Narvasa, registered a strong
objection to the theory of the majority. They agreed that the trial court could no
longer hear the counterclaim, but only on the ground that defendant's motion
to be allowed to present evidence on the counterclaim was filed after the
order dismissing the complaint had already become final. They disagreed
however that the compulsory counterclaim was necessarily dismissed along
with the main complaint, pointing out that a situation wherein the dismissal of
the complaint was occasioned by plaintiff's failure to appear during pre-trial
was governed under Section 3, Rule 17, and not Section 2 of the same rule.
Justice Regalado, who ironically penned the decision in Metals cited by the
majority, explained:
Turning back to Rule 17, it is readily apparent that Sections 2 and 3 thereof
envisage different factual and adjective situations. The dismissal of the
complaint under Section 2 is at the instance of plaintiff, for whatever reason
he is minded to move for such dismissal, and, as a matter of procedure, is
without prejudice unless otherwise stated in the order of the court or, for that
matter, in plaintiff's motion to dismiss his own complaint. By reason thereof, to
curb any dubious or frivolous strategy of plaintiff for his benefit or to obviate
possible prejudice to defendant, the former may not dismiss his complaint
over the defendant's objection if the latter has a compulsory counterclaim
since said counterclaim would necessarily be divested of juridical basis and
defendant would be deprived of possible recovery thereon in that same
judicial proceeding.

Section 3, on the other hand, contemplates a dismissal not procured by

plaintiff, albeit justified by causes imputable to him and which, in the present
case, was petitioner's failure to appear at the pre-trial. This situation is also
covered by Section 3, as extended by judicial interpretation, and is ordered
upon motion of defendant or motu proprio by the court. Here, the issue of
whether defendant has a pending counterclaim, permissive or compulsory, is
not of determinative significance. The dismissal of plaintiff's complaint is
evidently a confirmation of the failure of evidence to prove his cause of action
outlined therein, hence the dismissal is considered, as a matter of evidence,
an adjudication on the merits. This does not, however, mean that there is
likewise such absence of evidence to prove defendant's counterclaim
although the same arises out of the subject matter of the complaint which was
merely terminated for lack of proof. To hold otherwise would not only work
injustice to defendant but would be reading a further provision into Section 3
and wresting a meaning therefrom although neither exists even by mere
implication. Thus understood, the complaint can accordingly be dismissed, but
relief can nevertheless be granted as a matter of course to defendant on his
counterclaim as alleged and proved, with or without any reservation therefor
on his part, unless from his conduct, express or implied, he has virtually
consented to the concomitant dismissal of his counterclaim.50
Justice Regalado also adverted to Sta. Maria and noted that the objections
raised and rejected by the Court therein were the same as those now relied
upon by the plaintiff. He pointed out that Dalman and International Container,
both relied upon by the majority, involved the application of Section 2, Rule 17
and not Section 3, which he insisted as the applicable provision in the case at
bar.51
The partial dissent of Justice Regalado in BA Finance proved opportune, as
he happened then to be a member of the Rules of Court Revision Committee
tasked with the revision of the 1964 Rules of Court. Just a few months after
BA Finance was decided, Justice Regalado proposed before the Committee
an amendment to Section 3, Rule 17 that would explicitly provide that the
dismissal of the complaint due to the fault of the plaintiff shall be "without
prejudice to the right of the defendant to prosecute his counterclaim in the
same or in a separate action." The amendment, which was approved by the
Committee, is reflected in the minutes of the meeting of the Committee held
on 12 October 1993:
[Justice Regalado] then proposed that after the words "upon the court's own
motion" in the 6th line of the draft in Sec. 3 of Rule 17, the following provision
be inserted: "without prejudice to the right of the defendant to prosecute

his counterclaim in the same or in a separate action." The Committee

agreed with the proposed amendment of Justice Regalado.
Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not the
action that is dismissed but the complaint. He asked whether there is any
distinction between "complaint" and "action." Justice Regalado opined that the
action of the plaintiff is initiated by his complaint.
Justice Feria then suggested that the dismissal be limited to the
complaint[.] Thus, in the 1st line of Sec. 1, the words "An action" will be
changed to "a complaint"; in the 2nd line of Sec. 2, the words "an
action" will be changed to "a complaint" and in Sec. 3, the word "action"
on the 5th line of the draft will be changed to "complaint." The
Committee agreed with Justice Feria's suggested amendments.
CA 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 approved the revisions now contained in the 1997 Rules of Civil
Procedure, not only did Justice Regalado's amendment to Section 3, Rule 17
remain intact, but the final version likewise eliminated the qualification
formerly offered under Section 2 on "counterclaims that can remain pending
for independent adjudication by the court."53 At present, even Section 2,
concerning dismissals on motion of the plaintiff, now recognizes the right of
the defendant to prosecute the counterclaim either in the same or separate
action notwithstanding the dismissal of the complaint, and without regard as to
the permissive or compulsory nature of the counterclaim.
In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado
expounds on the effects of the amendments to Section 2 and 3 of Rule 17:
2. Under this revised section [2], where the plaintiff moves for the dismissal of
his complaint to which a counterclaim has been interposed, the dismissal shall
be limited to the complaint. Such dismissal shall be without prejudice to the
right of the defendant to either prosecute his counterclaim in a separate action
or to have the same resolved in the same action. Should he opt for the first

alternative, the court should render the corresponding order granting and
reserving his right to prosecute his claim in a separate complaint. Should he
choose to have his counterclaim disposed of in the same action wherein the
complaint had been dismissed, he must manifest such preference to the trial
court within 15 days from notice to him of plaintiff's motion to dismiss. These
alternative remedies of the defendant are available to him regardless of
whether his counterclaim is compulsory or permissive. A similar
alternative procedure, with the same underlying reason therefor, is adopted in
Sec. 6, Rule 16 and Sec. 3 of this Rule, wherein the complaint is dismissed on
the motion of the defendant or, in the latter instance, also by the court motu
proprio.
xxxx
2. The second substantial amendment to [Section 3] is with respect to the
disposition of the defendant's counterclaim in the event the plaintiff's
complaint is dismissed. As already observed, he is here granted the choice to
prosecute that counterclaim in either the same or a separate action. x x x x
3. With the aforestated amendments in Secs. 2 and 3 laying down
specific rules on the disposition of counterclaims involved in the
dismissal actions, the controversial doctrine in BA Finance Corporation
v. Co, et al., (G.R. No. 105751, June 30, 1993) has been abandoned,
together with the apparent confusion on the proper application of said
Secs. 2 and 3. Said sections were distinguished and discussed in the author's
separate opinion in that case, even before they were clarified by the present
amendments x x x.54
Similarly, Justice Feria notes that "the present rule reaffirms the right of the
defendant to move for the dismissal of the complaint and to prosecute his
counterclaim, as stated in the separate opinion [of Justice Regalado in BA
Finance.]"55 Retired Court of Appeals Justice Herrera pronounces that the
amendment to Section 3, Rule 17 settles that "nagging question" whether the
dismissal of the complaint carries with it the dismissal of the counterclaim, and
opines that by reason of the amendments, the rulings in Metals Engineering,
International Container, and BA Finance "may be deemed abandoned."56 On
the effect of amendment to Section 3, Rule 17, the commentators are in
general agreement,57 although there is less unanimity of views insofar as
Section 2, Rule 17 is concerned.58
To be certain, when the Court promulgated the 1997 Rules of Civil Procedure,
including the amended Rule 17, those previous jural doctrines that were
inconsistent with the new rules incorporated in the 1997 Rules of Civil

Procedure were implicitly abandoned insofar as incidents arising after the

effectivity of the new procedural rules on 1 July 1997. BA Finance, or even the
doctrine that a counterclaim may be necessarily dismissed along with the
complaint, clearly conflicts with the 1997 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
counterclaim, since Section 3, Rule 17 mandates that the dismissal of
complaint is without prejudice to the right of the defendant to prosecute
counterclaim in the same or separate action. If the RTC were to dismiss
counterclaim, it should be on the merits of such counterclaim. Reversal of
RTC is in order, and a remand is necessary for trial on the merits of
counterclaim.

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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 crosscomplaint or answer of the defendant."59 Note that no qualification was made
then as to the nature of the counterclaim, whether it be compulsory or
permissive. The protection of the defendant's right to prosecute the
counterclaim was indeed unqualified. In City of Manila, decided in 1918, the
Court explained:
By paragraph 1 [of Section 127], it will be seen that, where the defendant has
interposed a counterclaim, or is seeking affirmative relief by a crosscomplaint, that then, and in that case, the plaintiff cannot dismiss the action so
as to affect the right of the defendant in his counterclaim or prayer for
affirmative relief. The reason for that exception is clear. When the answer
sets up an independent action against the plaintiff, it then becomes an

action by the defendant against the plaintiff, and, of course, the plaintiff
has no right to ask for a dismissal of the defendant's action.60
Nonetheless, a new rule was introduced when Act No. 190 was replaced by
the 1940 Rules of Court. Section 2, Rule 30 of the 1940 Rules specified that if
a counterclaim is pleaded by a defendant prior to the service of the plaintiff's
motion to dismiss, the action shall not be dismissed against the defendant's
objection unless the counterclaim can remain pending for independent
adjudication by the court. This qualification remained intact when the 1964
Rules of Court was introduced.61 The rule referred only to compulsory
counterclaims, or counterclaims which arise out of or are necessarily
connected with the transaction or occurrence that is the subject matter of the
plaintiff's claim, since the rights of the parties arising out of the same
transaction should be settled at the same time.62 As was evident in Metals,
International Container and BA Finance, the rule was eventually extended to
instances wherein it was the defendant with the pending counterclaim, and
not the plaintiff, that moved for the dismissal of the complaint.
We should not ignore the theoretical bases of the rule distinguishing
compulsory counterclaims from permissive counterclaims insofar as the
dismissal of the action is concerned. There is a particular school of thought
that informs the broad proposition in Dalman that "if the civil case is
dismissed, so also is the counterclaim filed therein,"63 or the more nuanced
discussions offered in Metals, International Container, and BA Finance. The
most potent statement of the theory may be found in Metals,64 which proceeds
from the following fundamental premises'a compulsory counterclaim must be
set up in the same proceeding or would otherwise be abated or barred in a
separate or subsequent litigation on the ground of auter action pendant, litis
pendentia or res judicata; a compulsory counterclaim is auxiliary to the main
suit and derives its jurisdictional support therefrom as it arises out of or is
necessarily connected with the transaction or occurrence that is the subject
matter of the complaint;65 and that if the court dismisses the complaint on the
ground of lack of jurisdiction, the compulsory counterclaim must also be
dismissed as it is merely ancilliary to the main action and no jurisdiction
remained for any grant of relief under the counterclaim.
The first point is derived from Section 4, Rule 9, of the 1964 Rules of Court,
while the two latter points are sourced from American jurisprudence. There is
no disputing the theoretical viability of these three points. In fact, the
requirement that the compulsory counterclaim must be set up in the same
proceeding remains extant under the 1997 Rules of Civil Procedure.66 At the
same time, other considerations rooted in actual practice provide a
counterbalance to the above-cited rationales.

Whatever the nature of the counterclaim, it bears the same integral

characteristics as a complaint; namely a cause (or causes) of action
constituting an act or omission by which a party violates the right of another.
The main difference lies in that the cause of action in the counterclaim is
maintained by the defendant against the plaintiff, while the converse holds
true with the complaint. Yet, as with a complaint, a counterclaim without a
cause of action cannot survive.
It would then seemingly follow that if the dismissal of the complaint somehow
eliminates the cause(s) of the counterclaim, then the counterclaim cannot
survive. Yet that hardly is the case, especially as a general rule. More often
than not, the allegations that form the counterclaim are rooted in an act
or omission of the plaintiff other than the plaintiff's very act of filing the
complaint. Moreover, such acts or omissions imputed to the plaintiff are
often claimed to have occurred prior to the filing of the complaint itself.
The only apparent exception to this circumstance is if it is alleged in the
counterclaim that the very act of the plaintiff in filing the complaint
precisely causes the violation of the defendant's rights. Yet even in such
an instance, it remains debatable whether the dismissal or withdrawal of
the complaint is sufficient to obviate the pending cause of action
maintained by the defendant against the plaintiff.67
These considerations persist whether the counterclaim in question is
permissive or compulsory. A compulsory counterclaim arises out of or is
connected with the transaction or occurrence constituting the subject matter of
the opposing party's claim, does not require for its adjudication the presence
of third parties, and stands within the jurisdiction of the court both as to the
amount involved and the 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. Petitioner's
counterclaim as defendant in Civil Case. No. 98-012 is REINSTATED. The

Regional Trial Court is ORDERED to hear and decide the counterclaim with
deliberate dispatch.
SO ORDERED.

!
FILINVEST LAND, INC.,
Petitioner,
- versus HON. COURT OF APPEALS and ROMEO, ANTONIO, JOSEFINA,
RICARDO (JR.), all surnamed ALVAREZ and VENANCIA R. Vda. de
ALVAREZ, for herself as guardian ad litem for her minor children,
RAMON, VERONICA, and FLORDELIZA, all surnamed ALVAREZ, and as
necessary and indispensable party plaintiffs JAIME, VICTORIA, and
MANUEL, all surnamed ALVAREZ, and ROSARIO PARAM Vda. de
ALVAREZ,
Respondents.

!
!

G. R. No. 142439
Promulgated:
December 6, 2006
x--------------------------------------------------x
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the
1997 Rules of Court, as amended, seeking to set aside a Decision[1] of the
Court of Appeals dated 11 November 1998 in CAG.R. SP No. 48396
annulling the sale of a parcel of land specified as Lot No. 329, GSS-877 of the
Laguna Resettlement Project, to the late Ricardo Alvarez and the subsequent
transfers to Mercedes Oliver and petitioner Filinvest Land Inc. (Filinvest); and
the reversion of the subject property to the ownership of the government. The
Court of Appeals in its assailed Decision affirmed the Decision[2] of the

Department of Agrarian Reform Adjudication Board (DARAB) dated 1 July

1998.
The subject matter in this case is a parcel of land registered as Lot
No. 329 of the Laguna Resettlement Project, located in Barrio San Vicente,
San Pedro, Laguna, with an area of 16,495 square meters. The Department
of Agrarian Reform (DAR) awarded to Ricardo Alvarez the right to purchase
the land in question, pursuant to an Order of Award dated 9 October 1973.[3]
On 15 August 1977, Ricardo Alvarez, with the consent of his wife, respondent
Rosario Param, purchased the land, evidenced by a Deed of Sale executed
by the DAR.[4] This Deed of Sale specifically prohibited the transfer of the
land within ten (10) years from the issuance of the certificate of title to any
person other than the vendees relatives within the third civil degree by
consanguinity or affinity who are, at the same time, qualified beneficiaries.[5]
This restriction was in accordance with Section 62 of Republic Act No. 3844,
or the Agricultural Land Reform Code.[6]
However, pending the issuance of the certificate of title of the said
land, Presidential Decree No. 1474, Declaring the San Pedro Tunasan Estate
(also known as the Laguna Resettlement Project) of the Department of
Agrarian Reform Suitable for Residential, Commercial, or Industrial, or other
Non-Agricultural Purposes, was enacted on 11 June 1978 and published in
the Official Gazette on 27 November 1978. This effectively repealed the tenyear prohibition on the transfer of agrarian lands situated in the Laguna
Resettlement Project. Presidential Decree No. 1474 provided that:
Section 1.
The Department of
Agrarian Reform, as Administrator of the San
Pedro Tunasan Estate, is hereby ordered to
convert such estate into a commercial, industrial
and residential site and to transfer the same to
the National Housing Authority.
Section 2.
Individuals who have
legally acquired farm lots in the Estate under
Orders of Award or Certificates of Land Transfer
or Agreement to Sell or Deeds of Sale, may sell
or transfer their lots covered thereby or convert
the same for the purposes mentioned in Section
1 hereof.

The Register of Deeds of the Province of Laguna issued Transfer

Certificate of Title (TCT) No. 62731, covering the subject land, in the name of
Ricardo Alvarez on 25 May 1979. On 10 June 1979, only 16 days after the
title was issued, Ricardo Alvarez and his wife, Rosario Param, sold the said
land to Mercedes Oliver for Ten Thousand Pesos (P10, 000.00). Oliver was
not a relative within the third degree of consanguinity and had no capacity to
personally cultivate the land, as required of a qualified beneficiary. Thus, TCT
No. 62731 was cancelled, and TCT No. 64967 was issued in the name of
Mercedes Oliver.[7]
On 22 December 1989, Mercedes Oliver sold the subject land to
Filinvest, resulting in the issuance of TCT No. 201836 on 23 January 1990 in
the name of Filinvest.[8]
On 7 March 1982, the heirs of the late Ricardo Alvarez filed a case
for reconveyance, redemption and damages against Mercedes Oliver, Avelino
Ramos and Jose Nunez, before the Regional Trial Court (RTC) of Bian,
Laguna.[9] Respondents filed an Amended Complaint for Annulment of Title
with Reconveyance, dated 4 December 1985, wherein they claim that the sale
of the subject land was made without their knowledge, and it was only in the
1980s that they learned of such sale. They alleged that their mother and
father, both illiterate, were deceived by the defendants into executing the
Deed of Sale covering the subject land in favor of Mercedes Oliver.
Respondents also argued that such sale was void since the Deed of Sale was
executed in violation of the law which enjoins the sale of the subject land.[10]
This case was, however, dismissed for failure of the respondents and counsel
to appear during the hearing for the reception of their evidence, despite due
notice and after eight postponements[11]. The RTC, in its Order,[12] dated 17
February 1989, ruled that:
Further considering that without the
evidence of said witness and the plaintiffs not
having presented any evidence on record, upon
motion of counsel for defendants that this case
be dismissed and further manifestation by the
defendants that they are waiving their right to a
counterclaim, the Court hereby orders the
dismissal of this case (both the complaint and
counterclaim).
Let copy of this Order be furnished
party plaintiff.

