CIVPRO – RULE 17 – DISMISSAL OF ACTIONS – UPON
"9 Thus, private respondents prayed that the plaintiffs
NOTICE BY PLAINTIFF – BEFORE ANSWER
G.R. No. 135803 March 28, 2006
O.B. JOVENIR CONSTRUCTION AND DEVELOPMENT
CORPORATION, OSCAR B. JOVENIR and GREGORIO
LIONGSON, Petitioners,
vs.
MACAMIR REALTY AND DEVELOPMENT CORPORATION,
SPOUSES ROSAURO and GLORIA MIRANDA and the
HONORABLE COURT OF APPEALS, Respondents.
DECISION
TINGA, J.:
In denying the present petition, the Court affirms the right of
a plaintiff to cause the dismissal of the complaint at any time
before service of the answer without need of affirmative action
on the part of the trial court. It must be qualified though that
the incidents for adjudication occurred a few months before the
effectivity of the 1997 Rules of Civil Procedure1 which now
requires that upon the filing of such notice, the court issue an
order confirming the dismissal.2 The precedental value of this
decision is thus qualified to instances occurring prior to the
1997 Rules of Civil Procedure.
On 3 February 1997,3 a complaint was filed before the Regional
Trial Court (RTC) of Makati City, with private respondents
Macamir Realty and Development Corp. (Macamir Realty) and
spouses Rosauro and Gloria Miranda as plaintiffs, and
petitioners O.B. Jovenir Construction and Development Corp.
(Jovenir Construction), Oscar B. Jovenir, and Gregorio
Liongson being among the defendants. The complaint,
docketed as Civil Case No. 97-256, sought the annulment of
certain agreements between private respondents and
petitioners, as well as damages.4 It was alleged that Jovenir
Construction was contracted to complete the construction of
private respondents condominium project. Private respondents
subsequently sought the termination of their agreements with
petitioners after it was discovered that Jovenir Construction
had misrepresented itself as a legitimate contractor.5
Respondents likewise prayed for the issuance of a writ of
preliminary injunction. A hearing on the prayer appears to have
been conducted on 6 February 1997.6
It was also alleged in the complaint that Gloria Miranda was the
principal stockholder and President of Macamir Realty while her
husband Rosauro was the owner of the real properties on which
the condominium project was being constructed.7
Almost immediately, two of the impleaded defendants filed
their respective motions to dismiss. Defendant Salud Madeja
filed her motion on 6 February 1997, while Cesar Mangrobang,
Sr. and Cesar Mangrobang, Jr. followed suit with their motion
dated 13 February 1997. Madeja pertinently alleged that while
the spouses Miranda had initiated the complaint on behalf of
Macamir Realty, the real party-in-interest, they failed to attach
any Board Resolution authorizing them to file suit on behalf of
the corporation. Oddly enough, Madeja was a member of the
Board of Directors of Macamir Realty, and she averred as a fact
that said Board of Directors had not authorized the spouses
Miranda to initiate the complaint against Jovenir Realty.8
On 13 February 1997, or 10 days after the filing of the
complaint, private respondents filed a Motion to Withdraw
Complaint, alleging that during the initial hearing on the prayer
for preliminary injunction on 6 February 1997, counsel for
plaintiffs "discovered a supposed technical defect in the
complaint x x x that x x x may be a ground for the dismissal of
1
this case.
be allowed to withdraw the complaint without prejudice.
Petitioners filed an opposition to the Motion to Withdraw
Complaint on 18 February 1997, wherein they adopted
Madeja’s arguments as to the lack of authority on the part of
the spouses Miranda to sue on behalf of Macamir Realty.
However, just one day earlier, or on 17 February 1997, private
respondents filed another complaint against the same
defendants save for Madeja, and seeking the same reliefs as
the first complaint. This time, a Board Resolution dated 10
February 1997 authorizing the spouses Miranda to file the
Complaint on behalf of Macamir Realty was attached to the
complaint. This second complaint was also filed with the Makati
RTC and docketed as Civil Case No. 97-379. The Verification
and Certification [of] Non-Forum Shopping in the second
complaint was accomplished by Rosauro Miranda, who averred
as follows:
3. That other than Civil Case No. 97-256 filed on February 3,
1997 before the Regional Trial Court of Makati City which was
withdrawn on February 13, 1997, I further certify that we have
not commenced any other action or proceedings involving the
same issue in the Supreme Court, or Court of Appeals or any
other tribunal or agency; x x x 10
On 24 February 1997, 11 days after the filing of the Motion to
Withdraw Complaint and seven days after the filing of the
second Complaint, the Makati RTC, Branch 149, acting in Civil
Case No. 97-256, granted the Motion to Withdraw Complaint.
The RTC noted in its Order11 that "an action may be dismissed
by the plaintiffs even without Order of the Court by filing a
notice of dismissal at anytime before the service of the answer
under Rule 17, Section 1 of the Rules of Court," and accordingly
considered the complaint withdrawn without prejudice.12
The battle then shifted to Civil Case No. 97-379, which had
been raffled to Branch 136 of the Makati RTC. On 4 March 1997,
petitioners filed a Motion to Dismiss the second complaint on
the ground of forum-shopping. They pointed out that at the
time of the filing of the second complaint on 17 February 1997,
the first complaint was still pending. The Makati RTC denied the
Motion to Dismiss in an Order13 dated 23 May 1997, observing
that at the time the Motion to Withdraw Complaint was filed,
none of the defendants had filed any answer or any responsive
pleading. Thus, it was then within respondents’ right to cause
the dismissal of the complaint without having to await action of