The order became final and executory when the respondents failed to file a
motion for reconsideration of this Order, despite receipt thereof.[13]

Oliver and defendant Filinvest Land

Incorporated;

On 26 March 1990, respondents filed a complaint against

Mercedes Oliver and Filinvest before the Provincial Agrarian Reform
Adjudication (PARAD) of Sta. Cruz, Laguna, seeking to annul the Deed of
Sale between the Spouses Alvarez and Mercedes Oliver and the subsequent
transfer between Mercedes Oliver and Filinvest, on grounds similar to the
complaint filed before the RTC of Bian. They also sought the issuance of a
restraining order enjoining Filinvest from bulldozing the subject land, which
was occupied and cultivated by the respondents. Mercedes Oliver filed a
Motion to Dismiss on the grounds of res judicata and that the PARAD had no
jurisdiction over the subject matter of the case. Filinvest similarly filed a
motion to dismiss on the grounds of res judicata and laches. It also alleged,
in its defense, that it was a purchaser for value and in good faith. In its
Position Paper, Filinvest likewise asserted that the restriction against selling
the subject land within ten years, provided under the Deed of Sale executed
by DAR in favor of the Spouses Alvarez had already been superseded by
Presidential Decree No. 1474, which took effect in 1978.[14]

2.
Ordering the cancellation of
Transfer Certificate of Title No. 201836,
covering the subject land, issued by the
Register of Deeds for the Province of Laguna,
Calamba branch, in the name of defendant
Filinvest; and
3. Directing the Register of Deeds for
the Province of Laguna, Calamba branch, to
issue in lieu of TCT No. 201836, a Certificate of
Title in the name of the Republic of the
Philippines, through DAR, for distribution to
qualified farmer-beneficiary in accordance with
Administrative Order No. 01, Series of 1992,
which is the Revised Rules and Procedures
Governing the Disposition of Homelots and
other Lots in Barangay Sites and Residential,
Commercial, and Industrial Lots in Townsites
within DAR Settlement Project and Similar
Other Areas under DAR Jurisdiction.

On 25 August 1993, the PARAD of Sta. Cruz, Laguna, dismissed

the complaint on the ground of res judicata. Moreover, it ruled that the sale
between the Spouses Alvarez and Mercedes Oliver was valid.[15] The
dispositive part of this Decision[16] reads:
WHEREFORE, in view therefrom,
Judgment is hereby rendered dismissing the
instant case for lack of merit.
On appeal, the DARAB reversed and set aside the Decision
dismissing the complaint, and ordered the reversion of the subject property to
the government. The dispositive portion of the said Order,[17] dated 1 July
1998 reads:
WHEREFORE, premises considered,
the challenged decision dated August 25, 1993
is hereby REVERSED and SET ASIDE and a
new judgment is hereby rendered as follows:
1. Annulling the transfer of the land in
question to the late Ricardo Alvarez and its
subsequent transfers to defendant Mercedes

The DARAB ruled, too, that res judicata as a bar against filing a
complaint with the PARAD is not applicable in this case since there was no
adjudication of the merits before the RTC of Bian.
The DARAB considered as self-serving and unsupported by
evidence the allegations of the respondents that the consent of the Spouses
Alvarez was obtained through fraud in connection with the sale made in favor
of Mercedes Oliver. It also ruled that the sale between Ricardo Alvarez and
Mercedes Oliver was a violation of the ten-year prohibition against the transfer
of the land imposed by the Deed of Sale between the government and
Ricardo Alvarez, in accordance with Section 62 of Republic Act No. 3844.
Such act rendered the Deed of Sale executed by the DAR in favor of Ricardo
Alvarez void, and, therefore, the subsequent transfers to Mercedes Oliver and
Filinvest were, likewise, void.[18]
In negating Filinvests claim that Presidential Decree No. 1474 has
superseded Section 62 of Republic Act No. 3844, the DARAB cited the case
of Tipon v. Intermediate Appellate Court,[19] where the Court upheld the
validity of the ten-year prohibition on the transfer of land given by the

government to farmer-beneficiaries. The DARAB added that the restriction

on transfer of land is contained in our present agrarian laws, particularly
Republic Act No. 6675.[20]
The petitioners then filed a Petition for Certiorari under Section 43
of the 1997 Rules of Court before the Court of Appeals, but on 11 November
1998, the appeal was again dismissed for lack of merit and the assailed
Decision of the DARAB was affirmed. [21]
The petitioners filed a Motion for Reconsideration, which was
subsequently denied in a Resolution dated 8 February 1999.[22]
Hence this petition, wherein Filinvest raised the following issues:
I
W H E T H E R O R N O T T H E C O U RT O F
A P P E A L S G R AV E LY A B U S E D I T S
DISCRETION AND COMMITTED REVERSIBLE
ERROR IN HOLDING THAT THE SALE OF
THE SUBJECT PARCEL OF LAND BY
RICARDO ALVAREZ TO MERCEDES OLIVER
VIOLATED THE TRANSFER RESTRICTION
CONTAINED IN THE PRIOR DEED OF SALE
OF THE SAME PROPERTY EXECUTED BY
THE DEPARTMENT OF AGRARIAN REFORM
IN FAVOR OF RICARDO ALVAREZ AND
SECTION 62, ARTICLE II, CHAPTER III OF
REPUBLIC ACT NO. 3844
II
W H E T H E R O R N O T T H E C O U RT O F
APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AND COMMITTED REVERSIBLE
ERROR IN APPLYING SECTION 1 (C), RULE II
OF THE NEW RULES OF PROCEDURE OF
THE DEPARTMENT OF AGRARIAN REFORM
A D J U D I C AT I O N B O A R D ( D A R A B ) ,
CONFERRING JURISDICTION OF THE
DARAB OVER THE INSTANT CASE, IN
DISREGARD OF THE PROVISIONS OF
PRESIDENTIAL DECREE NO. 1474

III
W H E T H E R O R N O T T H E C O U RT O F
APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AND COMMITTED REVERSIBLE
ERROR IN RULING THAT THE DOCTRINE OF
RES JUDICATA DOES NOT APPLY TO BAR
RESPONDENTS COMPLAINT IN DARAB
CASE NO. IV-032-L
IV
W H E T H E R O R N O T T H E C O U RT O F
APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AND COMMITTED REVERSIBLE
ERROR IN NOT RULING THAT PETITIONER
IS A BUYER IN GOOD FAITH WHO SHOULD
BE ENTITLED TO PROTECTION AGAINST
THE ALLEGED CLAIM OF THE RESPONDENT
HEREIN, PURSUANT TO THIS HONORABLE
COURTS RULING IN AGRICULTURAL AND
HOME EXTENSION DEVELOPMENT GROUP
VS. COURT OF APPEALS, ET AL., G.R. NO.
92319, SEPTEMBER 3, 1992[23]

This petition is meritorious.

The first issue raised by Filinvest is whether the sale between
Ricardo Alvarez and Mercedes Oliver was void because it violated the
prohibitory condition contained in the Deed of Sale between Ricardo Alvarez
and the Government, to wit:
2.

That from the date of the pertinent Order

of Award and within TEN (10) years from
the date of issuance by the proper
Register of Deeds of the certificate of title,
the land subject hereof shall not, except by
hereditary succession, be subdivided, sold
or in any manner transferred or
encumbered except in favor of any of the
VENDEES relative within the third civil

degree by consanguinity or affinity who

fulfill the four (4) requirements in Section 6
Land Authority Administrative Order No. 4,
Series of 1967, or in favor of the
Government and its financial or banking
institutions or rural banks, and only upon
prior written consent of the Secretary of
the Department of Agrarian Reform; and
any sale, transfer, encumberance or
alienation made in violation hereof shall
be null and void: x x x[24]
This condition is in accordance with Section 62 of Republic Act No.
3844, The Agricultural Land Reform Code, which provided that:
Section 62. Limitation on Land Rights. - Except
in case of hereditary succession by one heir,
landholdings acquired under this Code may not
be resold, mortgaged, encumbered, or
transferred until after the lapse of ten years from
the date of full payment and acquisition and
after such ten-year period, any transfer, sale or
disposition may be made only in favor of
persons qualified to acquire economic familysize farm units in accordance with the
provisions of this Code: Provided, That a
purchaser who acquired his landholding under a
contract to sell may secure a loan on the same
from any private lending institution or individual
for an amount not exceeding his equity on said
landholding upon a guaranty by the Land Bank.
Filinvest, however, contends that these restrictions were already
revoked by the issuance of Presidential Decree No. 1474, Declaring the San
Pedro Tunasan Estate of the Department of Agrarian Reform Suitable for
Residential, Commercial or Industrial, or Other Non-Agricultural Purposes.
This law reclassifies the San Pedro Tunasan Estate, known as and hereinafter
referred to as the Laguna Resettlement Project, into a commercial, industrial
and residential site as it is no longer conducive to agricultural development.
The position taken by Filinvest is justified. Section 2 of Presidential
Decree No. 1474[25] categorically empowers individuals who have legally

acquired lots in the (San Pedro Tunasan) Estate under Orders of Awards or
Deeds of Sale, among others things, to sell or transfer their lots covered
thereby. Therefore, transfers of land located within the Laguna Resettlement
Project, made after the law took effect, are valid and the restriction on transfer
of the land within ten years after its registration is no longer applicable.
In the present case, the government, through the DAR had already
issued an Order of Award and a Deed of Sale in favor of Ricardo Alvarez
covering a parcel of land located within the Laguna Resettlement Project,
when Presidential Decree No. 1474 was enacted on 11 June 1978. In 1979,
Alvarez, with the consent of his spouse, Rosario Param, transferred the same
parcel of land to Mercedes Oliver. Such transfer was clearly sanctioned. As
earlier adverted to, Section 2 of Presidential Decree No. 1474 revoked the
application of Section 62 of Republic Act No. 3844 and the condition
prohibiting the transfer of the land contained in the Deed of Sale executed by
the DAR in favor of Alvarez, in so far as land within the Laguna Resettlement
Project was concerned. Since the transfer made by Ricardo Alvarez to
Mercedes Oliver was valid, the subsequent transfer made by Mercedes Oliver
to Filinvest is also valid.
DARABs reliance on the ruling of the Court in Tipon v.
Intermediate Appellate Court,[26] upholding the ten-year prohibition on the
transfer of land distributed by the government in favor of its beneficiaries, is
misplaced. This case is not applicable for it did not take into account
Presidential Decree No. 1474 because of different factual circumstances. It is
true that the Tipon case shares some similarities with the present case - the
subject property was part of the Laguna Resettlement Project, and the Deed
of Sale between the DAR and the farmer-beneficiary, Renato Tipon, was
executed before the enactment of Presidential Decree No. 1474 in 1978.
However, there is a crucial difference. Unlike the present case where the
subsequent transfer by the farmer-beneficiary, Ricardo Alvarez, to Mercedes
Oliver was made in 1979 after Presidential Decree No. 1474 took effect, the
subsequent transfer by farmer-beneficiary Renato Tipon to Atty. Umiral Matic,
was made in 1976 before the enactment of Presidential Decree No. 1474.
The factual background of the Tipon case, as recounted by the Court, are
thus:
Petitioner Renato Tipon acquired the
lot in question (Lot No. 386 of the Laguna
Settlement Project) from the government by
virtue of a Deed of Sale executed in his favor by
the Department of Agrarian Reform on

November 23, 1976, for the price of P1,251.20.

x x x.
xxxx
On the day the Deed of Sale was
executed in his favor, Tipon filed a request with
the Department of Agrarian Reform for
permission to transfer his rights and interest
over the lot in question in favor of Atty. Umiral P.
Matic (respondent herein). This request was
granted by the Regional Director of Region IV of
the Department of Agrarian Reform on
December 9, 1976 subject to the condition that
the Deed of Transfer is submitted to this
department for verification and final approval.
On December 10, 1976, Tipon submitted
the Deed of Absolute Sale in favor of Matic for
approval and, on the same day, it was approved
by the Regional Director of Region IV of the
Department of Agrarian Reform. Thereafter,
Matic caused the titling of the property in the
name of Tipon to whom was issued Transfer
Certificate of Title No. 50617 and later, had the
same transferred to his name under Transfer
Certificate of Title No. 53850 dated July 12,
1977, of the Registry of Deeds for the Province
of Laguna.[27]
A basic principle of statutory construction mandates that general legislation
must give way to special legislation on the same subject, and generally be so
interpreted as to embrace only cases in which the special provisions are not
applicable.[28] There is no question that Section 2 of Presidential Decree No.
1474 is inconsistent with Section 62 of Republic Act No. 3844. The former
authorizes the sale or transfer of agricultural lands within the Laguna
Resettlement Project, while the latter law prohibits the transfer of agricultural
lands distributed by the government to farmer-beneficiaries, at least for a
limited period. Presidential Decree No. 1474 as a special law should govern
lands within the Laguna Resettlement Project, while Republic Act No. 3844 is
a law generally applied to agrarian lands.

The second issue Filinvest raised is whether the DARAB had

jurisdiction over a case involving the subject land. Rule II, Section 1, of the
DARAB Revised Rules of Procedure provides that the DARAB shall have
primary jurisdiction, both original and appellate over:
(c)
Cases involving the annulment or
cancellation of orders or decisions of DAR
officials other than the Secretary, lease
contracts or deeds of sale or their amendments
under the administration and disposition of the
DAR and LBP; x x x.
However, Filinvest argued that under Section 1 of Presidential Decree No.
1474, the Laguna Resettlement Project was no longer agricultural land but
was effectively converted into a commercial, industrial and residential site,
and was therefore outside the jurisdiction of the DARAB. Section 1 of
Presidential Decree No. 1474 reads:
Section 1.
The Department of
Agrarian Reform, as Administrator of the San
Pedro Tunasan Estate, is hereby ordered to
convert such estate into a commercial, industrial
and residential site and to transfer the same to
the National Housing Authority.
From the aforecited provision, it is clear that the DAR had lost
jurisdiction over government lands located in the Laguna Resettlement Project
formerly under its administration which it was ordered to transfer to the
National Housing Authority (NHA). More importantly, the DARAB can no
longer annul the Deed of Sale between the government and Ricardo Alvarez,
or the subsequent transfers, on the ground that Alvarez violated Section 62 of
Republic Act No. 3844 and the conditions laid down in the Deed of Sale
regarding the ten-year restriction on the transfer of the same land. At that
time, the transfer between Alvarez and Oliver was made, these
aforementioned rules were repealed by the provisions of Presidential Decree
No. 1474. These rules were no longer applicable to the land in question, as it
was no longer under the administration of the DAR nor agrarian in character.
The validity of the subsequent transfer of the subject land between Ricardo
Alvarez and Mercedes Oliver, or even the later transfer between Mercedes
Oliver and Filinvest, was no longer subject to agrarian laws, as the land was
already commercial, industrial, or residential in nature at the time of the
transfer.
Therefore, any proceeding which attacks the validity of the
subsequent transfers are within the jurisdiction of regular courts.

Clearly, the respondents filed the case before the PARAD, not
because the case involved a dispute that would be properly resolved by the
PARAD, but because they were already barred from filing the case before the
proper forum. The allegations and relief found in the Complaint filed by the
respondents before the PARAD are conspicuously similar to those in the
Amended Complaint which they had earlier filed before the trial court of Bian.
[29] As earlier discussed, the trial court ordered the dismissal of the case for
failure to prosecute. When the respondents failed to file a motion for
reconsideration, despite due notice, such order became final.
This Court cannot countenance the party-litigants recourse to such
measures. The foundation principle upon which the doctrine of res judicata
rests is that parties should not be permitted to litigate the same issue more
than once. When a right or fact has been judicially tried and determined by a
court of competent jurisdiction, or an opportunity for such trial has been given,
the judgment of the court, so long as it is not reversed, should be conclusive
upon the parties and those in privity with them in law or estate.[30]
The following requisites must concur in order that a prior judgment
may bar a subsequent action: (1) the former judgment or order must be final;
(2) it must be a judgment or order on the merits, that is, it was rendered after
a consideration of the evidence or stipulations submitted by the parties at the
trial of the case; (3) it must have been rendered by a court having jurisdiction
over the subject matter and the parties; and (4) there must be, between the
first and second actions, identity of parties, of subject matter and of cause of
action. [31]
A perusal of the records easily shows that the first, third and fourth
requirements have been complied with in this case. The Order rendered by
Branch XXIV of the RTC of Bian, dated 17 February 1989, dismissing the
case, is clearly final, as it disposed of all the rights and obligations of the
parties before it.[32] There was never any question raised on the jurisdiction
of Branch XXIV of the RTC to hear and decide the question of whether the
sale executed between Ricardo Alvarez and Mercedes Oliver was valid. It is
also obvious that the allegations of the respondents in their Amended
Complaint filed before the RTC of Bian are substantially identical to the
Complaint filed before the PARAD; involved the same subject matter, and
raised the same causes of action.[33] Filinvest was named as a party only in
the complaint before the PARAD, since it acquired the property from
Mercedes Oliver only on 22 December 1989,[34] after the case before the
RTC was dismissed on 17 February 1997.
Moreover, the fact that its
predecessor-in interest, Mercedes Oliver, was a party in the case filed before

the RTC of Bian satisfies the requirement on the identity of parties. In the
case of Camara v. Court of Appeals,[35] this Court has ruled that, [t]here is
identity of parties not only where the parties are the same, but also those in
privity with them, as between their successors-in-interest by title subsequent
to the commencement of the action, litigating for the same thing and under the
same title and in the same capacity.
The only contention between the parties was whether the second
requirement, that the decision or order must have been based on the merits of
the case, was met. In situations contemplated in Section 3, Rule 17 of the
Rules of Court,[36] where a complaint is dismissed for failure of the plaintiff to
comply with a lawful order of the court, such dismissal has the effect of an
adjudication upon the merits.[37] A dismissal for failure to prosecute has the
effect of an adjudication on the merits, and operates as res judicata,
particularly when the court did not direct that the dismissal was without
prejudice.[38]
Having complied with the four requisites needed for the doctrine of
res judicata to operate, the Order rendered by the RTC of Bian dismissing
Civil Case No. B-1941 finally determined the ownership of the subject land,
the heirs of the late Ricardo Alvarez, Mercedes Oliver, and her successor-ininterest, Filinvest, as no motion for reconsideration on this Order was filed.
Moreover, this would bar any dispute over the subject land from being brought
before any judicial forum. Rule 39, Section 47 of the Rules of Court[39]
provides that in case of a judgment or final order over a specific thing,
rendered by a court having jurisdiction, the judgment or final order is
conclusive upon the title to the thing and binding upon the parties and their
successors-in-interest.
Furthermore, the allegations of the private respondents of their
counsels negligence cannot be given any credence. In the Affidavit of private
respondent Romeo Alvarez, and reiterated in the Comment filed by the private
respondents before the Court of Appeals, it was alleged that on 12 December
1986,
their counsel, Atty. Rosendo O. Chavez, executed a Notice of
Withdrawal, which was not filed before the trial court and did not bear the
conformity of the private respondents.[40] Thereafter, Atty. Chavez allegedly
stopped attending the hearings before the trial court. As a result thereof, the
private respondents were not notified of the 17 February 1989 hearing, when
the Order dismissing the case was issued.
Records clearly show that Atty. Chavez could not have withdrawn
from the case on 12 December 1986. As of 14 December 1987, Atty. Chavez

presented as his witness, Rosario Param, one of the private respondents.[41]

Since he requested for continuance, he was required to bring the witness on
the next hearing date. However, seven postponements later, he was unable
to bring the witness he presented.[42] On 17 October 1988, Atty. Chavez
attended the hearing. He failed to attend the next hearing on 20 January
1989. Nevertheless, he was still at that time the counsel of the private
respondents and therefore the notice to him was binding upon the parties.
Moreover, the private respondent Rosario Param was perfectly aware that her
testimony was far from finished, and that she still needed to appear before the
Court. Given the foregoing facts, private respondents allegations that their
counsel was grossly negligent and that he had deceived them is not credible.
Even if the allegations of the private respondents are to be believed,
they should have raised them in a Motion for Reconsideration, or a petition to
annul the Order of the trial court dismissing the case. While they alleged that
they did not receive the Order requiring them to appear on the 17 February
1989 hearing, they never denied receiving the Order of dismissal. As the
records stand, the counsel for the respondents received the Order dismissing
the case on 28 February 1989,[43] and the respondents never filed a Motion
for Reconsideration or even a belated appeal to question the Order dismissing
case. Instead, they waited for a full year and filed with the DARAB a case
which was under the jurisdiction of the regular courts.
WHEREFORE, premises considered, this Court GRANTS this
petition and REVERSES the Decision of the Court of Appeals in CA-G.R. SP
No. 48396, dated 11 November 1998, affirming the Order of the DARAB
nullifying the transfer certificate titles issued in the names of Ricardo Alvarez,
Mercedes Oliver and Filinvest Land Inc. since the DARAB was without
jurisdiction to issue the said Order. No costs.
SO ORDERED.

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[G.R. NO. 166104 : June 26, 2008]

RN DEVELOPMENT CORPORATION, Petitioner, v. A.I.I. SYSTEM, INC.,
Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
In this Petition for Review under Rule 45 of the Rules of Court, petitioner RN
Development Corporation (now Fontana Development Corporation) seeks the
reversal of the September 2, 2004 decision1 of the Court of Appeals (CA) in
CA-G.R. CV No. 75227 entitled A.I.I. Systems, Inc. v. RN Development
Corporation as reiterated in its November 22, 2004 Resolution2 denying
petitioner's motion for reconsideration.
The assailed decision reversed and set aside an earlier Order and Resolution
of the Regional Trial Court (RTC) of Quezon City, Branch 226, in Civil Case
No. QOO-41445, dismissing respondent's complaint for its failure to appear
for pre-trial and for lack of interest. The respondent's motion for
reconsideration of the said Order was denied by the RTC in its Resolution
dated March 22, 2002, which is quoted hereunder:
As set forth in the Order of November 27, 2001, the pre-trial in this case has
been reset for five times already: first on February 6, 2001, then on April 24,
2001, on August 7, 2001, September 18, 2001 and on November 27, 2001.
Let it be noted that on April 24, 2001, there was no appearance for
[respondent] and counsel. Again, on August 7, 2001, [respondent] and
counsel did not appear, which prompted the Court to reset the pre-trial for the
last time to September 18, 2001, with a warning that should the [respondent]
and counsel not appear on the next setting, the Court will dismiss the case for
lack of interest. On September 18, 2001, counsel for the [respondent] moved
for a resetting since the new counsel had not yet studied the proposals for
settlement made by the [petitioner]. Thus, pre-trial was again reset for the last
time to November 27, 2001. On November 27, 2001, there was again no
appearance for the [respondent] and its counsel.
The record thus bears out that the Court had been very lenient to the
[respondent] when it allowed the resetting of the pre-trial for five times. In fact,
the Court set the pre-trial "for the last time" twice. It is litigants like

[respondent] who unduly clog the court dockets by taking advantage of the
court's leniency. If only to decongest the court dockets and to serve as a
lesson to [respondent] and counsel to be more considerate of the time and
resources of the Court, the amended motion for reconsideration is DENIED,
for lack of merit.
WHEREFORE, in view of the foregoing, the amended Motion for
Reconsideration is DENIED, for lack of merit. The Order of November 27,
2001 is REITERATED.
SO ORDERED.3
Aggrieved, respondent went on appeal to the CA on the lone issue as to
whether or not its complaint was properly dismissed for its failure to appear on
November 27, 2001 for pre-trial and for its lack of interest to prosecute the
case.
In its assailed Decision dated September 2, 2004, the CA reversed and set
aside the RTC's Order dated November 27, 2001 and the Resolution dated
March 22, 2002 and remanded the case to the said trial court for further
proceedings. We quote the fallo of the CA decision:
WHEREFORE, the appealed Order and Resolution of Branch 226 of the
Regional Trial Court of Quezon City, in Civil Case No. QOO-41445, dated 27
November 2001 and 22 March 2002, respectively, are hereby REVERSED
AND SET ASIDE. The case is remanded to the trial court for further
proceedings.
The petitioner sought reconsideration of the above-cited decision, which was
denied by the appellate court.
Hence, the petitioner is now before this Court contending that the CA erred in
reversing the RTC's Order dismissing the petitioner's complaint because "the
inference made by the Court of Appeals was manifestly mistaken; its
judgment was based on misapprehension of facts; and the Court of Appeals
manifestly overlooked certain facts not disputed by the parties and which, if
properly considered, would justify a different conclusion." Petitioner added
that the trial court did not commit grave abuse of discretion in dismissing
respondent's complaint.

The facts of the case are summed up by the CA from the records in its
decision, which reads in part:
On 28 July 2000, AII Systems, Inc. [respondent] filed a Complaint for Sum of
Money against RN Development Corporation [petitioner], seeking to collect
the outstanding balance of the purchase price of the pipes and fittings, valves
and electrical panels which [petitioner] allegedly ordered from [respondent].
On 09 November 2000, [petitioner] filed its answer. On 20 November 2000,
[respondent] filed an Ex-Parte Motion to Set Case for Pre-Trial which was
granted by the court a quo scheduling the case for pre-trial on 06 February
2001.
During the 06 February 2001 pre-trial conference, parties' counsel manifested
their intention to settle the case. In view thereof the pre-trial was reset to 24
April 2001.
At the calendared 24 April 2001 pre-trial, only [petitioner's] counsel appeared.
He manifested that there are negotiations for the settlement of the case and
moved for the resetting of the pre-trial. The trial court granted said request in
order to give the parties an opportunity to settle the case. Pre-trial was
rescheduled to 07 August 2001.
In the 07 August 2001 pre-trial meeting, [petitioner's] counsel appeared but
[respondent] and counsel were absent. The trial court deferred the pre-trial
and set the same to 18 September 2001, with a proviso that said resetting
shall be "the last time" and warned that if [respondent] and his counsel will not
appear again "the Court shall dismiss the case for lack of interest."
During the 18 September 2001 pre-trial, [respondent's] new counsel
appeared. He requested the resetting of the pre-trial because he has yet to
study [petitioner's] proposals for the settlement of the case. Despite its
warning in the 07 August 2001 Order the trial court relented to [respondent's]
request setting another date, 27 November 2001, for pre-trial. The trial court
again cautioned the parties that the resetting shall be for the "last time."
On 27 November 2001, pre-trial proceeded. [Petitioner] appeared but
[respondent] did not. Pursuant to the trial court's warning contained in the 07
August 2001 Order, the [respondent's] Complaint was dismissed, thus:

When this case was called for pre-trial, only [the] counsel for the [petitioner]
appeared; there was no appearance for the [respondent] and its counsel.
The court issued a warning during the hearing held on August [7,] 2001 that
should the [respondent] and counsel fail to appear again today for pre-trial,
the case shall be dismissed. The Court observes that this is the fifth time that
this case has been reset for pre-trial'
WHEREFORE, as prayed for, the complaint is hereby DISMISSED for failure
of the [respondent] and counsel to appear for pre-trial and for lack of interest'
SO ORDERED.
On 03 December 2001, [respondent] filed its Motion for Reconsideration
explaining his failure to attend the 27 November 2001 pre-trial, thus:
1. The instant case was scheduled for Pre-Trial last November 27, 2001 at
8:30 a.m. However, the - counsel [for respondent] arrived in court at 8:34 a.m.
or four (4) minutes late'
2. The - counsel [for respondent] sincerely apologizes for - tardiness which
was entirely unintentional. [He] left his residence [in Sampaloc, Manila] at 7:00
a.m. allotting the usual one (1) hour for his trip to Quezon City knowing that
[the] Honorable Court starts its hearing at exactly 8:30 [a.m.] but' along the
way [his vehicle suffered] a flat tire' It took - thirty (30) minutes to replace the tire and [he arrived at] Quezon City Hall at 8:20 a.m. - unfortunately [he] had a
hard time locating a parking space. [He] arrived in court at 8:34 a.m.
3. [Counsel] for [respondent] had always been punctual in attending the
hearing in this case.
On March 22, 2002 [respondent's] motion for reconsideration was denied by
the trial court, hence, this appeal.
According to petitioner, the case was scheduled for pre-trial for five (5) times,
particularly, on February 6, April 24, August 7, September 18, and November
27, 2001. The pre-trial set for April 24 and August 7, 2001 were reset when
respondent and counsel did not appear without any motion for postponement.
The pre-trial scheduled for September 18, 2001 was again reset on motion of

respondent's counsel who had not studied yet the proposals for settlement. In
two of these four resettings, the trial court warned respondent that the
resetting "was for the last time" and that in case of another failure to appear,
the case would be dismissed for lack of interest. It was only when respondent
and counsel failed to appear on November 27, 2001, despite warning, that the
trial court dismissed the complaint. Under the foregoing circumstances,
petitioner contended that the CA committed a reversible error when it inferred
that the trial court had been unduly strict in applying the rules of procedure
and that it entirely had no reason to dismiss the complaint. Petitioner likewise
disputed the appellate court's observation that the trial court's inflexible
attitude failed to meet the fundamental requirement of fairness and justice.
After a careful study and a thorough examination of the records, we find no
substantial reason to overturn the findings and conclusions of the CA,
particularly, that the respondent should not be blamed entirely for the resetting
of the pre-trial, which were duly approved by the trial court for the reasons
cited in its orders, quoted hereunder:
1. The Order dated February 6, 2001 which reset the pre-trial at the instance
of both parties When this case was called for pre-trial, the respective counsel of the parties
appeared and manifested before the Court their desire for an amicable
settlement of this case. In view of this, reset the pre-trial to April 24, 2001 at
8:30 a.m., sharp.
2. The Order dated April 24, 2001 which reset the pre-trial at the instance of
the petitioner's counsel also in view of the on-going negotiations between the
parties '
When this case was called for pre-trial, only the defendant's (petitioner's)
counsel, appeared. However, he manifested before this Court that there are
negotiations for the settlement of this case and asked for a resetting of the
pre-trial today, in order to give the parties time to settle the case. Wherefore,
reset the pre-trial to August 7, 2001 at 8:30 a.m., sharp.
3. The Order dated August 7, 2001 which allowed for the last time the
postponement of the scheduled pre-trial at the request of [petitioner's] counsel
-

When this case was called for pre-trial, only the defendant's (petitioner's)
counsel appeared. There was no appearance for the plaintiff (respondent) and
counsel. As manifested in open court, to show good faith on the part of the
defendant's (petitioner's) counsel and so as not to take advantage of the
absence of plaintiff (respondent) and counsel, reset the pre-trial for the last
time to September 18, 2001 at 8:30 a.m. sharp.
Notify the plaintiff and counsel. Should the plaintiff and counsel not appear on
the next setting, the Court will dismiss the case for lack of interest.
4. The Order dated September 18, 2001 which still allowed the postponement
of the pre-trial despite the previous warning in the 7 August 2001 Order, on
motion of respondent's new counsel to enable him to study the petitioner's
proposal for amicable settlement -

set aside the order of default issued by the trial court due to the ten-minute
delay of petitioner's counsel, ratiocinating that:
.. petitioner was declared in default - for his lawyer's ten-minute delay at the
pre-trial'
It is quite obvious that petitioner was denied his basic right to be heard, even
after his counsel had promptly explained the reason for his tardiness at the
pre-trial' [I]t would seem that the proverbial wheels of justice literally
"oversped". For an innocuous delay of ten minutes, petitioner was ultimately
denied due process of law which could have, had respondent judge been in a
less hurry to clear his docket, enable him to present his defenses . . .

When this case was called for pre-trial, the respective counsel of the parties
appeared, counsel for the plaintiff moved for a resetting of this case since the
new counsel had not yet studied the proposals for settlement made by the
defendant.

While it is desirable that the Rules of Court be faithfully observed, courts

should not be obsessively strict over the occasional lapses of litigants. Given
a good reason, the trial court should set aside its order of default, constantly
bearing in mind that it is the exception and not the rule of the day. A default
order must be resorted to only in clear cases of obstinate refusal or inordinate
neglect to comply with the orders of the court.

Wherefore, reset this case for pre-trial for the last time to November 27, 2001,
with additional setting for initial trial on January 21, 2002, both dates at 8:30 in
the morning, sharp.

Further, in Bank of the Philippine Islands v. Court of Appeals,5 we cautioned

the courts against the improvident dismissal of cases for failure to prosecute,
thus:

What remains for consideration is the cancellation of the pre-trial on

November 27, 2001 which resulted in the dismissal of the complaint by the
trial court. The counsel for respondent sought the reconsideration of the
dismissal of the case on the ground that he was only four (4) minutes late. He
explained why he came late for pre-trial on November 27, 2001, but
nonetheless apologized to the court for his tardiness which was not
intentional.

xxx. In Marahay v. Melicor, we said -

While petitioner now raises a factual issue as to whether or not the counsel for
respondent actually arrived in court four (4) minutes late on November 27,
2001, there is nothing on record to show that the allegation of the counsel for
respondent on this factual matter was disputed before the trial court. Hence,
the CA did not err when it found that the respondent only failed to arrive on
time for the pre-trial, instead of finding that there was failure to appear and
lack of interest on the part of the respondent. Under this factual setting, the
CA properly applied our ruling in Africa v. Intermediate Appellate Court,4 which

While a court can dismiss a case on the ground of non prosequitur, the real
test of such power is whether, under the circumstances, plaintiff is chargeable
with want of due diligence in failing to proceed with reasonable promptitude.
In the absence of a pattern or a scheme to delay the disposition of the case 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 rather
than wield their authority to dismiss.
Indeed, the dismissal of a case whether for failure to appear during trial or
prosecute an action for an unreasonable length of time rests on the sound
discretion of the trial court. But this discretion must not be abused, nay
gravely abused, and must be exercised soundly. Deferment of proceedings
may be tolerated so that cases may be adjudged only after a full and free
presentation of all the evidence by both parties. The propriety of dismissing a

case must be determined by the circumstances surrounding each particular

case. There must be sufficient reason to justify the dismissal of a complaint.
Pre-trial is not a mere technicality in court proceeding for it is essential in the
simplification and the speedy disposition of disputes. The Court observed in
the case of Development Bank of the Philippines v. Court of Appeals6 that:
Everyone knows that a pre-trial in civil actions is mandatory, and has been so
since January 1, 1964. Yet to this day its place in the scheme of things is not
fully appreciated, and it receives but perfunctory treatment in many courts.
Some courts consider it a mere technicality, serving no useful purpose save
perhaps, occasionally to furnish ground for non-suiting the plaintiff, or
declaring a defendant in default, or, wistfully, to bring about a compromise.
The pre-trial device is not thus put to full use. Hence it has failed in the main
to accomplish the chief objective for it: the simplification, abbreviation and
expedition of the trial, if not indeed its dispensation. This is a great pity,
because the objective is attainable, and with not much difficulty, if the device
were more intelligently and extensively handled.
It is the policy of the Court to afford every litigant the amplest opportunity for
the proper and just determination of his cause, free from the constraints of
technicalities. Since rules of procedure are mere tools designed to facilitate
the attainment of justice, courts must avoid the rigid application thereof which
tends to frustrate rather than promote the ends of justice.7 Here, the counsel
for respondent, upon receiving the order dismissing the complaint,
immediately filed a motion for reconsideration which adequately explained his
late arrival for four (4) minutes, which was not disputed before the trial court.
Under the circumstances, the latter should have granted respondent's motion
for reconsideration of the dismissal of the complaint. The interest of justice will
be better served by the continuation of the proceedings and final disposition of
the case on the merits before the trial court. Thus, the appellate court did not
commit any reversible error when it set aside the order of the trial court
dismissing the respondent's complaint.
WHEREFORE, the instant petition is DENIED for lack of merit. The Decision
of the Court of Appeals dated September 2, 2004 is AFFIRMED. Civil Case
No. QOO-41445 is remanded to the court of origin which is directed to resolve
the case with dispatch.
SO ORDERED.

G.R. No. 119879. March 11, 2004]

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

ALCORIZA, BEATRIZ M. PATROCIO, SOLOMON I. MARIO, BENJAMIN
I. MARIO, LILI MARIO, VERONICA I. MARIO, SEVERINA MARIO
VDA. DE ISO, ROSITA ISO, AGRIPINO ISO, ELIZABETH ISO, VIRGINIA
ISO, LEOPOLDO ISO, NAPOLEON ISO, petitioners, vs.