the court on their motion.14 This Order was affirmed by the
Court of Appeals
Special Sixth Division in its Decision15 dated 23 June 1998 after
petitioners had assailed the RTC’s order via a special civil action
for certiorari filed with the appellate court.16 Hence, the present
petition.
Petitioners now argue that under Section 1 of Rule 17 of the
Rules of Civil Procedure in effect at the time of these
antecedents, the plaintiff may obtain the dismissal of his own
complaint before a responsive pleading has been filed through
the filing of a notice of dismissal. However, respondents in this
case did not file a notice of dismissal, but instead lodged a
Motion to Withdraw Complaint, a motion which requires
affirmative action from the court before the complaint may be
deemed dismissed. Since the Makati RTC had granted the
motion only on 24 February 1997, the first complaint had not
yet been withdrawn as of 17 February 1997, when the second
complaint was filed. It is thus posited that the Certification of
Non-Forum Shopping attached to the second complaint was
false, in that it averred that the first complaint "was withdrawn
on February 13, 1997" when in fact the motion to withdraw
complaint was granted only 11 days after. In sum, respondents
had violated the procedural rules against forum-shopping,
which at that time were incorporated in Administrative Circular
No. 04-94 of the Supreme Court.
We find no error on the part of the lower courts since the denial
of the motion to dismiss is wholly in accord with the Rules of
Civil Procedure.
Section 1, Rule 17 of the 1964 Rules of Civil Procedure stated:
Dismissal by the plaintiff — An action may be dismissed by
the plaintiff without order of court by filing a notice of
dismissal at any time before service of the answer or of
a motion for summary judgment. 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. A class suit shall not be dismissed or compromised
without the approval of the court.17
Indubitably, the provision ordained the dismissal of the
complaint by the plaintiff as a matter of right at any time before
service of the answer.18 The plaintiff was accorded the right to
dismiss the complaint without the necessity of alleging in the
notice of dismissal any ground nor of making any reservation.19
In Go v. Cruz,20 the Court, through Chief Justice Narvasa, has
recognized that "where the dismissal of an action rests
exclusively on the will of a plaintiff or claimant, to prevent
which the defending party and even the court itself is
powerless, requiring in fact no action whatever on the part of
the court except the acceptance and recording of the causative
document."21 The facts in that case are well worth considering.
Therein, the notice of dismissal was filed by the plaintiff on 12
November 1981. Respondent filed his answer three days
earlier, or on 9 November, but plaintiff was served a copy of
the answer by registered mail only on 16 November.
Notwithstanding the fact that the answer was filed with the trial
court three days prior to the filing of the notice of dismissal,
the Court still affirmed the dismissal sought by the plaintiff. The
Court declared that the right of the plaintiff to cause the
dismissal of the complaint by mere notice is lost not by the
filing of the answer with the trial court, but upon the actual
service to the plaintiff of the answer.22
The Court further ruled that "[plaintiff’s] notice ipso facto
brought about the dismissal of the action then pending in the
Manila Court, without need of any order or other action by the
Presiding Judge. The dismissal was effected without regard to
whatever reasons or motives [plaintiff] might have had for
bringing it about, and was, as the same Section 1, Rule 17
points out, ‘without prejudice,’ the contrary not being otherwise
‘stated in the notice’ and it being the first time the action was
being so dismissed."23
It is quite clear that under Section 1, Rule 17 of the old Rules,
the dismissal contemplated therein 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. It is due to these considerations that the petition
should be denied.
Evidently, respondents had the right to dismiss their complaint
by mere notice on 13 February 1997, since as of even date,
petitioners had not yet served their answer on respondents.
The Motion to Withdraw Complaint makes clear respondents’
"desire to withdraw the complaint without prejudice." That
respondents resorted to a motion to effect what they could
have instead by mere notice may be indicative of a certain
degree of ignorance of procedural rules on the part of
respondents’ counsel. Yet such "error," if it could be called as
such, should hardly be of fatal consequence. Petitioners posit
that the "remedy" of filing a notice of dismissal is not exclusive,
respondents having the "option" of securing the court’s
approval to the dismissal.24 On the contrary, the trial court
has no discretion or option to deny the motion, since
2
dismissal by the plaintiff under Section 1, Rule 17 is
guaranteed as a matter of right to the plaintiffs. Even if
the motion cites the most ridiculous of grounds for
dismissal, the trial court has no choice but to consider
the complaint as dismissed, since the plaintiff may opt
for such dismissal as a matter of right, regardless of
ground.
We are in accord with the Court of Appeals when it pronounced:
While [the Motion to Withdraw Complaint] is styled as a
"motion" and contains a "prayer", these are innocuous errors
and superfluities that do not detract from its being a notice of
dismissal made under said Section 1 of Rule 17 and which ipso
facto dismissed the case. It is a hornbook rule that it is not the
caption of a pleading but the allegations thereat that
determines its nature.[25] The court order of dismissal is a mere
surplusage under the circumstances and emphasized by the
court a quo itself when it granted the motion "[x x x]