COURT OF APPEALS and THE HEIRS OF FELIX GAUDIANE, namely:

ARNULFO GAUDIANE, GEORGE GAUDIANE, RODOLFO GAUDIANE,
RAYMUNDO GAUDIANE, SANDRA GAUDIANE, CEFERINA GAUDIANE,
JONNA GAUDIANE, MILLARD GAUDIANE, GLORIA TORRES-GAUDIANE,
WILFREDO GAUDIANE, ROLANDO GAUDIANE, ANTONIO GAUDIANE,
KATHRYN GAUDIANE, PRISCILLA GAUDIANE, CATALINA PACIOS,
DONATELLA PACIOS, REMEDIOS PACIOS, GUALBERTO GAUDIANE,
VICTOR GAUDIANE, LORNA GAUDIANE, DOLORES GAUDIANE,
respondents.

DECISION
CORONA, J.:
Before us is a petition for review of the decision[1] dated February 24,
1995 of the Court of Appeals[2] affirming the decision[3] dated March 27,
1991 of the Regional Trial Court of Dumaguete City, Branch 34, ordering the
partition of Lot 4389 and directing the petitioners to make an accounting of the
rentals and profits they have obtained from the said lot from the time the case
was filed and to remit to respondents their one-half share thereof.
The facts, as found by the courts a quo, follow.
The lot in controversy is Lot 4389 located at Dumaguete City and
covered by Original Certificate of Title No. 2986-A (OCT 2986-A) in the names

of co-owners Felix and Juana Gaudiane. Felix died in 1943 while his sister
Juana died in 1939. Herein respondents are the descendants of Felix while
petitioners are the descendants of Juana.
On November 4, 1927, Felix executed a document entitled Escritura de
Compra-Venta (Escritura, for brevity) whereby he sold to his sister Juana his
one-half share in Lot No. 4156 covered by Transfer Certificate of Title No.
3317-A. The Escritura described the lot sold as follows:
A parcel of land (Lot No. 4156 of the Cadastral Survey of Dumaguete), with
the improvements thereon, situated in the Municipality of Dumaguete.
Bounded on the NE. and E. by Lot No. 4155; on the SW. by Lots Nos. 4157
and 4158; and on the NW. by Lot No. 4154. Containing an area of FIVE
HUNDRED AND FIFTY-TWO (552) SQUARE METERS, more or less.
What muddled the otherwise clear contract of sale was a statement in the
Escritura that Lot No. 4156 was declared under Tax Declaration No. 18321.
However, said tax declaration was for another parcel of land, Lot 4389 and not
Lot 4156.
Petitioners predecessors-in-interest, Geronimo and Ines Iso (the Isos),
believed that the sale by Felix to their mother Juana in 1927 included not only
Lot 4156 but also Lot 4389. In 1974, they filed a pleading in the trial court
seeking to direct the Register of Deeds of Dumaguete City to cancel OCT
2986-A covering Lot 4389 and to issue a new title in favor of the Isos. This
was later withdrawn after respondents predecessors-in-interest, Procopio
Gaudiane and Segundo Gaudiane, opposed it on the ground that the Isos
falsified their copy of the Escritura by erasing Lot 4156 and intercalating in
its place Lot 4389.
The Isos again tried their luck to acquire title in their name by filing in
1975 a case for quieting of title of Lot 4389 but the same was dismissed
without prejudice.

On March 27, 1991, the trial court rendered a decision in favor of the
respondents, the dispositive portion of which read:
WHEREFORE, judgment is hereby rendered ordering the partition of the land
in question, i.e., Lot No. 4389 of the Dumaguete Cadastre, covered by
Original Certificate of Title No. 2986-A, in the names of Felix Gaudiane and
his sister Juana Gaudiane, consisting of 36,988 square meters, between the
plaintiffs and the defendants in the following proportion: one-half (1/2) share
will go to the heirs of the late Felix Gaudiane, (1/2) share will go to the heirs of
the late Juana Gaudiane, defendants herein.
The defendants who are in possession of the subject property are likewise
directed within thirty (30) days from receipt of this decision to make an
accounting of the rents and profits they may have obtained from the real
estate in question, from the time this action was instituted, and to remit to
plaintiffs their proportionate one-half (1/2) share thereof.[5]
According to the trial court, Felix did not sell to Juana his one-half share
in Lot 4389. The Escritura clearly stated and described that what was sold
was Lot 4156, not Lot 4389. Had it been his intention to include Lot 4389, he
would have so identified and described it in the deed of sale. The fact that the
title to Lot 4389 was still in the names of siblings Felix and Juana was proof
that the subject lot continued to be under their co-ownership. The trial court
refused to give weight to the tax declarations supposedly evidencing
petitioners exercise of ownership over said lot after discovering that said
declarations did not state the lot number or the certificate of title number.
The trial court also ruled that the dismissal of petitioners second case
for quieting of title due to failure to prosecute and for failure to comply with
court orders had the effect of adjudication on the merits, pursuant to the Rules
of Court. Consequently, petitioners claim of exclusive ownership over Lot
4389 was without merit because it was barred by the order of dismissal dated
January 10, 1985 in Civil Case No. 6817.

The Isos later filed another action for quieting of title, docketed as Civil
Case No. 6817, but it was again dismissed[4] on January 10, 1985 by the
RTC of Negros Oriental, Branch 35, due to the failure of the plaintiffs (the
Isos) to prosecute and to comply with the orders of the court. When the
judgment became final, respondents sent a letter to Ines Iso asking her to
surrender the possession of the one-half portion of Lot No. 4389 comprising
Felix share. The Isos refused.

As to whether the respondents lost by prescription their right to their

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

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

[6]

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

The appellate court reiterated the reasons of the trial court in holding
that Felix never sold his share in Lot 4389 to Juana. The order of dismissal of
the action for quieting of title was not appealed and therefore the issues
raised therein involving the same lot could not be raised in the subject action
anymore. Lastly, according to the Court of Appeals, the doctrine that a titled
lot may be acquired by prescription in certain exceptional circumstances could
not apply in the case at bar for the reason that herein petitioners employed
fraud in claiming exclusive ownership over Lot 4389.
Hence, this petition for review based on the following assignment of
errors:
I
THE RESPONDENT HONORABLE COURT
GRAVELY ERRED IN AFFIRMING THAT WHAT
WAS SOLD BY THE LATE FELIX GAUDIANE TO
HIS SISTER JUANA GAUDIANE WAS HIS ONEHALF (1/2) SHARE OF ANOTHER LAND, LOT NO.
4156, COVERED BY ORIGINAL CERTIFICATE OF
T I T L E N O . 2 9 8 6 - A , P U R S U A N T TO T H E
ESCRITURA DE COMPRA VENTA, EXHIBIT A
DATED NOVEMBER 4, 1927, DISREGARDING
THE DOCUMENTARY EVIDENCE OF THE
PETITIONERS AS WELL AS THE TESTIMONIAL
EVIDENCE ADDUCED BY THE PETITIONERS;
II
THAT THE RESPONDENT HONORABLE COURT
GRAVELY ERRED IN FINDING THAT THE
ARGUMENT OF THE PETITIONERS WITH
REFERENCE TO THE SECOND ASSIGNMENT OF
ERROR TO THE EFFECT THAT THE DISMISSAL
OF THE COMPLAINT FOR QUESTING OF TITLE,
DOCKETED AS CIVIL CASE NO. 6817 DID NOT
BAR THEM FROM INTERPOSING AS A DEFENSE
IN THE CASE AT BAR THEIR CAUSE OF ACTION
IN CIVIL CASE NO. 6817;
III
THAT RESPONDENT HONORABLE COURT
GRAVELY ERRED BY NOT GIVING DUE COURSE

TO THE CLAIM OF PETITIONERS AND LEGAL

EFFECT OF PRESCRIPTION AND LACHES
ADVERTED BY DEFENDANTS-APPELLANTS IN
THEIR ANSWER AND AFFIRMATIVE DEFENSES
PROVEN DURING THE HEARING BY
DOCUMENTARY AND TESTIMONIAL EVIDENCE.
[7]
Unconvinced by the rulings of the courts a quo, petitioners reiterate
their arguments to support their claim of exclusive ownership of Lot 4389.
Petitioners insist on their ownership over Felix share in said lot on the
ground that the Escritura expressly mentioned Tax Declaration No. 18321
representing payment of taxes for Lot 4389. We disagree. As found by the
courts a quo, a thorough reading of the Escritura reveals that Felix intended to
sell his share in Lot 4156 only. In fact, only Lot 4156 was described in the
Escritura. Consequently, the citation of Tax Declaration No. 18321 vis--vis
Lot 4156 was clearly a mistake. Even the petitioners predecessors-in-interest,
the Isos, believed that Lot 4389 was not included in the Escritura because
they erased Lot 4156 and fraudulently replaced it with Lot 4389 in their
prayer to cancel OCT 2986-A. Had they honestly believed that Lot 4389 was
included in the sale, there would have been no need for them to resort to
falsification. Moreover, if Felix had really sold his share in Lot 4389 to Juana,
the latter would have had the title to the property transferred to her name
alone. But she never did and the title to Lot 4389 continued to be in the
names of both Felix and Juana.
According to the petitioners, the order dated January 10, 1985 in Civil
Case No. 6817 of the RTC of Negros Oreintal, Branch 35, dismissing their
case for quieting of title on the ground of failure to prosecute and to comply
with the lawful orders of the court was erroneously issued, considering that all
the plaintiffs therein (petitioners), except their counsel, failed to attend the
supposed hearing. And assuming arguendo that the order was dismissal with
prejudice, petitioners contend that they are not barred from raising the
defense of exclusive ownership in the instant case for partition because their
present defense was not the issue in the case for quieting of title. Also, the
effect of said order was effectively waived when the petitioners were allowed
during the trial to present evidence of their exclusive ownership of Lot 4389
without any objection from the respondents.
Petitioners arguments are misplaced.
We cannot delve anymore into the legality and validity of the order of
dismissal dated January 10, 1985 in Civil Case No. 6817 because it has long

become final and executory for failure of the petitioners to file an appeal. In
accordance with Section 3, Rule 17 of the 1997 Rules of Civil Procedure,[8]
said order had the effect of judgment on the merits although no trial was
conducted because it did not contain any statement that the case was
dismissed without prejudice to the filing of a similar future action. As such,
based on the principle of res judicata,[9] the petitioners are barred in another
action (involving the same subject matter, parties and issues) from raising a
defense and from asking for a relief inconsistent with an order dismissing an
earlier case with prejudice.
Petitioners argue that res judicata does not apply in the case at bar for
the reason that a petition to quiet title has a cause of action different from a
petition for partition.
We do not think so.
In Medija vs. Patcho, et al.,[10] we ruled that a case for partition and an
action for quieting of title have identical causes of action and can therefore be
the subject of res judicata:
Is there identity of cause of action between the first and second actions? The
answer is yes. The fact that Civil Case No. 1884, filed by the appellees
against the appellant was for partition of the hereditary estate with accounting
of fruits of several parcels of land, while Civil Case No. 2665, brought by
appellant against the appellees, was for quieting of title over two parcels
which are parts of the same properties subject of the previous case, does not
remove the present proceeding from the operation of the principle of bar by
former judgment. As specifically stated in the decision of the Court of Appeals
in Civil Case No. 1884, now final and executory, the right of therein plaintiffs
(appellees herein) to partition the several parcels of land was based on Article
1103 of the Civil Code. The appellees' right to ownership is based on
succession they being heirs of the deceased Lorenzo Morante. What the
appellant did is to institute another action which would preclude the execution
of the judgment of the lower court in Civil Case No. 1884. It must be
remembered that a change in the form of action or in the relief sought does
not remove a proper case from the application of res judicata. In other words,
a party cannot, by varying the form of action, or adopting a different method of
presenting his case, escape the operation of the principle that one and the
same cause of action shall not be twice litigated between the same parties
(Ramos vs. Pangasinan Transportation Company, Inc., 79 SCRA 171; Aguila
vs. J.M. Tuason & Co., Inc., 22 SCRA 690, citing Clemente vs. H.E. Heacock
Co., G.R. No. L-23212, May 18, 1967; Francisco vs. Blas, 93 Phil. 43).[11]

Petitioners filed an action to quiet title for the sole purpose of claiming
for themselves exclusive ownership of Lot 4389. On the other hand, in the
case for partition filed by respondents, petitioners set up the defense of sole
dominion in order to frustrate the equal division of the property between the
heirs of Felix and Juana. Considering the similarity of petitioners defense in
this case with their main averment in the case for quieting of title, petitioners
are barred by res judicata from claiming sole ownership of Lot 4389.
We also find that respondents never waived their right to object to
petitioners barred defense of exclusive ownership. While the petitioners were
allowed in the subject case for partition, accounting and damages to present
their evidence of exclusive ownership, the respondents failure to oppose did
not mean that the latter waived their right to object to the petitioners
evidence. For reasons of public policy, res judicata cannot be waived by a
party because the time and energy of the State and the taxpayers are wasted
by the re-litigation of settled issues. That is the reason why, under Rule 9 of
the 1997 Rules of Civil Procedure, a trial court may dismiss a case motu
proprio on grounds of res judicata although it is not raised, and apparently
waived, in a motion to dismiss or answer. Conversely, a plaintiff, or the trial
court itself, may invoke res judicata to resist a defense barred by prior
judgment even after trial on the merits.
Lastly, petitioners argue that they acquired Felix share in the lot in
question through prescription and laches. As a general rule, ownership over
titled property cannot be lost through prescription.[12] Petitioners, however,
invoke our ruling in Tambot vs. Court of Appeals[13] which held that titled
property may be acquired through prescription by a person who possessed
the same for 36 years without any objection from the registered owner who
was obviously guilty of laches.
Petitioners claim is already rendered moot by our ruling barring
petitioners from raising the defense of exclusive ownership due to res
judicata. Even assuming arguendo that petitioners are not so barred, their
contention is erroneous. As correctly observed by the appellate court:
The TAMBOT case is inapplicable. The case of Bicarme vs. Court of Appeals
would be more in point. In the case at bar, appellees predecessor-in-interest
fraudulently denied possession of one-half of Lot No. 4389 to appellants by
misrepresenting the Escritura executed by Felix Gaudiane included not only
Lot No. 4156 but also Lot No. 4389. That of course is not true. As explained
earlier, only Lot No. 4156 was sold. It was through this misrepresentation that
appellees predecessor-in-interest succeeded in withholding possession of
appellees share in Lot No. 4389. Appellees cannot, by their own fraudulent
act, benefit therefrom by alleging prescription and laches.[14]

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

SO ORDERED.

!
!

JOSEFINA M. CRUZ and ERNESTINA M. CONCEPCION,

Petitioners,
- versus THE HON. COURT OF APPEALS, SECOND DIVISION, MARIANO BOY
BUNAG and ROLANDO BUNAG,
Respondents.
G.R. No. 164797
February 13, 2006
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Certiorari under Rule 65 of the Rules of Court
which seeks to reverse and set aside the decision[1] of public respondent
Court of Appeals dated 19 March 2004 which dismissed the petition for
certiorari asking for the nullity of the 13 May 2003 Order of the Regional Trial
Court of Gapan, Nueva Ecija, Branch 35, in Civil Case No. 2583-02, and its
Resolution[2] dated 29 June 2004 denying petitioners motion for
reconsideration.
follows:

The antecedents are substantially stated by the Court of Appeals as

There are four (4) cases involved in this
controversy.
The first case that was filed
between the parties is Civil Case No. 4365 for
Unlawful Detainer litigated before the Municipal
Trial Court of Gapan, Nueva Ecija entitled
Josefina M. Cruz and Ernestina M.
Concepcion, plaintiffs, vs. Mariano `Boy Bunag,
Rolando Bunag, Remedios Bunag, et al.,
Defendants.
This case was decided on 6

November 1998 by the Municipal Trial Court in

favor of herein petitioner Josefina M. Cruz and
Ernestina M. Concepcion.
The second case is Civil Case No. 1600
for Quieting of Title, filed before the Regional
Trial Court of Gapan, Nueva Ecija, Branch 36
with Carlos L. Bunag, Elias Bunag Natividad,
Mariano Bunag, Salud Bunag Clanaoc and
Juliana Bunag Arevalo, as Plaintiffs and
Josefina M. Cruz and Ernestina M. Concepcion
as Heirs of Sps. Carlos Maniquis and Marina
Bunag, as Defendants.
This case was
dismissed for failure to prosecute as evidenced
by the Regional Trial Court Order dated 10
March 2000.
The third case is Civil Case No. 2573-02
for Injunction, with Mariano `Boy Bunag and
Rolando Bunag as Petitioners against Carlos
Bunag, Elias Bunag Natividad, Mariano Bunag,
Salud Bunag Clanaoc and Juliana Bunag
Arevalo as Defendants. This case, which was
filed before the Regional Trial Court of Gapan
City, Branch 35, was dismissed on ground of res
judicata. The 6 November 2002 Order, in effect,
ruled that there is a substantial identity of
parties in this case and in Civil Case No. 1600,
a Petition for Quieting of Title.
The fourth case is the instant
controversy for Annulment of Title With
Damages.
Docketed as Civil Case No.
2583-02, it was lodged by herein private
respondents Mariano Bo[y] Bunag and
Rolando Bunag against herein petitioners
Josefina M. Cruz and Ernestina M. Concepcion
before the sala of Branch 35, Regional Trial
Court of Gapan City.
It appears that herein petitioners
interposed a Motion for Outright Dismissal of
Civil Case No. 2583 which was granted by the

Court a quo as evidenced by an Order dated 18

February 2003, ratiocinating:
xx

xxx

xxx

After a careful study of the arguments of both

parties, the Court has found that herein case (2583)
involve the same parties, subject matter and issue as
that in Civil Case No. 1600 which has become final
and executory and Civil Case No. 2573-02 which was
already dismissed by this Court on the ground of res
judicata.
In all three cases, Mariano Bunag was
included as party-plaintiff and Ernestina Concepcion
as party-defendant. The subject matter involves a
parcel of land located in San Nicolas, Gapan City with
an area of 1,160 square meters, more or less, and the
issue is who between the two parties has the lawful
title over the same. Clearly, not only res judicata but
also accion pendente lite is present in herein case
which the plaintiffs and their counsel should have
revealed in the Certificate/Verification of their
complaint. The allegation that it is only now that they
have learned of the existence of Civil Case No. 1600
is without merit considering that in the Motion for the
Outright Dismissal of Civil Case No. 2573, dated
September 19, 2002, its existence was already
disclosed and even became the ground for the
dismissal of Civil Case No. 2573 on the ground of res
judicata.
Moreover, the Certification against forum
shopping does not only refer to final and executory
actions but also to pending controversies.
Considering that plaintiffs have been represented by
the same counsel in Civil Case No. 2573 and herein
case (Civil Case No. 2583-02), it is very clear that
plaintiffs counsel is appraised (sic) of the existence of
Civil Case No. 1600 and Civil Case No. 2573.
WHEREFORE, premises considered, the
Motion for Outright Dismissal is granted by reason of
res judicata and accion pendente lite and the plaintiffs

and their counsel are declared guilty of indirect

Contempt of Court by reason of non-disclosure of Civil
Case No. 1600 and Civil Case No. 2573 as required
by Section 5, Rule 7 of the Revised Rules of Court
and ordered them to pay a fine of P1,000.00 each.
SO ORDERED. (Rollo, p. 36)
x

xxx

xxx

xx

However, when herein private respondents

interposed their Motion for Reconsideration, the court a
quo reversed itself and reinstated the present case, the
fallo of the herein assailed Order reads:
x

xxx
xxx

xx

In the light of the foregoing, the Order dated

February 18, 2003 of this Court, granting defendants
Motion for the Outright Dismissal of this case and citing
plaintiffs and counsel for contempt of court is hereby
reconsidered and set aside. Accordingly, the instant case
is reinstated and the defendants are directed to file their
answer/responsive pleading within fifteen (15) days from
receipt of this order.
SO ORDERED. (Rollo, pp. 11-13)[3]
Via petition for review, petitioners went to the Court
of Appeals. The latter dismissed the petition for lack of
merit. It ruled that one of the elements of res judicata,
i.e., that there must be, between the first and the second
actions, identity of parties, of subject matter and of cause
of action, is lacking. It explained:
First. The issue in the Injunction case is the propriety of
the demolition order; while in the present action (Petition
for Annulment of Title With Damages), the pivot of inquiry
is the ownership of the controversial estate.

Second. Private respondent Mariano Bunag denied that

he authorized Carlos Bunag to sign the Verified
Complaint in his behalf. Because of this, Mariano Bunag
cannot be considered as a party litigant in the Injunction
case.
Concomitantly, there is no identity of parties
between the present case and in Civil Case No. 2573-02
(Injunction). As correctly ruled by the trial court, thus:
x x x

xxx

xxx

While it is true that this Court has earlier made a

declaration in Civil Case No. 2573 that Carlos Bunag was
authorized by his co-plaintiffs to file Civil Case No. 1600
including herein plaintiff Mariano Bunag, against herein
defendants, such declaration was based on the verified
complain[t] signed by Carlos Bunag. In the absence of
any evidence to the contrary, the Court has to assume
that indeed Carlos Bunag was authorized by his coplaintiff Mariano Bunag to file Civil Case No. 1600.
However, with the submission of the affidavit of Mariano
Bunag on April 14, 2003, wherein he claimed that Civil
Case No. 1600 for quieting of title was filed without his
knowledge by Carlos Bunag for and in behalf of the other
plaintiffs including himself, the verified complaint of
Carlos Bunag is now disputed.
The categorical denial of Mariano Bunag that he was not
aware that Carlos included him as one of the plaintiffs in
Civil Case No. 1600 for quieting of title has disputed the
verified complaint of Carlos Bunag.
What is more,
Rolando Bunag, one of the herein plaintiffs was never
made a party in the said Civil Case No. 1600 for quieting
of title. Since Mariano Bunag did not authorize nor give
his consent to Carlos Bunag to include him as one of the
plaintiffs in Civil Case No. 1600 and that herein plaintiffs
Rolando Bunag is not a party to the said case, the
dismissal of Civil Case No. 1600 will not bind them.
Hence, the dismissal of Civil Case No. 1600 will not bar
the filing of the instant complaint as one of the requisites
of res judicata is absent. There is no identity of parties
between Civil Case No. 1600 and the instant case for the
simple reason that herein plaintiffs were not parties in
Civil Case No. 1600 as discussed above. Consequently,

plaintiffs and their counsel can not be said to have

violated the rule against forum shopping. Plaintiffs and
their counsel did not file Civil Case No. 1600 and
therefore they are not obligated to inform this Court that
they have filed a similar action involving the same issue
with other court.
x x x
Third. As the court of justice abhors the disposition of the
case based on technicalities, this Court further concurs
with the trial courts disquisition, to quote:
x

xxx

xxx

xx

Moreover, substantial justice demands that technicalities

should not be allowed to prevail over the substantive
rights of a party-litigant. If the subject property is really
owned by the plaintiffs, then it would be the height of
injustice if they are not allowed to prove their cause of
action because of mere technicality. It would amount to
deprivation of their property without due process.[4]
Petitioners filed a motion for reconsideration[5] which was denied in a
resolution dated 29 June 2004.[6]
Dissatisfied, petitioners are now before us charging that the Court of
Appeals committed grave abuse of discretion amounting to lack or excess of
jurisdiction in rendering the assailed decision and resolution.[7]
Petitioners contend that all the elements of res judicata are present in
the instant case. They argue that the shuffling of parties should not prevent
the application of res judicata considering that three prior cases (Civil Case
No. 4365 for Unlawful Detainer, Civil Case No. 1600 for Quieting of Title and
Civil Case No. 2573 for Injunction) against substantially the same parties over
the same subject matter and cause of action have all been decided in their
favor. They point out that private respondent Mariano Boy Bunag was one
of the parties in the Ejectment and Quieting of Title cases (and Injunction),
and that his allegation in his affidavit that he neither authorized Carlos Bunag
to include him in the Quieting of Title case nor was he (Mariano) informed
thereof, leaves too much to be desired and that same was merely intended for
delay. As regards the non-inclusion of private respondent Rolando Bunag in

the case for Quieting of Title but who was a party in the Ejectment case (as
well as in the Injunction case), they claim that same was in preparation for this
stage of the proceedings. They added that insofar as identity of causes of
action is concerned, it cannot be denied that the ownership and its
concomitant right of possession are the issues in the cases for Quieting of
Title, Injunction and Annulment of Title.
In their comment,[8] private respondents Rolando Bunag and
Monina Luzong Vda. de Bunag[9] maintain that the public respondent did not
err when it held that there was no res judicata in the instant case and that the
disposition of the case should not be based on technicalities.
at bar?

The question to be resolved is: Does res judicata apply in the case

Under the rule of res judicata, also known as bar by prior

judgment, a final judgment or order on the merits, rendered by a Court having
jurisdiction of the subject matter and of the parties, is conclusive in a
subsequent case between the same parties and their successor-in-interest by
title subsequent to the commencement of the action or special proceeding,
litigating for the same thing and under the same title and in the same
capacity. The requisites essential for the application of the principle are: (1)
there must be a final judgment or order; (2) said judgment or order must be on
the merits; (3) the Court rendering the same must have jurisdiction on the
subject matter and the parties; and (4) there must be between the two cases
identity of parties, identity of subject matter, and identity of causes of action.
[10]
Petitioners claim res judicata applies in this case because all the
elements thereof are present. On the other hand, private respondents argue
the contrary alleging that the second and fourth elements are lacking.
There being no dispute as to the presence of the first and third
elements, we now determine if the second and fourth elements are attendant
in the case.
On the second element, private respondents argue that the
dismissal of Civil Case No. 1600 (for Quieting of Title) was not a dismissal on
the merits. The dismissal of this case, they claim, will not bar the filing of the
instant case (Civil Case No. 2583-02 for Annulment of Title) because there
was neither litigious consideration of the evidence nor any stipulations
submitted by the parties at the trial. In fact, there was no pre-trial conference
and that after four years of court inactivity, the case was dismissed for failure
to prosecute.[11]

Their argument does not hold water. Section 3 of Rule 17 of the

1997 Rules of Civil Procedure provides:
Section 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.[12]
The rule enumerates the instances where the complaint may be
dismissed due to plaintiff's fault: (1) if he fails to appear on the date for the
presentation of his evidence in chief; (2) if he fails to prosecute his action for
an unreasonable length of time; or (3) if he fails to comply with the rules or
any order of the court. Once a case is dismissed for failure to prosecute, this
has the effect of an adjudication on the merits and is understood to be with
prejudice to the filing of another action unless otherwise provided in the order
of dismissal. In other words, unless there be a qualification in the order of
dismissal that it is without prejudice, the dismissal should be regarded as an
adjudication on the merits and is with prejudice.[13] The order dismissing
Civil Case No. 1600 reads:

For failure of the plaintiffs as well as

counsel to appear on several settings despite
due notices, precisely for the reception of
plaintiffs evidence, upon motion of the
defendant through Atty. Mark Arcilla, this case is
dismissed for failure to prosecute.[14]
It is clear from the afore-mentioned order that said case was dismissed,
upon petitioners motion, for failure of private respondents and their counsel to
attend several scheduled hearings for the presentation of their evidence.

Since the order did not contain a qualification whether same is with or without
prejudice, following Section 3, it is deemed to be with prejudice and shall have
the effect of an adjudication on the merits. A ruling based on a motion to
dismiss, without any trial on the merits or formal presentation of evidence, can
still be a judgment on the merits.[15]
We now go to the fourth element identity of parties, subject matter
and cause of action.
Petitioners, citing jurisprudence, argue that res judicata is not defeated
by a minor difference of parties, as it does not require absolute but only
substantial identity of parties[16] in light of the fact that three prior cases
before the instant case have been decided in their favor against substantially
the same parties over the same subject matter and cause of action.
Public respondent ruled there was no identity of parties for two reasons:
(1) Private respondent Mariano Bunag was not a party litigant in the Quieting
of Title[17] case because he denied in an affidavit that he authorized Carlos
Bunag to sign the Verified Complaint and to make him a party thereof; (2)
Private respondent Rolando Bunag was not made a party in the Quieting of
Title case.
Private respondent Mariano Boy Bunags claim that the Quieting of
Title case was filed without his knowledge does not inspire belief. In the
decision of the trial court in Civil Case No. 4365 (for Unlawful Detainer), it is
very clear that the defendants in said case that included both private
respondents, have knowledge of the pendency of the Quieting of Title case. A
portion of the decision[18] reads:
Defendants claim of ownership of the
property involved in this case which is now
pending with the Regional Trial Court of Gapan,
Nueva Ecija (paragraph 3, Pre-Trial brief of
defendants) where the issue of ownership is the
subject of the proceedings x x x.
It was the defendants, through their trial brief, that informed the court hearing
the ejectment case that a case (Civil Case No. 1600 for Quieting of Title) is
pending where the issue of ownership is the subject of the proceedings.
Thus, as early as the pendency of the Ejectment case, private respondents
had known of the case for Quieting of Title. If he really did not authorize
Carlos Bunag to include him as one of the plaintiffs in the Quieting of Title
case, he could have easily questioned his inclusion therein at an earlier time.

This, he did not do. He executed his affidavit only on 14 April 2003 or more
that three years after the case for Quieting of Title has been dismissed, and
after the Injunction case which he and private respondent Rolando Bunag
filed, was dismissed. It is evident that his affidavit is a mere afterthought
executed after his Motion for Reconsideration in the injunction case was
denied because the court gave no weight on his counsels allegation that he
(Mariano Bunag) was unaware of the complaint signed and filed by Carlos
Bunag. It is too late in the day for him to claim lack of knowledge. It is very
clear that the execution of the affidavit is to make it appear that there is no
identity of parties in the instant case and in the case for Quieting of Title.
Private respondents add that since Rolando Bunag was not a party in
the Quieting of Title case, the dismissal of said case will not bind him and thus
not bar the filing of the instant case.
We do not agree. The principle of res judicata may not be evaded by
the mere expedient of including an additional party to the first and second
action. Only substantial identity is necessary to warrant the application of res
judicata. The addition or elimination of some parties does not alter the
situation. There is substantial identity of parties when there is a community of
interest between a party in the first case and a party in the second case albeit
the latter was not impleaded in the first case.[19]
In the case at bar, it is apparent that from the face of the complaint for
Quieting of Title, private respondent Rolando Bunag was not a party therein
as his name does not appear in the title. This, notwithstanding, his claim and
that of the plaintiffs therein, which included private respondent Mariano
Bunag, are the same to be declared the true owners of the parcel of land
covered by Original Certificate of Title (OCT) No. 22262 and Transfer
Certificate of Title (TCT) No. 67161 of the Registry of Deeds of Nueva Ecija.
Private respondent Rolando Bunag and the plaintiffs are all heirs of the
alleged owners of the parcel of land covered by OCT No. 22262. Private
respondent Rolando Bunag, though not a party therein, shared an identity of
interest from which flowed an identity of relief sought, namely, to declare them
the true owners of the parcel of land covered by OCT No. 22262 and TCT No.
67161. Such identity of interest is sufficient to make them privy-in-law,
thereby satisfying the requisite of substantial identity of parties.
As regards the identity of subject matter, we find that there is. In both
Civil Case No. 1600 (for Quieting of Title) and Civil Case No. 2583 (for
Annulment of Title), what is involved is one and the same parcel of land
covered by TCT No. 67161.

We likewise rule that there is identity of causes of action.

Hornbook is the rule that identity of causes of action does not mean absolute
identity. Otherwise, a party could easily escape the operation of res judicata
by changing the form of the action or the relief sought. The test to determine
whether the causes of action are identical is to ascertain whether the same
evidence will sustain both actions, or whether there is an identity in the facts
essential to the maintenance of the two actions. If the same facts or evidence
would sustain both, the two actions are considered the same, and a judgment
in the first case is a bar to the subsequent action.[20] In Stilianopulos v. The
City of Legaspi,[21] this Court had this to say:
The underlying objectives or reliefs
sought in both the quieting-of-title and the
annulment-of-title cases are essentially the
same -- adjudication of the ownership of the
disputed lot and nullification of one of the two
certificates of title. Thus, it becomes readily
apparent that the same evidence or set of facts
as those considered in the quieting-of-title case
would also be used in this Petition.
The difference in form and nature of
the two actions is immaterial and is not a reason
to exempt petitioner from the effects of res
judicata. The philosophy behind this rule
prohibits the parties from litigating the same
issue more than once. When a right or fact has
been judicially tried and determined by a court
of competent jurisdiction or an opportunity for
such trial has been given, the judgment of the
court, as long as it remains unreversed, should
be conclusive upon the parties and those in
privity with them. Verily, there should be an end
to litigation by the same parties and their privies
over a subject, once it is fully and fairly
adjudicated.
Civil Case No. 1600 was for Quieting of Title, while Civil Case No.
2583 is for Annulment of Title with Damages. The two cases are different only
in the form of action but an examination of the allegations in the second case
would reveal that the issue raised ownership of the land -- and the relief
sought be declared as owner and TCTs be issued in their names -- are
substantially the same. The evidence required to substantiate their claims are

likewise the same. The proceedings in the instant case, if permitted to

continue, would entail the presentation of evidence which should have been
adduced in the case for Quieting of Title. The case for Annulment of Title is
simply a second cycle of review involving a subject matter that has already
been decided with finality in the Quieting of Title case.
Finally, private respondents ask that the instant case be not
decided based on technicalities, for substantial justice demands that
technicalities should not be allowed to prevail over the substantive right of a
party litigant.
We find no reason not to adhere to the doctrine of res judicata. A
case for Quieting of Title had been filed for the purpose of determining the
ownership of the subject land, but same was dismissed because the plaintiffs
therein failed to attend the scheduled hearings for the presentation of their
evidence. As above discussed, the dismissal was an adjudication on the
merits. They had all the opportunity to present all the evidence for their cause
but they failed to do so. It is undeniable that there was no denial of due
process in this case.
The doctrine of res judicata is a rule which pervades every wellregulated system of jurisprudence and is founded upon two grounds
embodied in various maxims of the common law, namely: (1) public policy and
necessity, which makes it to the interest of the State that there should be an
end to litigation - republicae ut sit litium, and (2) the hardship on the individual
that he should be vexed twice for the same cause - nemo debet bis vexari et
eadem causa. A contrary doctrine would subject the public peace and quiet to
the will and neglect of individuals and prefer the gratification of the litigious
disposition on the part of suitors to the preservation of the public tranquility
and happiness.[22]
WHEREFORE, premises considered, the petition is GRANTED.
The decision of the Court of Appeals dated 19 March 2004 and its resolution
dated 29 June 2004 are REVERSED and SET ASIDE. Civil Case No.
2583-02 for Annulment of Title with Damages, pending before Branch 35 of
the Regional Trial Court of Gapan City, Nueva Ecija, is herby ordered
DISMISSED. With costs.
SO ORDERED.

!!
!!