considering that an action may be dismissed by the plaintiffs
even without Order of the Court[x x x]"26
Thus, the complaint could be properly considered as having
been dismissed or withdrawn as of 13 February 1997.
Accordingly, when respondents filed their new complaint
relating to the same cause of action on 17 February 1997, the
old complaint was no longer pending. The certification against
forum-shopping attached to the new complaint correctly
asseverated that the old complaint "was withdrawn on
February 13, 1997."27
Petitioners are unable to propose any convincing legal
argument or any jurisprudence that would sway the Court to
their point of view. At the same time, our present ruling must
be distinguished from Ortigas & Company Limited Partnership
v. Velasco,28 wherein it was advanced that "theoretically every
final disposition of an action does not attain finality until after
fifteen (15) days therefrom, x x x the plaintiff may move to
withdraw and set aside his notice of dismissal and revive his
action, before that period lapses."29 That statement was made
in the context of ruling that a plaintiff may move for the revival
of the complaint dismissed on his instance under Section 1 of
Rule 17 only within 15 days upon notice; otherwise the remedy
of the plaintiff would be to file a new complaint. This
observation in Ortigas does not detract from the fact that under
Section 1, Rule 17 of the previous Rules, the complaint is
deemed ipso facto dismissed on the day of the filing of the
notice. This again is because dismissal at the instance of the
plaintiff under Section 1, Rule 17 is a matter of right, and under
the 1964 Rules of Civil Procedure, effective without need of any
affirmative action on the part of the trial court.
As noted at the onset, the 1997 Rules of Civil Procedure now
requires that upon the filing of such notice, the court issue an
order confirming the dismissal.30 The new requirement is
intended to qualify the right of a party to dismiss the action
before the adverse party files an answer or asks for summary
judgment.31 Still, there is no cause to apply the 1997 Rules
retroactively to this case. A plaintiff’s right to cause the
dismissal of his complaint under the old rules was unqualified.
Procedural rules may not be given retroactive effect if vested
rights would be disturbed,32 or if their application would not be
feasible or would work injustice.33 Since respondents possessed
an unqualified right to cause the dismissal of their complaint
without need of confirmation by the trial court, as enunciated
in the 1964 Rules, they did not err in asserting that their first
complaint was withdrawn on the day of the filing of their motion
to withdraw, and the lower courts were correct in agreeing with
respondents on this point.
WHEREFORE, the Petition is DENIED. Costs against petitioners.
SO ORDERED.
CIVPRO – RULE 17 – DISMISSAL OF ACTIONS – DUE TO
FAULT OF PLAINTIFF
G.R. No. 164797 February 13, 2006
JOSEFINA M. CRUZ and ERNESTINA M. CONCEPCION,
Petitioners,
vs.
THE HON. COURT OF APPEALS, SECOND DIVISION,
MARIANO "BOY" BUNAG and ROLANDO BUNAG,
Respondents.
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 decision1 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 Resolution2
dated 29 June 2004 denying petitioners' motion for
reconsideration.
The antecedents are substantially stated by the Court of
Appeals as follows:
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:
3
xxx 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)
xxx xxx xxx
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:
xxx xxx xxx
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:
xxx 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 co-
plaintiff 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
court's disquisition, to quote:
xxx xxx xxx
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 reconsideration5 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
4
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 Bunag9 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.
The question to be resolved is: Does res judicata apply in the
case at bar?
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 parties16 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.lavvphil.ñe+
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 Title17 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" Bunag's 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,
5
have knowledge of the pendency of the Quieting of Title case.
A portion of the decision18 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 counsel's 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. the public peace and quiet to the will and neglect of individuals
Hornbook is the rule that identity of causes of action does not and prefer the gratification of the litigious disposition on the
mean absolute identity. Otherwise, a party could easily escape part of suitors to the preservation of the public tranquility and
the operation of res judicata by changing the form of the action happiness.22 lavvphil.ñe+
or the relief sought. The test to determine whether the causes
of action are identical is to ascertain whether the same
WHEREFORE, premises considered, the petition is GRANTED.
evidence will sustain both actions, or whether there is an
The decision of the Court of Appeals dated 19 March 2004 and
identity in the facts essential to the maintenance of the two
its resolution dated 29 June 2004 are REVERSED and SET
actions. If the same facts or evidence would sustain both, the
ASIDE. Civil Case No. 2583-02 for Annulment of Title with
two actions are considered the same, and a judgment in the
Damages, pending before Branch 35 of the Regional Trial Court
first case is a bar to the subsequent action.20 In Stilianopulos
of Gapan City, Nueva Ecija, is herby ordered DISMISSED. With
v. The City of Legaspi,21 this Court had this to say:
costs.

The underlying objectives or reliefs sought in both the quieting-

SO ORDERED.
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.lavvphil.ñe+

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.lavvphil.ñe+

The doctrine of res judicata is a rule which pervades every well-

regulated 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

6
G.R. No. 170354 June 30, 2006

EDGARDO PINGA, Petitioner,
vs.
THE HEIRS OF GERMAN, SANTIAGO represented by
FERNANDO SANTIAGO, Respondents.
DECISION
TINGA, J.:
The constitutional faculty of the Court to promulgate rules of
practice and 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
At the hearing of 27 July 2005, plaintiffs’ counsel on record
failed to appear, sending in his stead a representative who
sought the postponement of the hearing. Counsel for
defendants (who include herein petitioner) opposed the move
for postponement and moved instead for the dismissal of the
case. The RTC noted that it was obvious that respondents had
failed to prosecute the case for an unreasonable length of time,
in fact not having presented their evidence yet. On that ground,
the complaint was dismissed. At the same time, the RTC
allowed defendants "to present their evidence ex-parte."12
Respondents filed a Motion for Reconsideration13 of the order
issued in open court on 27 July 2005, opting however not to
seek that their complaint be reinstated, but praying instead
that the entire action be dismissed and petitioner be disallowed
from presenting evidence ex-parte. Respondents claimed that
the order of the RTC allowing petitioner to present evidence ex-
parte was not in accord with established jurisprudence. They
cited cases, particularly City of Manila v. Ruymann14 and
Domingo v. Santos,15 which noted those instances in which a
counterclaim could not remain pending for independent
adjudication.

In granting this petition, the Court recognizes that the former

jurisprudential rule can no longer stand in light of Section 3,
Rule 17 of the 1997 Rules of Civil Procedure.
The relevant facts are simple enough. Petitioner Eduardo Pinga
was named as one of two defendants in a complaint for
injunction4 filed with Branch 29 of the Regional Trial Court
(RTC)5 of San Miguel, Zamboanga del Sur, by respondent Heirs
of German Santiago, represented by Fernando Santiago. The
Complaint6 dated 28 May 1998 alleged in essence that
petitioner and co-defendant Vicente Saavedra had been
unlawfully entering the coco lands of the respondent, cutting
wood and bamboos and harvesting the fruits of the coconut
trees therein. Respondents prayed that petitioner and
Saavedra be enjoined from committing "acts of depredation"
on their properties, and ordered to pay damages.
In their Amended Answer with Counterclaim,7 petitioner and
his co-defendant disputed respondents’ ownership of the
properties in question, asserting that petitioner’s father,
Edmundo Pinga, from whom defendants derived their interest
in the properties, had been in possession thereof since the
1930s.8 They alleged that as far back as 1968, respondents
had already been ordered ejected from the properties after a
complaint for forcible entry was filed by the heirs of Edmundo
Pinga. It was further claimed that respondents’ application for
free patent over the properties was rejected by the Office of
the President in 1971. Defendants in turn prayed that owing to
respondents’ forcible re-entry in the properties and the
irresponsible and reckless filing of the case, they be awarded
various types of damages instead in amounts totaling
P2,100,000 plus costs of suit.9
By July of 2005, the trial of the case had not yet been
completed. Moreover, respondents, as plaintiffs, had failed to
present their evidence. It appears that on 25 October 2004,
the RTC already ordered the dismissal of the complaint after
respondents’ counsel had sought the postponement of the
hearing scheduled then.10 However, the order of dismissal was
subsequently reconsidered by the RTC in an Order dated 9 June
2005, which took into account the assurance of respondents’
counsel that he would give priority to that case.11
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