[G.R. NO. 156470 : April 30, 2008]

FREDERICK DAEL, Petitioner, v. SPOUSES BENEDICTO and VILMA
BELTRAN, Respondents.
DECISION
QUISUMBING, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the 1997
Rules of Civil Procedure raising pure questions of law, and seeking a reversal
of the Resolution1 dated May 28, 2002 of the Regional Trial Court (RTC),
Branch 34, Negros Oriental, Dumaguete City, in Civil Case No. 13072, which
dismissed with prejudice, petitioner's complaint for breach of contract and
damages against the respondents. Also assailed is the trial court's Resolution2
dated December 5, 2002, denying petitioner's motion for reconsideration.
The facts are as follows:
On November 23, 2001, petitioner Frederick Dael filed before the RTC,
Branch 34, Negros Oriental, a Complaint3 for breach of contract and damages
against respondent-spouses Benedicto and Vilma Beltran. In his complaint,
petitioner alleged that respondents sold him a parcel of land covering three
hectares located at Palayuhan, Siaton, Negros Oriental. Petitioner alleged
that respondents did not disclose that the land was previously mortgaged.
Petitioner further alleged that it was only on August 6, 2001 when he
discovered that an extrajudicial foreclosure over the property had already
been instituted, and that he was constrained to bid in the extrajudicial sale of
the land conducted on August 29, 2001. Possession and ownership of the
property was delivered to him when he paid the bid price of P775,100.
Petitioner argued that respondents' non-disclosure of the extrajudicial
foreclosure constituted breach of contract on the implied warranties in a sale
of property as provided under Article 15474 of the New Civil Code. He likewise
claimed that he was entitled to damages because he had to pay for the
property twice.
On January 10, 2002, respondents filed a Motion to Dismiss5 on the ground
that petitioner had no cause of action since the contract to sell stated that the
vendor was Benedicto Beltran and the vendee was Frederick George Ghent
Dael, not the petitioner.
On February 12, 2002, in a hearing on the motion, Atty. Dirkie Y. Palma,
petitioner's counsel, disclosed that petitioner is the father of Frederick George

Ghent Dael whose name appears as the contracting party in the Contract to
Sell dated July 28, 2000. Atty. Palma moved to reset the hearing to enable the
petitioner to withdraw and have the complaint dismissed, amended, or to
enter into a compromise agreement with respondents.
The RTC on the same day ordered petitioner to clarify whether or not he and
Frederick George Ghent Dael were one and the same person; whether or not
they were Filipinos and residents of Dumaguete City; and whether or not
Frederick George Ghent Dael was of legal age, and married, as stated in the
Contract to Sell.6 Petitioner did not comply. Instead, he filed a Notice of
Dismissal on February 20, 2002. The Notice of Dismissal states:
Plaintiff, through counsel, unto this Honorable Court, respectfully files this
notice of dismissal of the above-captioned case without prejudice by virtue of
Rule 17, Section 1 of the 1997 Rules of Civil Procedure. By this notice,
defendants['] Motion to Dismiss is then rendered moot and academic.
WHEREFORE, plaintiff Frederick Dael respectfully prays that this Honorable
Court dismiss the above-captioned case without prejudice.
RESPECTFULLY SUBMITTED.7
On May 28, 2002, the RTC dismissed the complaint with prejudice. The
dispositive portion of the Resolution reads thus:
WHEREFORE, finding merit to defendants' contention that plaintiff Frederick
Dael has no cause of action against them since said plaintiff is not one of the
contracting parties in the Contract to Sell, which is allegedly breached, the
Motion to Dismiss filed by defendants is granted. Consequently, the case at
bar is DISMISSED, with prejudice.
SO ORDERED.8 [Emphasis supplied.]
Arguing that the RTC erred in dismissing the complaint with prejudice based
on respondents' Motion to Dismiss, and not without prejudice based on his
Notice of Dismissal, petitioner filed a Motion for Reconsideration9 but it was
denied by the RTC in a Resolution dated December 5, 2002.
Hence, this petition.
Petitioner raises the following issues for our resolution:
I.

WHETHER [OR] NOT THE REGIONAL TRIAL COURT ERRED IN

DISMISSING THE COMPLAINT FOR BREACH OF CONTRACT AND
DAMAGES BASED ON THE MOTION TO DISMISS FILED BY HEREIN
RESPONDENTS AND NOT ON THE NOTICE OF DISMISSAL PROMPTLY
[FILED] BY HEREIN PETITIONER BEFORE RESPONDENTS COULD FILE A
RESPONSIVE PLEADING, UNDER RULE 17, SECTION 1 OF THE 1997
RULES O[F] CIVIL PROCEDURE.
II.
WHETHER OR NOT THE REGIONAL TRIAL COURT ERRED IN
DISMISSING THE COMPLAINT FOR BREACH OF CONTRACT AND
DAMAGES WITH PREJUDICE.10
On the other hand, respondents raise the following issues:
I.
WHETHER OR NOT THE REGIONAL TRIAL COURT ERRED IN
DISMISSING THE ACTION FOR BREACH OF CONTRACT AND DAMAGES
ON THE BASIS OF THE MOTION TO DISMISS FILED BY THE DEFENDANT
AND NOT ON THE BASIS OF THE NOTICE OF DISMISSAL FILED BY THE
PLAINTIFF.
II.
WHETHER OR NOT THE REGIONAL TRIAL COURT IS CORRECT IN
DISMISSING THE CASE WITH PREJUDICE.
III.
WHETHER OR NOT PETITIONER'S RECOURSE UNTO THIS HONORABLE
COURT BY WAY OF PETITION FOR REVIEW ON CERTIORARI IS
PROPER.11
Essentially, the issues are (1) Did the RTC err in dismissing the complaint with
prejudice? and (2) Was petitioner's recourse to this Court by way of a Petition
for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure
proper?cra lawlibrary
Petitioner, citing Serrano v. Cabrera and Makabulo12 in his Memorandum,13
argues that the 1997 Rules of Civil Procedure expressly states that before the
defendant has served his answer or moved for a summary judgment, he has,

as a matter of right, the prerogative to cause the dismissal of a civil action

filed, and such dismissal may be effected by a mere notice of dismissal. He
further argues that such dismissal is without prejudice, except (a) where the
notice of dismissal so provides; (b) where the plaintiff has previously
dismissed the same case in a court of competent jurisdiction; or (c) where the
dismissal is premised on payment by the defendant of the claim involved. He
asserts it is the prerogative of the plaintiff to indicate if the Notice of Dismissal
filed is with or without prejudice and the RTC cannot exercise its own
discretion and dismiss the case with prejudice.
On the other hand, respondents in their Memorandum,14 counter that the RTC
is correct in dismissing the case with prejudice based on their Motion to
Dismiss because they filed their motion on January 10, 2002, ahead of
petitioner who filed his Notice of Dismissal only on February 20, 2002. They
further argue that although it is correct that under the 1997 Rules of Civil
Procedure a complaint may be dismissed by the plaintiff by filing a notice of
dismissal before service of the answer or of a motion for summary judgment,
the petitioner filed the Notice of Dismissal only as an afterthought after he
realized that the Motion to Dismiss was meritorious.
Further, they point out that petitioner deceived the court when he filed the
action knowing fully well that he was not the real party-in-interest representing
himself as Frederick George Ghent Dael.
Respondents also argue that petitioner's recourse to this Court by way of a
Petition for Review on Certiorari was not proper since the proper remedy
should have been to file an appeal of the order granting the Motion to
Dismiss. He contends that the petitioner should have appealed to the Court of
Appeals under Rule 4115 instead of assailing the ruling of the RTC by way of a
Petition for Review on Certiorari before the Supreme Court.
As to the propriety of dismissal of the complaint with prejudice, Section 1,
Rule 17 of the 1997 Rules of Civil Procedure provides:
SECTION 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. [Emphasis supplied.]

Under this provision, it is mandatory that the trial court issue an order
confirming such dismissal and, unless otherwise stated in the notice, the
dismissal is without prejudice and could be accomplished by the plaintiff
through mere notice of dismissal, and not through motion subject to approval
by the court. Dismissal is ipso facto upon notice, and without prejudice unless
otherwise stated in the notice.16 The trial court has no choice but to consider
the complaint as dismissed, since the plaintiff may opt for such dismissal as a
matter of right, regardless of the ground.17
Respondents argue that the Motion to Dismiss they filed precedes the Notice
of Dismissal filed by petitioner and hence, the trial court correctly gave it
precedence and ruled based on the motion.
This argument is erroneous. Section 1 of Rule 17 does not encompass a
Motion to Dismiss. The provision specifically provides that a plaintiff may file a
notice of dismissal before service of the answer or a motion for summary
judgment. Thus, upon the filing of the Notice of Dismissal by the plaintiff, the
Motion to Dismiss filed by respondents became moot and academic and the
trial court should have dismissed the case without prejudice based on the
Notice of Dismissal filed by the petitioner.
Moreover, to allow the case to be dismissed with prejudice would erroneously
result in res judicata18 and imply that petitioner can no longer file a case
against respondents without giving him a chance to present evidence to prove
otherwise.
As to the second issue, petitioner's recourse to this Court by way of a Petition
for Review on Certiorari under Rule 45 is proper. An order of dismissal,
whether correct or not, is a final order. It is not interlocutory because the
proceedings were terminated; it leaves nothing more to be done by the lower
court. Therefore, the remedy of the plaintiff is to appeal the order.19 Under the
Rules of Court, a party may directly appeal to the Supreme Court from a
decision of the trial court only on pure questions of law.20
WHEREFORE, the petition is GRANTED. The assailed Resolutions dated
May 28, 2002 and December 5, 2002 of the Regional Trial Court, Branch 34,
Negros Oriental are AFFIRMED with MODIFICATION such that the case is
dismissed without prejudice. No pronouncement as to costs.
SO ORDERED.

ZENAIDA G. MENDOZA,
Petitioner,

G.R. No. 175885

Present:
Ynares-Santiago, J.

(Chairperson),
- versus ENGR. EDUARDO PAULE,
ENGR. ALEXANDER COLOMA
and NATIONAL IRRIGATION
ADMINISTRATION (NIA
MUOZ, NUEVA ECIJA),
Respondents.
x ------------------------------------------------------ x
MANUEL DELA CRUZ,
Petitioner,

G.R. No. 176271

- versus ENGR. EDUARDO M. PAULE,

ENGR. ALEXANDER COLOMA
and NATIONAL IRRIGATION
ADMINISTRATION (NIA
MUOZ, NUEVA ECIJA),
Respondents.

Promulgated:
February 13, 2009

x ---------------------------------------------------------------------------------------- x

!
DECISION
YNARES-SANTIAGO, J.:
These consolidated petitions assail the August 28, 2006
Decision[1] of the Court of Appeals in CA-G.R. CV No. 80819 dismissing the
complaint in Civil Case No. 18-SD (2000),[2] and its December 11, 2006
Resolution[3] denying the herein petitioners motion for reconsideration.

Engineer Eduardo M. Paule (PAULE) is the proprietor of E.M.

Paule Construction and Trading (EMPCT).
On May 24, 1999, PAULE
executed a special power of attorney (SPA) authorizing Zenaida G. Mendoza
(MENDOZA) to participate in the pre-qualification and bidding of a National
Irrigation Administration (NIA) project and to represent him in all transactions
related thereto, to wit:
1.

To represent E.M. PAULE

CONSTRUCTION & TRADING of
which I (PAULE) am the General
Manager in all my business
transactions with National Irrigation
Authority, Muoz, Nueva Ecija.

2.

To participate in the bidding, to secure

bid bonds and other documents prerequisite in the bidding of Casicnan
Multi-Purpose Irrigation and Power
Plant (CMIPPL 04-99), National
Irrigation Authority, Muoz, Nueva
Ecija.

3.

To receive and collect payment in check

i n b e h a l f o f E . M . PA U L E
CONSTRUCTION & TRADING.

4.

To do and perform such acts and things

that may be necessary and/or
required to make the herein authority
effective.[4]

On September 29, 1999, EMPCT, through MENDOZA, participated

in the bidding of the NIA-Casecnan Multi-Purpose Irrigation and Power Project
(NIA-CMIPP) and was awarded Packages A-10 and B-11 of the NIA-CMIPP
Schedule A. On November 16, 1999, MENDOZA received the Notice of
Award which was signed by Engineer Alexander M. Coloma (COLOMA), then
Acting Project Manager for the NIA-CMIPP. Packages A-10 and B-11 involved
the construction of a road system, canal structures and drainage box culverts
with a project cost of P5,613,591.69.
When Manuel de la Cruz (CRUZ) learned that MENDOZA is in
need of heavy equipment for use in the NIA project, he met up with
MENDOZA in Bayuga, Muoz, Nueva Ecija, in an apartment where the latter

was holding office under an EMPCT signboard. A series of meetings followed

in said EMPCT office among CRUZ, MENDOZA and PAULE.
On December 2 and 20, 1999, MENDOZA and CRUZ signed two
Job Orders/Agreements[5] for the lease of the latters heavy equipment (dump
trucks for hauling purposes) to EMPCT.
On April 27, 2000, PAULE revoked[6] the SPA he previously issued
in favor of MENDOZA; consequently, NIA refused to make payment to
MENDOZA on her billings. CRUZ, therefore, could not be paid for the rent of
the equipment. Upon advice of MENDOZA, CRUZ addressed his demands
for payment of lease rentals directly to NIA but the latter refused to
acknowledge the same and informed CRUZ that it would be remitting
payment only to EMPCT as the winning contractor for the project.
In a letter dated April 5, 2000, CRUZ demanded from MENDOZA
and/or EMPCT payment of the outstanding rentals which amounted to
P726,000.00 as of March 31, 2000.
On June 30, 2000, CRUZ filed Civil Case No. 18-SD (2000) with
Branch 37 of the Regional Trial Court of Nueva Ecija, for collection of sum of
money with damages and a prayer for the issuance of a writ of preliminary
injunction against PAULE, COLOMA and the NIA. PAULE in turn filed a thirdparty complaint against MENDOZA, who filed her answer thereto, with a
cross-claim against PAULE.
MENDOZA alleged in her cross-claim that because of PAULEs
whimsical revocation of the SPA, she was barred from collecting payments
from NIA, thus resulting in her inability to fund her checks which she had
issued to suppliers of materials, equipment and labor for the project. She
claimed that estafa and B.P. Blg. 22 cases were filed against her; that she
could no longer finance her childrens education; that she was evicted from
her home; that her vehicle was foreclosed upon; and that her reputation was
destroyed, thus entitling her to actual and moral damages in the respective
amounts of P3 million and P1 million.
Meanwhile, on August 23, 2000, PAULE again constituted
MENDOZA as his attorney-in-fact
1.
To represent me (PAULE), in
my capacity as General Manager of the E.M.
PAULE CONSTRUCTION AND TRADING, in all
meetings, conferences and transactions

exclusively for the construction of the projects

known as Package A-10 of Schedule A and
Package No. B-11 Schedule B, which are
38.61% and 63.18% finished as of June 21,
2000, per attached Accomplishment Reports x x
x;
2.
To implement, execute,
administer and supervise the said projects in
whatever stage they are in as of to date, to
collect checks and other payments due on said
projects and act as the Project Manager for
E.M. PAULE CONSTRUCTION AND TRADING;
3.
To do and perform such acts
and things that may be necessary and required
to make the herein power and authority
effective.[7]
At the pre-trial conference, the other parties were declared as in
default and CRUZ was allowed to present his evidence ex parte. Among the
witnesses he presented was MENDOZA, who was impleaded as defendant in
PAULEs third-party complaint.
On March 6, 2003, MENDOZA filed a motion to declare third-party
plaintiff PAULE non-suited with prayer that she be allowed to present her
evidence ex parte.
However, without resolving MENDOZAs motion to declare PAULE
non-suited, and without granting her the opportunity to present her evidence
ex parte, the trial court rendered its decision dated August 7, 2003, the
dispositive portion of which states, as follows:
WHEREFORE, judgment is hereby
rendered in favor of the plaintiff as follows:
1.
Ordering defendant Paule to
pay the plaintiff the sum of P726,000.00 by way
of actual damages or compensation for the
services rendered by him;

2.
Ordering defendant Paule to
pay plaintiff the sum of P500,000.00 by way of
moral damages;
3.
Ordering defendant Paule to
pay plaintiff the sum of P50,000.00 by way of
reasonable attorneys fees;
4.
Ordering defendant Paule to
pay the costs of suit; and
5.
Ordering defendant National
Irrigation Administration (NIA) to withhold the
balance still due from it to defendant Paule/E.M.
Paule Construction and Trading under NIACMIPP Contract Package A-10 and to pay
plaintiff therefrom to the extent of defendant
Paules liability herein adjudged.
SO ORDERED.[8]
In holding PAULE liable, the trial court found that MENDOZA was
duly constituted as EMPCTs agent for purposes of the NIA project and that
MENDOZA validly contracted with CRUZ for the rental of heavy equipment
that was to be used therefor. It found unavailing PAULEs assertion that
MENDOZA merely borrowed and used his contractors license in exchange for
a consideration of 3% of the aggregate amount of the project. The trial court
held that through the SPAs he executed, PAULE clothed MENDOZA with
apparent authority and held her out to the public as his agent; as principal,
PAULE must comply with the obligations which MENDOZA contracted within
the scope of her authority and for his benefit. Furthermore, PAULE knew of
the transactions which MENDOZA entered into since at various times when
she and CRUZ met at the EMPCT office, PAULE was present and offered no
objections. The trial court declared that it would be unfair to allow PAULE to
enrich himself and disown his acts at the expense of CRUZ.
PAULE and MENDOZA both appealed the trial courts decision to
the Court of Appeals.
PAULE claimed that he did not receive a copy of the order of
default; that it was improper for MENDOZA, as third-party defendant, to have
taken the stand as plaintiff CRUZs witness; and that the trial court erred in

finding that an agency was created between him and MENDOZA, and that he
was liable as principal thereunder.

the revocation of the SPAs is a prerogative that is allowed to PAULE under

Article 1920[11] of the Civil Code.

On the other hand, MENDOZA argued that the trial court erred in
deciding the case without affording her the opportunity to present evidence on
her cross-claim against PAULE; that, as a result, her cross-claim against
PAULE was not resolved, leaving her unable to collect the amounts of
P3,018,864.04, P500,000.00, and P839,450.88 which allegedly represent the
unpaid costs of the project and the amount PAULE received in excess of
payments made by NIA.

CRUZ and MENDOZAs motions for reconsideration were denied;

hence, these consolidated petitions:

On August 28, 2006, the Court of Appeals rendered the assailed

Decision which dismissed CRUZs complaint, as well as MENDOZAs appeal.
The appellate court held that the SPAs issued in MENDOZAs favor did not
grant the latter the authority to enter into contract with CRUZ for hauling
services; the SPAs limit MENDOZAs authority to only represent EMPCT in its
business transactions with NIA, to participate in the bidding of the project, to
receive and collect payment in behalf of EMPCT, and to perform such acts as
may be necessary and/or required to make the said authority effective. Thus,
the engagement of CRUZs hauling services was done beyond the scope of
MENDOZAs authority.
As for CRUZ, the Court of Appeals held that he knew the limits of
MENDOZAs authority under the SPAs yet he still transacted with her. Citing
Manila Memorial Park Cemetery, Inc. v. Linsangan,[9] the appellate court
declared that the principal (PAULE) may not be bound by the acts of the agent
(MENDOZA) where the third person (CRUZ) transacting with the agent knew
that the latter was acting beyond the scope of her power or authority under
the agency.
With respect to MENDOZAs appeal, the Court of Appeals held that
when the trial court rendered judgment, not only did it rule on the plaintiffs
complaint; in effect, it resolved the third-party complaint as well;[10] that the
trial court correctly dismissed the cross-claim and did not unduly ignore or
disregard it; that MENDOZA may not claim, on appeal, the amounts of
P3,018,864.04, P500,000.00, and P839,450.88 which allegedly represent the
unpaid costs of the project and the amount PAULE received in excess of
payments made by NIA, as these are not covered by her cross-claim in the
court a quo, which seeks reimbursement only of the amounts of P3 million
and P1 million, respectively, for actual damages (debts to suppliers, laborers,
lessors of heavy equipment, lost personal property) and moral damages she
claims she suffered as a result of PAULEs revocation of the SPAs; and that

G.R. No. 175885 (MENDOZA PETITION)

a)
The Court of Appeals erred in
sustaining the trial courts failure to resolve her
motion praying that PAULE be declared nonsuited on his third-party complaint, as well as
her motion seeking that she be allowed to
present evidence ex parte on her cross-claim;
b)
The Court of Appeals erred
when it sanctioned the trial courts failure to
resolve her cross-claim against PAULE; and,
c)
The Court of Appeals erred in
its application of Article 1920 of the Civil Code,
and in adjudging that MENDOZA had no right to
claim actual damages from PAULE for debts
incurred on account of the SPAs issued to her.
G.R. No. 176271 (CRUZ PETITION)
CRUZ argues that the decision of the
Court of Appeals is contrary to the provisions of
law on agency, and conflicts with the Resolution
of the Court in G.R. No. 173275, which affirmed
the Court of Appeals decision in CA-G.R. CV
No. 81175, finding the existence of an agency
relation and where PAULE was declared as
MENDOZAs principal under the subject SPAs
and, thus, liable for obligations (unpaid
construction materials, fuel and heavy
equipment rentals) incurred by the latter for the
purpose of implementing and carrying out the
NIA project awarded to EMPCT.

CRUZ argues that MENDOZA was acting within the scope of her
authority when she hired his services as hauler of debris because the NIA
project (both Packages A-10 and B-11 of the NIA-CMIPP) consisted of
construction of canal structures, which involved the clearing and disposal of
waste, acts that are necessary and incidental to PAULEs obligation under the
NIA project; and that the decision in a civil case involving the same SPAs,
where PAULE was found liable as MENDOZAs principal already became final
and executory; that in Civil Case No. 90-SD filed by MENDOZA against
PAULE,[12] the latter was adjudged liable to the former for unpaid rentals of
heavy equipment and for construction materials which MENDOZA obtained
for use in the subject NIA project. On September 15, 2003, judgment was
rendered in said civil case against PAULE, to wit:
WHEREFORE, judgment is hereby
rendered in favor of the plaintiff (MENDOZA)
and against the defendant (PAULE) as follows:
1.
Ordering defendant Paule to
p a y p l a i n t i ff t h e s u m o f P 1 3 8 , 3 0 4 . 0 0
representing the obligation incurred by the
plaintiff with LGH Construction;
2.
Ordering defendant Paule to
p a y p l a i n t i ff t h e s u m o f P 2 0 0 , 0 0 0 . 0 0
representing the balance of the obligation
incurred by the plaintiff with Artemio Alejandrino;
3.
Ordering defendant Paule to
pay plaintiff the sum of P520,000.00 by way of
moral damages, and further sum of
P100,000.00 by way of exemplary damages;
4.
Ordering defendant Paule to
pay plaintiff the sum of P25,000.00 as for
attorneys fees; and
5.

To pay the cost of suit.[13]

PAULE appealed[14] the above decision, but it was dismissed by

the Court of Appeals in a Decision[15] which reads, in part:
As to the finding of the trial court that
the principle of agency is applicable in this case,

this Court agrees therewith.

It must be
emphasized that appellant (PAULE) authorized
appellee (MENDOZA) to perform any and all
acts necessary to make the business
transaction of EMPCT with NIA effective.
Needless to state, said business transaction
pertained to the construction of canal structures
which necessitated the utilization of construction
materials and equipments. Having given said
authority, appellant cannot be allowed to turn its
back on the transactions entered into by
appellee in behalf of EMPCT.
The amount of moral damages and
attorneys fees awarded by the trial court being
justifiable and commensurate to the damage
suffered by appellee, this Court shall not disturb
the same. It is well-settled that the award of
damages as well as attorneys fees lies upon
the discretion of the court in the context of the
facts and circumstances of each case.
WHEREFORE, the appeal is
DISMISSED and the appealed Decision is
AFFIRMED.
SO ORDERED.[16]
PAULE filed a petition to this Court docketed as G.R. No. 173275
but it was denied with finality on September 13, 2006.
MENDOZA, for her part, claims that she has a right to be heard on
her cause of action as stated in her cross-claim against PAULE; that the trial
courts failure to resolve the cross-claim was a violation of her constitutional
right to be apprised of the facts or the law on which the trial courts decision is
based; that PAULE may not revoke her appointment as attorney-in-fact for
and in behalf of EMPCT because, as manager of their partnership in the NIA
project, she was obligated to collect from NIA the funds to be used for the
payment of suppliers and contractors with whom she had earlier contracted
for labor, materials and equipment.
PAULE, on the other hand, argues in his Comment that
MENDOZAs authority under the SPAs was for the limited purpose of securing

the NIA project; that MENDOZA was not authorized to contract with other
parties with regard to the works and services required for the project, such as
CRUZs hauling services; that MENDOZA acted beyond her authority in
contracting with CRUZ, and PAULE, as principal, should not be made civilly
liable to CRUZ under the SPAs; and that MENDOZA has no cause of action
against him for actual and moral damages since the latter exceeded her
authority under the agency.
We grant the consolidated petitions.
Records show that PAULE (or, more appropriately, EMPCT) and
MENDOZA had entered into a partnership in regard to the NIA project.
PAULEs contribution thereto is his contractors license and expertise, while
MENDOZA would provide and secure the needed funds for labor, materials
and services; deal with the suppliers and sub-contractors; and in general and
together with PAULE, oversee the effective implementation of the project. For
this, PAULE would receive as his share three per cent (3%) of the project cost
while the rest of the profits shall go to MENDOZA. PAULE admits to this
arrangement in all his pleadings.[17]
Although the SPAs limit MENDOZAs authority to such acts as
representing EMPCT in its business transactions with NIA, participating in the
bidding of the project, receiving and collecting payment in behalf of EMPCT,
and performing other acts in furtherance thereof, the evidence shows that
when MENDOZA and CRUZ met and discussed (at the EMPCT office in
Bayuga, Muoz, Nueva Ecija) the lease of the latters heavy equipment for
use in the project, PAULE was present and interposed no objection to
MENDOZAs actuations. In his pleadings, PAULE does not even deny this.
Quite the contrary, MENDOZAs actions were in accord with what she and
PAULE originally agreed upon, as to division of labor and delineation of
functions within their partnership. Under the Civil Code, every partner is an
agent of the partnership for the purpose of its business;[18] each one may
separately execute all acts of administration, unless a specification of their
respective duties has been agreed upon, or else it is stipulated that any one of
them shall not act without the consent of all the others.[19] At any rate,
PAULE does not have any valid cause for opposition because his only role in
the partnership is to provide his contractors license and expertise, while the
sourcing of funds, materials, labor and equipment has been relegated to
MENDOZA.
Moreover, it does not speak well for PAULE that he reinstated
MENDOZA as his attorney-in-fact, this time with broader powers to
implement, execute, administer and supervise the NIA project, to collect

checks and other payments due on said project, and act as the Project
Manager for EMPCT, even after CRUZ has already filed his complaint.
Despite knowledge that he was already being sued on the SPAs, he
proceeded to execute another in MENDOZAs favor, and even granted her
broader powers of administration than in those being sued upon. If he truly
believed that MENDOZA exceeded her authority with respect to the initial
SPA, then he would not have issued another SPA. If he thought that his trust
had been violated, then he should not have executed another SPA in favor of
MENDOZA, much less grant her broader authority.
Given the present factual milieu, CRUZ has a cause of action
against PAULE and MENDOZA.
Thus, the Court of Appeals erred in
dismissing CRUZs complaint on a finding of exceeded agency. Besides, that
PAULE could be held liable under the SPAs for transactions entered into by
MENDOZA with laborers, suppliers of materials and services for use in the
NIA project, has been settled with finality in G.R. No. 173275. What has been
adjudged in said case as regards the SPAs should be made to apply to the
instant case. Although the said case involves different parties and
transactions, it finally disposed of the matter regarding the SPAs specifically
their effect as among PAULE, MENDOZA and third parties with whom
MENDOZA had contracted with by virtue of the SPAs a disposition that
should apply to CRUZ as well. If a particular point or question is in issue in
the second action, and the judgment will depend on the determination of that
particular point or question, a former judgment between the same parties or
their privies will be final and conclusive in the second if that same point or
question was in issue and adjudicated in the first suit. Identity of cause of
action is not required but merely identity of issues.[20]
There was no valid reason for PAULE to revoke MENDOZAs
SPAs. Since MENDOZA took care of the funding and sourcing of labor,
materials and equipment for the project, it is only logical that she controls the
finances, which means that the SPAs issued to her were necessary for the
proper performance of her role in the partnership, and to discharge the
obligations she had already contracted prior to revocation. Without the SPAs,
she could not collect from NIA, because as far as it is concerned, EMPCT
and not the PAULE-MENDOZA partnership is the entity it had contracted
with. Without these payments from NIA, there would be no source of funds to
complete the project and to pay off obligations incurred. As MENDOZA
correctly argues, an agency cannot be revoked if a bilateral contract depends
upon it, or if it is the means of fulfilling an obligation already contracted, or if a
partner is appointed manager of a partnership in the contract of partnership
and his removal from the management is unjustifiable.[21]

PAULEs revocation of the SPAs was done in evident bad faith.

Admitting all throughout that his only entitlement in the partnership with
MENDOZA is his 3% royalty for the use of his contractors license, he knew
that the rest of the amounts collected from NIA was owing to MENDOZA and
suppliers of materials and services, as well as the laborers. Yet, he
deliberately revoked MENDOZAs authority such that the latter could no longer
collect from NIA the amounts necessary to proceed with the project and settle
outstanding obligations.
From the way he conducted himself, PAULE committed a willful
and deliberate breach of his contractual duty to his partner and those with
whom the partnership had contracted. Thus, PAULE should be made liable
for moral damages.
Bad faith does not simply connote
bad judgment or negligence; it imputes a
dishonest purpose or some moral obliquity and
conscious doing of a wrong; a breach of a
sworn duty through some motive or intent or illwill; it partakes of the nature of fraud (Spiegel v.
Beacon Participation, 8 NE 2nd Series, 895,
1007).
It contemplates a state of mind
affirmatively operating with furtive design or
some motive of self-interest or ill will for ulterior
purposes (Air France v. Carrascoso, 18 SCRA
155, 166-167). Evident bad faith connotes a
manifest deliberate intent on the part of the
accused to do wrong or cause damage.[22]
Moreover, PAULE should be made civilly liable for abandoning the
partnership, leaving MENDOZA to fend for her own, and for unduly revoking
her authority to collect payments from NIA, payments which were necessary
for the settlement of obligations contracted for and already owing to laborers
and suppliers of materials and equipment like CRUZ, not to mention the
agreed profits to be derived from the venture that are owing to MENDOZA by
reason of their partnership agreement.
Thus, the trial court erred in
disregarding and dismissing MENDOZAs cross-claim which is properly a
counterclaim, since it is a claim made by her as defendant in a third-party
complaint against PAULE, just as the appellate court erred in sustaining it
on the justification that PAULEs revocation of the SPAs was within the
bounds of his discretion under Article 1920 of the Civil Code.

Where the defendant has interposed a counterclaim (whether

compulsory or permissive) or is seeking affirmative relief by a cross-complaint,
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. The present rule embodied in Sections 2 and 3 of Rule 17
of the 1997 Rules of Civil Procedure 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.[23]
Notwithstanding the immutable character of PAULEs liability to
MENDOZA, however, the exact amount thereof is yet to be determined by the
trial court, after receiving evidence for and in behalf of MENDOZA on her
counterclaim, which must be considered pending and unresolved.
WHEREFORE, the petitions are GRANTED. The August 28, 2006
Decision of the Court of Appeals in CA-G.R. CV No. 80819 dismissing the
complaint in Civil Case No. 18-SD (2000) and its December 11, 2006
Resolution denying the motion for reconsideration are REVERSED and SET
ASIDE. The August 7, 2003 Decision of the Regional Trial Court of Nueva
Ecija, Branch 37 in Civil Case No. 18-SD (2000) finding PAULE liable is
REINSTATED, with the MODIFICATION that the trial court is ORDERED to
receive evidence on the counterclaim of petitioner Zenaida G. Mendoza.
SO ORDERED.

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ROBERTO S. BENEDICTO and TRADERS ROYAL BANK,

Petitioners,
- versus MANUEL LACSON,

SUMMARY OF CLAIMS UNDER THE

FIRST TO FIFTEENTH
CAUSES OF ACTION

Respondents.

Bank, the total amount of which is claimed by respondents to be $33,907,172.

47, to wit:

G.R. No. 141508

Promulgated:

May 5, 2010
x-----------------------------------------------------x
DECISION
PERALTA, J.:
Before this Court is a Petition for Review on certiorari,[1] under Rule 45
of the Rules of Court, seeking to set aside the September 30, 1999
Decision[2] and January 10, 2000 Resolution[3] of the Court of Appeals (CA)
in CA-G.R. CV No. 53841.
The facts of the case are as follows:
Under Presidential Decree No. 388,[4] the Philippine Sugar
Commission (PHILSUCOM) was created and vested with the power to act as
the single buying and selling agency of sugar in the Philippines. On
September 7, 1977, PHILSUCOM further organized the National Sugar
Trading Corporation (NASUTRA) as its buying marketing arm. Petitioner
Robert S. Benedicto[5] was the concurrent Chairman and President of
Traders Royal Bank[6] and NASUTRA.
The case stems from a Complaint,[7] docketed as Civil Case No.
95-9137 (Bacolod Case), filed by respondents, individual sugar planters and
agricultural corporations Manuel Lacson et al., on November 23, 1995, in the
Regional Trial Court (RTC) of Bacolod City, Branch 44. Respondents
complaint was premised on a claim for unpaid shares based on Sugar Order
No. 2, series of 1979-1980[8] and Sugar Order No. 1, series of 1980-1981[9]
issued by PHILSUCOM. The claims cover the sugar export sales[10]
supposedly undervalued by NASUTRA and coursed through Traders Royal

92. As tabulated in Annex C hereof, while

the total amount actually paid by the buyers and
collected by the PHILSUCOM and the Defendants
NASUTRA, BENEDICTO, MONTEBON and TRB on
the sales of export sugar subject of the preceding
Causes of Action, amounted to US$ 94,146,954.03,
the PHILSUCOM and the said Defendants recorded
and reported a total collection of only US
$60,239,781.56, resulting in an undervaluation of
Defendant NASUTRAs export sales by US$ 33,
907,172.74 and, correspondingly, in an equivalent
understatement of the amount due the Plaintiffs and
other sugar producers in the profits realized from
such sales, pursuant to the directive of then
President Marcos as implemented in the
PHILSUCOM SUGAR ORDERS hereto attached as
Annexes B and B-1 hereof.
93. Accordingly, on the basis of their
respective production of A and C sugar for the
1980-1981 crop year vis--vis the national
production of 20,474,653 piculs of the same classes
of sugar for the same crop year, the Plaintiffs are
entitled to the payment by Defendants of their pro
rata share, in the amounts indicated opposite their
respective names in Annex C-1 hereof, in the
undeclared profit of US$33,907,172.74 realized from
the export sales, subject of the preceding Causes of
Action, during the said crop year.[11]
Petitioner, as President and concurrent Chairman of both Traders
Royal Bank and NASUTRA, was charged by respondents with fraud and bad
faith, not only in refusing to furnish them accurate data on NASUTRAs export
sugar sales, but, more importantly, in under-reporting and under-declaring the

true prices of the shipments.[12] Respondents, thus, prayed for a refund of

their shares in the undervalued shipments.
On December 27, 1995, petitioner filed a Motion to Dismiss,[13]
arguing therein (1) that respondents had violated the rule on forum shopping;
(2) that respondents have no cause of action; (3) that the issues involved are
res judicata or rendered moot by case law; and (4) that the claim or demand
has already been paid.
On the issue of forum shopping, petitioner argued that respondents
have already filed the following cases beforehand, viz.: (a) Civil Case No.
4301, before Branch 51 of the RTC of Bacolod, entitled Hector Lacson, et al.
v. NASUTRA et al., (Hector Lacson Case); (b) Civil Case No. 88-46368,
before Branch 23 of the RTC of Manila, entitled Ramon Monfort et al. v.
NASUTRA et al. (Ramon Monfort Case); and (c) Civil Case No. 65156,
before Branch 264 of the RTC of Pasig, entitled Manuel Lacson, et al. v.
NASUTRA, et al. (Pasig Case).[14]
On the issue of no cause of action, petitioner argued that: (a) not
being their agent, NASUTRA had no obligation to share its profits with
respondents; (b) the questioned transactions were already perfected and
consummated both with respect to the delivery of the sugar and full payment
of the price; (c) respondents are estopped from questioning the subject
transactions, having executed in favor of NASUTRA a Chattel Mortgage on
Standing Crop which authorized the latter, among others, to sell or dispose of
the same at the time, place, and for the price which it may deem convenient
and reasonable; and (d) NASUTRA had long been dissolved and liquidated
under Presidential Decree No. 2005 and Executive Order No. 114.[15]
Lastly, petitioner argued that the issues posed by respondents are
barred by res judicata and/or rendered moot by the decisions in the following
cases, viz.: (a) G.R. No. 55798, entitled Corazon Zayco, et al. v. NASUTRA et
al.; (b) Civil Case No. Q- 33723, entitled Hortensia Starke v. NASUTRA, et al.;
(c) Civil Case No. 3265, entitled Cecilia Magsaysay, et al. v. NASUTRA et al.;
and (d) Civil Case No. 16439, entitled John Keng Seng v. NASUTRA, et al.
[16]
On March 26, 1996, respondents filed a Consolidated Opposition to
Motion to Dismiss.[17] Simultaneous thereto, respondents also filed an
Amended Certification to the following effect:
xxxx