7
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
8
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 pre-trial. After favorable judgment
was rendered on the counterclaim, plaintiffs interposed an
appeal, citing among other grounds, that the counterclaim
could no longer have been heard after the dismissal of the
complaint. While the Court noted that the adjudication of the
counterclaim in question "does not depend upon the
adjudication of the claims made in the complaint since they
were virtually abandoned by the non-appearance of the
plaintiffs themselves," it was also added that "[t]he doctrine
invoked is not available to plaintiffs like the petitioners, who
prevent or delay the hearing of their own claims and
allegations."37 The Court, through Justice JBL Reyes, noted:
The doctrine that the complaint may not be dismissed if the
counterclaim cannot be independently adjudicated is not
available to, and was not intended for the benefit of, a plaintiff
who prevents or delays the prosecution of his own complaint.
Otherwise, the trial of counterclaims would be made to depend
upon the maneuvers of the plaintiff, and the rule would offer a
premium to vexing or delaying tactics to the prejudice of the
counterclaimants. It is in the same spirit that we have ruled
that a complaint may not be withdrawn over the opposition of
the defendant where the counterclaim is one that arises from,
or is necessarily connected with, the 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
9
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
10
"action." Justice Regalado opined that the action of the plaintiff
is initiated by his complaint.
Justice Feria then suggested that the dismissal be limited to
the complaint[.] Thus, in the 1st line of Sec. 1, the words "An
action" will be changed to "a complaint"; in the 2nd line of Sec.
2, the words "an action" will be changed to "a complaint" and
in Sec. 3, the word "action" on the 5th line of the draft will be
changed to "complaint." The Committee agreed with Justice
Feria’s suggested amendments.
CA Paño believed that there is a need to clarify the counterclaim
that the defendant will prosecute, whether it is permissive or
compulsory or all kinds of counterclaims.
Justice Regalado opined that there is no need of making a
clarification because it is already understood that it covers both
counterclaims.52
It is apparent from these minutes that the survival of the
counterclaim despite the dismissal of the complaint under
Section 3 stood irrespective of whether the counterclaim was
permissive or compulsory. Moreover, when the Court itself
approved the revisions now contained in the 1997 Rules of Civil
Procedure, not only did Justice Regalado’s amendment to
Section 3, Rule 17 remain intact, but the final version likewise
eliminated the qualification formerly offered under Section 2 on
"counterclaims that can remain pending for independent
adjudication by the court."53 At present, even Section 2,
concerning dismissals on motion of the plaintiff, now recognizes
the right of the defendant to prosecute the counterclaim either
in the same or separate action notwithstanding the dismissal
of the complaint, and without regard as to the permissive or
compulsory nature of the counterclaim.
In his commentaries on the 1997 Rules of Civil Procedure,
Justice Regalado expounds on the effects of the amendments
to Section 2 and 3 of Rule 17:
2. Under this revised section [2], where the plaintiff moves for
the dismissal of his complaint to which a counterclaim has been
interposed, the dismissal shall be limited to the complaint. Such
dismissal shall be without prejudice to the right of the
defendant to either prosecute his counterclaim in a separate
action or to have the same resolved in the same action. Should
he opt for the first alternative, the court should render the
corresponding order granting and reserving his right to
prosecute his claim in a separate complaint. Should he choose
to have his counterclaim disposed of in the same action wherein
the complaint had been dismissed, he must manifest such
preference to the trial court within 15 days from notice to him
of plaintiff’s motion to dismiss. These alternative remedies of
the defendant are available to him regardless of whether his
counterclaim is compulsory or permissive. A similar alternative
procedure, with the same underlying reason therefor, is
adopted in Sec. 6, Rule 16 and Sec. 3 of this Rule, wherein the
complaint is dismissed on the motion of the defendant or, in
the latter instance, also by the court motu proprio.
xxxx
2. The second substantial amendment to [Section 3] is with
respect to the disposition of the defendant’s counterclaim in the
event the plaintiff’s complaint is dismissed. As already
observed, he is here granted the choice to prosecute that
counterclaim in either the same or a separate action. x x x x
3. With the aforestated amendments in Secs. 2 and 3 laying
down specific rules on the disposition of counterclaims involved
in the dismissal actions, the controversial doctrine in BA
Finance Corporation vs. Co, et al., (G.R. No. 105751, June 30,
1993) has been abandoned, together with the apparent
confusion on the proper application of said Secs. 2 and 3. Said
sections were distinguished and discussed in the author’s
separate opinion in that case, even before they were clarified
by the present amendments x x x.54
Similarly, Justice Feria notes that "the present rule reaffirms