2. That, except for the case

entitled Manuel Lacson v. Roberto S.
Benedicto, et al., Civil Case 65156, Pasig,
RTC Branch 264, filed by some of the
Plaintiffs on June 20, 1995 and subsequently
withdrawn by them without prejudice on
November 14, 1995 pursuant to Sec. 1, Rule
17 prior to the filing of the present suit,
Plaintiffs have not commenced any other action
or proceeding involving the same issues in the
Supreme Court, the Court of Appeals, or any
other tribunal or agency; that to the best of my
knowledge, no such action or proceeding is
pending the Supreme Court, the Court of
Appeals, or any other tribunal or agency; and if I
or they should hereafter learn that a similar
action or proceeding has been filed or pending
before the Supreme Court , Court of Appeals, or
any other tribunal or agency, Plaintiffs and I
hereby undertake to report such fact within five
(5) days therefrom to this Honorable Court.[18]
On June 5, 1996, the RTC issued an Order[19] granting petitioners
motion to dismiss the complaint, the dispositive portion of which reads:
WHEREFORE, premises considered,
the Motions to Dismiss are hereby GRANTED.
The case against all the defendants is ordered
DISMISSED.
Furnish copies of this Order all
counsel on record for their information.
SO ORDERED.[20]
The RTC ruled that a perusal of the copies of the complaints in two
cases, namely: Hector Lacson Case and Ramon Monfort Case show
similarities with the present Bacolod Case such that different decisions or
rulings would give rise to conflicting rules on law on similar issues.[21] The
RTC also held that respondents were guilty of forum shopping for failure to
report in their original anti-forum shopping certification in the Bacolod Case

that they had filed a similar case with the RTC of Pasig notwithstanding that
the same had been withdrawn by them. The RTC ruled that even if the Pasig
Case had been withdrawn, the same had already been commenced.[22]
Thus, the RTC held that there was a need to report the same in the anti-forum
shopping certification in the Bacolod Case. Lastly, the RTC ruled that
NASUTRA had already been dissolved and hence, respondents have no
cause of action against NASUTRA.[23] The other grounds raised, however, by
petitioner in support of its motion to dismiss were denied by the RTC, as the
same did not appear to be indubitable without further evidence.[24]
Respondents appealed the RTC Order to the CA.
On September 30, 1999, the CA rendered a Decision reversing the
assailed RTC Order. The CA found merit in respondents appeal and ordered
for the remand of the case to the RTC. The dispositive portion of the Decision
reads:
WHEREFORE, the appeal is
GRANTED and the Assailed Order dated June
5, 1996 is REVERSED and SET ASIDE, and in
lieu thereof, a new one is entered ordering the
REMAND of the case to the court of origin for
further proceedings.
SO ORDERED.[25]

Aggrieved by the CA Decision, petitioner filed a Motion for

Reconsideration[26], which was, however, denied by the CA in a Resolution
dated January 10, 2000.
Hence, herein petition, with petitioner raising the following errors
committed by the CA, to wit:
5.1. WHEN IT ABSOLVED THE PRIVATE
RESPONDENTS OF ANY VIOLATION OF THE
ANTI-FORUM SHOPPING RULE
NOTWITHSTANDING THEIR (CONCEDED)
FAILURE TO SEASONABLY APPRISE THE
BACOLOD COURT OF THE EARLIER FILING OF
A SIMILAR CASE BEFORE THE PASIG COURT,

THE SAME BEING A MATERIAL INFORMATION

THE NON-DISCLOSURE OR CONCEALMENT
THEREOF CONSTITUTING AN INEXCUSABLE
OMISSION CLEARLY PENALIZED UNDER THE
PERTINENT SC CIRCULARS AND SECTION 5,
RULE 7 OF THE NEW RULES OF CIVIL
PROCEDURE;
5.2. WHEN IT REFUSED TO APPLY THE
PRINCIPLE OF LITIS PENDENTIA
N O T W I T H S TA N D I N G T H E ( C O N C E D E D )
SIMILARITIES IN THE CIRCUMSTANCES OF
THE PLAINTIFFS, THE IDENTITIES OF THE
DEFENDANTS AND, MOREOVER, THE
SIMILARITIES IN SOME OF THE ANTECEDENT
ISSUES IN CIVIL CASE NO. 95-9137 AND IN
THE OTHER PENDING CASES AGAINST THE
HEREIN PETITIONERS; and
5.3. WHEN IT FAILED TO CONSIDER
THAT CIVIL CASE NO. 95-9137 DESERVES
DISMISSAL, AT ANY RATE, BASED ON THE
OTHER GROUNDS INVOKED BY THE HEREIN
PETITIONERS, NAMELY, LACK OF CAUSE OF
ACTION, RES JUDICATA, PAYMENT AND
PRESCRIPTION.[27]
The petition is not meritorious.
On Forum Shopping: Civil Case No. 95-9137 (Bacolod Case) vis-a-vis
Civil Case No. 65156 (Pasig Case)
Petitioner contends that respondents are guilty of forum shopping
because they failed to disclose, at the time of the filing of the Bacolod Case,
the fact that some of the respondents had earlier commenced a similar action
in Pasig. Petitioner claims that respondents should have informed the RTC of
Bacolod of the commencement and subsequent withdrawal of the Pasig Case
in the certificate of non-forum shopping. Petitioner insists that even if the
Pasig Case was subsequently withdrawn, the same still constituted a

commenced action, which is required to be disclosed under the rules of

forum shopping.

Section 5, Rule 7 of the 1997 Rules of Civil Procedure provides that:

SEC. 5. Certification against forum

shopping. The plaintiff or principal party shall
certify under oath in the complaint or other
initiatory pleading asserting a claim for relief, or
in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has
not theretofore commenced any action or filed
any claim involving the same issues in any
court, tribunal or quasi-judicial agency and, to
the best of his knowledge, no such other action
or claim is pending therein; (b) if there is such
other pending action or claim, a complete
statement of the present status thereof; and (c)
if he should thereafter learn that the same or
similar action or claim has been filed or is
pending, he shall report that fact within five (5)
days therefrom to the court wherein his
aforesaid complaint or initiatory pleading has
been filed.
Failure to comply with the foregoing
requirements shall not be curable by mere
amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of
the case without prejudice, unless otherwise
provided, upon motion and after hearing. The
submission of a false certification or noncompliance with any of the undertakings therein
shall constitute indirect contempt of court,
without prejudice to the corresponding
administrative and criminal actions. If the acts of
the party or his counsel clearly constitute willful
and deliberate forum shopping, the same shall
be ground for summary dismissal with prejudice

and shall constitute direct contempt as well as a

cause for administrative sanctions.
A perusal of the records shows that, with the exception of additional
party-plaintiffs, the Pasig Case actually has a strong resemblance to the
Bacolod Case. The Pasig Case, however, was dismissed upon the instance
of the plaintiffs even before the Bacolod Case was filed. The RTC Order[28]
allowing the dismissal of the complaint in the Pasig Case is hereunder
reproduced, to wit:
xxxx
On November 14, 1995, A Notice of
Dismissal was filed by plaintiffs thru counsel, Attys.
Ricardo G. Nepomuceno, Jr. and Epifanio Sedigo,
Jr., pursuant to Section 1, Rule 17 of the Rules of
Court.
According to the said Rule, plaintiff may,
at any time before service of answer, dismiss an
action by filing a notice of dismissal.
Records show that no answer has yet been
filed by defendants.
Being in conformity to the Rules, the same
is hereby granted.
WHEREFORE, herein complaint is hereby
DISMISSED and without prejudice to the re-filing
thereof.
Notify parties and counsel of this Order.
SO ORDERED.[29]
The essence of forum shopping is the filing by a party against whom
an adverse judgment has been rendered in one forum, seeking another and
possibly favorable opinion in another suit other than by appeal or special civil
action for certiorari;[30] the act of filing of multiple suits involving the same
parties for the same cause of action, either simultaneously or successively for

the purpose of obtaining a favorable judgment.[31] Forum shopping exists

where the elements of litis pendentia are present or where a final judgment in
one case will amount to res judicata in the action under consideration.[32]
There is no dispute that the dismissal of the complaint in the Pasig
case, upon notice of the plaintiffs therein, was sanctioned by Section 1, Rule
17 of the Revised Rules of Court.[33] Quite clearly, the Order declared that
the dismissal of the complaint was without prejudice to the re-filing thereof.
Moreover, even if the same were tested under the rules on litis pendentia and
res judicata, the danger of conflicting decisions cannot be present, since the
Pasig case was dismissed even before a responsive pleading was filed by
petitioner. Since a party resorts to forum shopping in order to increase his
chances of obtaining a favorable decision or action, it has been held that a
party cannot be said to have sought to improve his chances of obtaining a
favorable decision or action where no unfavorable decision has even been
rendered against him in any of the cases he has brought before the courts.
[34]
While the RTC may have been of the opinion that the Pasig Case
was nevertheless commenced and, therefore, the same should have been
stated by respondents in their certification of non-forum shopping in the
Bacolod case, this Court does not share the same view.
In Roxas v. Court of Appeals,[35] this Court had on occasion ruled
that when a complaint is dismissed without prejudice at the instance of the
plaintiff, pursuant to Section 1, Rule 17 of the 1997 Rules of Civil Procedure,
there is no need to state in the certificate of non-forum shopping in a
subsequent re-filed complaint the fact of the prior filing and dismissal of the
former complaint, thus:
Considering that the complaint in Civil
Case No. 97-0523 was dismissed without
prejudice by virtue of the plaintiffs (herein
petitioners) Notice of Dismissal dated November
20, 1997 filed pursuant to Section 1, Rule 17 of
the 1997 Rules of Civil Procedure, there is no
need to state in the certificate of non-forum
shopping in Civil Case No. 97-0608 about the
prior filing and dismissal of Civil Case No.
97-0523. In Gabionza v. Court of Appeals, we ruled
that it is scarcely necessary to add that Circular No.
28-91 (now Section 5, Rule 7 of the 1997 Rules of
Civil Procedure) must be so interpreted and applied

as to achieve the purposes projected by the

Supreme Court when it promulgated that Circular.
Circular No. 28-91 was designed to serve as an
instrument to promote and facilitate the orderly
administration of justice and should not be
interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective or
the goal of all rules or procedure which is to
achieve substantial justice as expeditiously as
possible. The fact that the Circular requires that it be
strictly complied with merely underscores its
mandatory nature in that it cannot be dispensed with
or its requirements altogether disregarded, but it
does not thereby interdict substantial compliance
with its provisions under justifiable circumstances.

Thus, an omission in the certificate of nonforum shopping about any event that would not
constitute res judicata and litis pendencia as in the
case at bar, is not fatal as to merit the dismissal and
nullification of the entire proceedings considering
that the evils sought to be prevented by the said
certificate are not present. It is in this light that we
ruled in Maricalum Mining Corp. v. National Labor
Relations Commission that a liberal interpretation of
Supreme Court Circular No. 04-94 on non-forum
shopping would be more in keeping with the
objectives of procedural rules which is to "secure a
just, speedy and inexpensive disposition of every
action and proceeding."[36]
Verily, in numerous occasions, this Court has relaxed the rigid
application of the rules to afford the parties the opportunity to fully ventilate
their cases on the merits. This is in line with the time-honored principle that
cases should be decided only after giving all parties the chance to argue their
causes and defenses. Technicality and procedural imperfection should thus
not serve as basis of decisions.[37] Technicalities should never be used to
defeat the substantive rights of the other party.[38] Every party-litigant must
be afforded the amplest opportunity for the proper and just determination of
his cause, free from the constraints of technicalities.[39] In that way, the ends
of justice would be better served.[40] For, indeed, the general objective of

procedure is to facilitate the application of justice to the rival claims of

contending parties, bearing always in mind that procedure is not to hinder but
to promote the administration of justice.[41] In the case at bar, considering
that the same involves the various claims of 371 respondents, this Court finds
that justice and equity are best served by allowing respondents to prove their
case on the merits rather than denying them their day in court on a strict
application of the rules.

On Litis Pendentia: Bacolod Case, Hector Lacson Case, Ramon Monfort

Case
Petitioner contends that the CA erred when it refused to apply the
principle of litis pendentia notwithstanding the similarities in the circumstances
of the plaintiffs, the identities of the defendants and the similarities in some of
the antecedent issues in the Bacolod Case, the Hector Lacson Case and
Ramon Monfort Case.
The requisites of litis pendentia are: (a) the identity of parties, or at
least, such as representing the same interests in both actions; (b) the identity
of rights asserted and relief prayed for, the relief being founded on the same
facts; and (c) the identity of the two cases, such that judgment in one,
regardless of which party is successful, would amount to res judicata in the
other.[42]
The underlying principle of litis pendentia is the theory that a party is
not allowed to vex another more than once regarding the same subject matter
and for the same cause of action.[43] This theory is founded on the public
policy that the same subject matter should not be the subject of controversy in
courts more than once, in order that possible conflicting judgments may be
avoided for the sake of the stability of the rights and status of persons.[44]
The CA was correct when it opined that:
Our perusal of the record reveals that forum
shopping cannot, indeed, be attributed to the
appellants. While it may be readily conceded that the
plaintiffs in the instant case are more or less similarly
situated as the plaintiffs in the cases previously filed
and that the defendants, or at least the interest they

represent, are basically the same, the fact remains

that there is no identity of causes of action and
issues in the cases so far filed against the latter. The
instant suit, as may be gleaned from the complaint,
concerns the supposed undervaluation by the
appellees of fifteen (15) sugar export sales of the
appellants export sugar production for the crop
years 1979-1980 and 1980-1981 (pp. 3-32, Orig.
Rec.). In contrast, Civil Case No. 4301, entitled
Hector Lacson, et al. vs. National Sugar Trading
Corporation, et al. concerns the overcharging of
trading costs for the plaintiffs export sugar
production for the crop years 1981-1982 and
1982-1983, underpayment resulting from the
defendants use of an erroneous peso-dollar
exchange rate and reimbursement for amounts
alleged to have been wrongfully withheld by the
latter (pp. 163-171, ibid.) On the other hand, Civil
Case No. 88-46368 entitled Ramon Monfort, et al.
vs. Philippine Sugar Commission, et al.
concerned the deficiency due the plaintiffs therein
from sugar export sales for which a lower exchange
rate was allegedly used by the defendants, the
recovery, among others, of excessive trading costs
charged, unauthorized deductions, damages,
premiums and other sums supposedly still due from
the defendants, as well as a detailed accounting of
the sales of the export sugar produced by the
plaintiffs therein. While the amended complaint filed
in the case also sought to claim differentials for three
(3) under-valued/under-declared NASUTRA export
sales from the crop year 1980-1981 harvest, the
same significantly pertained to different shipments
and were coursed not through appellee Traders
Royal Bank but through the Republic Planters Bank
(pp. 246-271, ibid). The variance in the subject
matters of the instant case and the aforesaid cases
are even conceded in the brief filed by appellee
Roberto Benedicto (pp. 153-155, Rollo).[45]
The test to determine identity of causes of action is to ascertain
whether the same evidence necessary to sustain the second cause of action

is sufficient to authorize a recovery in the first, even if the forms or the nature
of the two (2) actions are different from each other. If the same facts or
evidence would sustain both, the two (2) actions are considered the same
within the rule that the judgment in the former is a bar to the subsequent
action; otherwise, it is not. This method has been considered the most
accurate test as to whether a former judgment is a bar in subsequent
proceedings between the same parties. It has even been designated as
infallible.[46]
While the plaintiffs in the Bacolod Case are more or less similarly
situated as the plaintiffs in the Hector Lacson Case and Ramon Monfort Case,
the CA was correct when it ruled that there was no identity of causes of action
and issues[47] as it cannot be said that exactly the same evidence are
needed to prove the causes of action in all three cases.
Thus, in the Bacolod Case, the evidence needed to prove that
petitioner undervalued fifteen sugar export sales of respondents export sugar
production for the crop years 1979-1980 and 1980-1981 is not the same
evidence needed in the Hector Lacson Case to prove the over-charging of
trading costs for respondents export sugar production for the crop years
1981-1982 and 1982-1983, underpayment resulting from the petitioners use
of an erroneous peso-dollar exchange rate and reimbursement for amounts
alleged to have been wrongfully withheld by the latter. The same holds true for
the Ramon Monfort Case where the same significantly pertained to different
shipments and were coursed not thru the Traders Royal Bank, but thru the
Republic Planters Bank. The Court of Appeals, therefore, did not abuse its
discretion in finding that no litis pendentia existed in the case at bar.
On the other grounds which warrant the dismissal of the action
It is the position of petitioner that the CA erred when it chose not to
dismiss the case based on the other grounds petitioner had earlier raised in
its motion to dismiss. More specifically, petitioner claims that the grounds of
lack of cause of action, res judicata, payment and prescription warrant the
dismissal of the complaint.
The same deserves scant consideration.
It bears to stress that the RTC, in its June 5, 1996 Order, did not also
consider the other grounds now raised by petitioner, to wit:

In view of the sufficiency of the grounds for

dismissal discussed above, the other grounds
invoked by the defendants in their Motion to
Dismiss, which do not appear to be indubitable
without additional evidence need not be
considered.[48]
While petitioners Motion to Dismiss was granted by the RTC in its
June 5, 1996 Order, the same Order, however, effectively denied the other
grounds raised by petitioner as the same did not appear to be indubitable
without additional evidence.
It is a settled rule that an Order denying a motion to dismiss is merely
interlocutory and, therefore, not appealable, nor can it be subject of a petition
for review on certiorari. Such order may only be reviewed in the ordinary
course of law by an appeal from the judgment after trial. The ordinary
procedure to be followed in that event is to file an answer, go to trial, and if the
decision is adverse, reiterate the issue on appeal from the final judgment.[49]
While the rule refers to instances when a motion to dismiss is
completely denied, this Court finds no reason not to apply the same in
instances when some of the grounds raised in a motion to dismiss are denied
by the lower court. The other grounds now raised by petitioner were not
before the CA because the same were not put in issue by respondents when
they chose to assail the RTCs Order to dismiss the complaint. This is
understandable especially since the other grounds were not made the basis
of the RTCs Order. Procedurally then, the proper remedy of petitioner, should
he choose to reassert the other grounds, is to interpose the same as
defenses in his answer and not to put them in issue in this appeal.
WHEREFORE, premises considered, the petition is DENIED. The
September 30, 1999 Decision and January 10, 2000 Resolution of the Court
of Appeals in CA-G.R. CV No. 53841, directing for the remand of the case,
are AFFIRMED. The Regional Trial Court of Bacolod City, Branch 44, is
hereby ordered to hear the case on the merits and decide the same with
deliberate dispatch.
SO ORDERED.

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