the right of the defendant to move for the dismissal of the
complaint and to prosecute his counterclaim, as stated in the
separate opinion [of Justice Regalado in BA Finance.]"55
Retired Court of Appeals Justice Herrera pronounces that the
amendment to Section 3, Rule 17 settles that "nagging
question" whether the dismissal of the complaint carries with it
the dismissal of the counterclaim, and opines that by reason of
the amendments, the rulings in Metals Engineering,
International Container, and BA Finance "may be deemed
abandoned."56 On the effect of amendment to Section 3, Rule
17, the commentators are in general agreement,57 although
there is less unanimity of views insofar as Section 2, Rule 17 is
concerned.58
To be certain, when the Court promulgated the 1997 Rules of
Civil Procedure, including the amended Rule 17, those previous
jural doctrines that were inconsistent with the new rules
incorporated in the 1997 Rules of Civil Procedure were implicitly
abandoned insofar as incidents arising after the effectivity of
the new procedural rules on 1 July 1997. BA Finance, or even
the doctrine that a counterclaim may be necessarily dismissed
along with the complaint, clearly conflicts with the 1997 Rules
of Civil Procedure. The abandonment of BA Finance as doctrine
extends as far back as 1997, when the Court adopted the new
Rules of Civil Procedure. If, since then, such abandonment has
not been affirmed in jurisprudence, it is only because no proper
case has arisen that would warrant express confirmation of the
new rule. That opportunity is here and now, and we thus rule
that the dismissal of a complaint due to fault of the plaintiff is
without prejudice to the right of the defendant to prosecute any
pending counterclaims of whatever nature in the same or
separate action. We confirm that BA Finance and all previous
rulings of the Court that are inconsistent with this present
holding are now abandoned.
Accordingly, the RTC clearly erred when it ordered the
dismissal of the counterclaim, since Section 3, Rule 17
mandates that the dismissal of the complaint is without
prejudice to the right of the defendant to prosecute the
counterclaim in the same or separate action. If the RTC were
to dismiss the counterclaim, it should be on the merits of such
counterclaim. Reversal of the RTC is in order, and a remand is
necessary for trial on the merits of the counterclaim.
It would be perfectly satisfactory for the Court to leave this
matter at that. Still, an explanation of the reason behind the
new rule is called for, considering that the rationale behind the
previous rule was frequently elaborated upon.
11
Under Act No. 190, or the Code of Procedure in Civil Actions
promulgated in 1901, it was recognized in Section 127(1) that
the plaintiff had the right to seek the dismissal of the complaint
at any time before trial, "provided a counterclaim has not been
made, or affirmative relief sought by the cross-complaint or
answer of the defendant."59 Note that no qualification was
made then as to the nature of the counterclaim, whether it be
compulsory or permissive. The protection of the defendant’s
right to prosecute the counterclaim was indeed unqualified. In
City of Manila, decided in 1918, the Court explained:
By paragraph 1 [of Section 127], it will be seen that, where the
defendant has interposed a counterclaim, or is seeking
affirmative relief by a cross-complaint, that then, and in that
case, the plaintiff cannot dismiss the action so as to affect the
right of the defendant in his counterclaim or prayer for
affirmative relief. The reason for that exception is clear. When
the answer sets up an independent action against the plaintiff,
it then becomes an action by the defendant against the
plaintiff, and, of course, the plaintiff has no right to ask for a
dismissal of the defendant’s action.60
Nonetheless, a new rule was introduced when Act No. 190 was
replaced by the 1940 Rules of Court. Section 2, Rule 30 of the
1940 Rules specified that if a counterclaim is pleaded by a
defendant prior to the service of the plaintiff’s motion to
dismiss, the action shall not be dismissed against the
defendant’s objection unless the counterclaim can remain
pending for independent adjudication by the court. This
qualification remained intact when the 1964 Rules of Court was
introduced.61 The rule referred only to compulsory
counterclaims, or counterclaims which arise out of or are
necessarily connected with the transaction or occurrence that
is the subject matter of the plaintiff’s claim, since the rights of
the parties arising out of the same transaction should be settled
at the same time.62 As was evident in Metals, International
Container and BA Finance, the rule was eventually extended to
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
12
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.
CIVPRO – RULE 17 – DISMISSAL OF ACTIONS –
REMEDY OF PLAINTIFF
G.R. Nos. 169131-32 January 20, 2006
LULLETE S. KO and ARLETTE SIMPLICIANO BASILIO,
Petitioners,
vs.
PHILIPPINE NATIONAL BANK, Laoag Branch, and the
REGISTER OF DEEDS OF ILOCOS NORTE, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari assailing the April 27,
2005 Order1 of the Regional Trial Court of Laoag City, Branch
14, in Civil Case No. 12523-14 dismissing petitioners’
complaint, and the July 28, 2005 Resolution2 denying
petitioners’ motion for reconsideration.
The case stemmed from an action filed by petitioners in the
trial court for Annulment of Mortgage, Extra-judicial
Foreclosure Sale, Annulment of Transfer Certificate of Title Nos.
T-21064 and T-21065 and Deed of Sale with a Prayer for
Preliminary Injunction and Restraining Order. The complaint
alleged that the assailed mortgage and the foreclosure
proceedings were null and void since the written consent of
petitioners, as beneficiaries of the mortgaged property, were
not secured. Respondent bank denied the claim and alleged
that in the execution of the mortgage, petitioners in fact gave
their consent.
During the course of the proceedings, petitioners and their
counsel failed to attend a scheduled trial. Upon motion of
respondent bank, the complaint was dismissed. In its order
dated April 27, 2005, the trial court stated:
When the case was called, Atty. Lorenzo Castillo, counsel for
the plaintiffs did not appear despite proper notice. No plaintiff
appeared. Atty. Eduardo Alcantara, counsel for defendant bank
appeared.
Atty. Alcantara manifested that there were numerous occasions
in the past when plaintiffs and counsel did not attend. He
pointed out that there is an apparent lack of interest on the
part of plaintiff to prosecute the action. He moved to dismiss
the case on that legal ground.
WHEREFORE, in view of the above premises, the above-entitled
case is hereby ordered dismissed.
SO ORDERED.3
Petitioners filed a motion for reconsideration claiming that they
have been continuously pursuing negotiations with respondent
bank to purchase back the property and have gained positive
results. Respondent bank countered that from the time the
complaint was filed, a period of three years had elapsed but
petitioners failed to prosecute their case, showing lack of
interest in the early resolution thereof. The trial court denied
the motion for reconsideration.
Hence, the instant petition for review on the following grounds:
I failure to comply with the prescribed procedure. Concomitant
13
THE TRIAL COURT ERRED IN LAW IN DISMISSING
PETITIONERS COMPLAINT ON THE GROUND OF THEIR FAILURE
TO APPEAR AT THE SCHEDULED HEARING DESPITE THAT
DEFENDANT PNB HAS BEEN EQUALLY GUILTY LIKEWISE.
II
THE TRIAL COURT ERRED IN LAW IN DISMISING THE CASE
DESPITE THAT THE CASE INVOLVES A PROPERTY OF
SIGNIFICANT IMPORTANCE AND VALUE TO THE LIFE AND
DIGNITY OF THE PETITIONERS THIS (sic) CALLING FOR THE
OVERRIDING CONSIDERATION OF A JUDGMENT BASED ON
THE MERITS OVER THE PRIMORDIAL INTEREST OF
PROCEDURE AND TECHNICALITIES.4
The petition lacks merit.
On the procedural aspect, we find that petitioners erred in filing
a petition for review on certiorari under Rule 45 of the Rules of
Court instead of filing an appeal with the Court of Appeals.
Section 3, Rule 17 of the Rules of Court provides:
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 the motion of the defendant
or upon the court’s own motion, without prejudice to the right
of the defendant to prosecute his counterclaim in the same or
in a separate action. This dismissal shall have the effect of
an adjudication upon the merits, unless otherwise
declared by the court. (Emphasis supplied)
Upon the order of dismissal, petitioners’ counsel filed a timely
motion for reconsideration which was denied by the trial court.
Considering that an order of dismissal for failure to prosecute
has the effect of an adjudication on the merits, petitioners’
counsel should have filed a notice of appeal with the appellate
court within the reglementary period.5 Instead of filing a
petition under Rule 45 of the Rules of Court, the proper
recourse was an ordinary appeal with the Court of Appeals
under Rule 41, which provides:
Sec. 2. Modes of Appeal.—
(a) Ordinary appeal. – The appeal to the Court of Appeals
in cases decided by the Regional Trial Court in the
exercise of its original jurisdiction shall be taken by filing
a notice of appeal with the court which rendered the judgment
or final order appealed from and serving a copy thereof upon
the adverse party x x x. (Emphasis supplied)
The rule is clear. In order to perfect an appeal all that is
required is a pro forma notice of appeal. Perhaps due to failure
to file a notice of appeal within the remaining two days of the
appeal period, petitioners’ counsel instead filed the instant
petition. The rules of procedure, however, do not exist for the
convenience of the litigants. These rules are established to
provide order to and enhance the efficiency of our judicial
system. They are not to be trifled with lightly or overlooked by
mere expedience of invoking "substantial justice." In Balindong
v. Court of Appeals6 we stated:
Hence, rules of procedure must be faithfully followed except
only when for persuasive reasons, they may be relaxed to
relieve a litigant of an injustice not commensurate with his
to a liberal application of the rules of procedure should be an
effort on the part of the party invoking liberality to explain its
failure to comply with the rules. Procedural law has its own
rationale in the orderly administration of justice,
namely, to ensure the effective enforcement of
substantive rights by providing for a system that
obviates arbitrariness, caprice, despotism or
whimsicality in the settlement of disputes. The
enforcement of procedural rules is not antithetical to the
substantive rights of the litigants. The policy of the courts
is to give effect to both procedural and substantive laws, as
complementing each other, in the just and speedy resolution of
the dispute between the parties. (Emphasis supplied)

Even on the merits, petitioners’ cause must still fail. The trial
court dismissed the complaint due to petitioners and counsel’s
apparent lack of interest to prosecute the case. Petitioners’
counsel argued that their repeated failure to attend the hearing
was caused by conflicts in his schedule and by his lack of
knowledge of the trial dates. He also contended that
respondent bank and counsel have been similarly guilty
thereof, and that petitioners have informed the court of
ongoing negotiations for the re-purchase of the foreclosed
property. Hence, petitioners invoke liberality and the primordial
interest of substantial justice over the strict enforcement of the
rules of technicality.

We are not persuaded. In every action, the plaintiff is duty-

bound to prosecute the same with utmost diligence and with
reasonable dispatch to enable him to obtain the relief prayed
for and, at the same time, minimize the clogging of the court
dockets. The expeditious disposition of cases is as much the
duty of the plaintiff as the court. It must be remembered that
a defendant in a case likewise has the right to the speedy
disposition of the action filed against him7 considering that any
delay in the proceedings entail prolonged anxiety and valuable
time wasted.

In the case at bar, three years have since lapsed from the filing
of the complaint on May 3, 2002 and the order of dismissal on
April 27, 2005. Petitioners’ failure to prosecute their case and
proceed with the trial during the span of three years leads to
no other conclusion than that petitioners have no interest in
seeing their case terminated at the earliest possible time; or
that petitioners’ case is unmeritorious from inception.
Whichever the case may be, the dismissal order of the trial
court stand and is now immutable.

Petitioners cannot claim that they were deprived of due

process. True, the right to due process safeguards the
opportunity to be heard and to submit any evidence one may
have in support of his claim or defense.8 Nonetheless, we have
time and again held that where the opportunity to be heard,
either through verbal arguments or pleadings, is accorded, and
the party can "present its side" or defend its "interest in due
course," there is no denial of due process.9 What the law
proscribes is the lack of opportunity to be heard.10

Petitioners had the opportunity to present their case and claim

the relief they seek. But their inadvertence and lack of
circumspect renders the trial court’s order dismissing their case
final and executory.

WHEREFORE, the petition is DENIED. The assailed April 27,

2005 Order of the Regional Trial Court of Laoag City, Branch
14 and its July 28, 2005 Resolution in Civil Case No. 12523-14
are AFFIRMED.

SO ORDERED.

14
CIVPRO – RULE 17 – DISMISSAL OF ACTIONS – EFFECT
G.R. No. 151098 March 21, 2006
ERLINDA GAJUDO, FERNANDO GAJUDO, JR., ESTELITA
GAJUDO, BALTAZAR GAJUDO and DANILO ARAHAN
CHUA, Petitioners,
vs.
TRADERS ROYAL BANK,1Respondent.
DECISION
PANGANIBAN, CJ:
The mere fact that a defendant is declared in default does not
automatically result in the grant of the prayers of the plaintiff.
To win, the latter must still present the same quantum of
evidence that would be required if the defendant were still
present. A party that defaults is not deprived of its rights,
except the right to be heard and to present evidence to the trial
court. If the evidence presented does not support a judgment
for the plaintiff, the complaint should be dismissed, even if the
defendant may not have been heard or allowed to present any
countervailing evidence.
The Case
Before us is a Petition for Review2 under Rule 45 of the Rules
of Court, assailing the June 29, 2001 Decision3 and December
6, 2001 Resolution4 of the Court of Appeals (CA) in CA-GR CV
No. 43889. The CA disposed as follows:
"UPON THE VIEW WE TAKE OF THIS CASE, THUS, the partial
judgment appealed from, must be, as it hereby is, VACATED
and SET ASIDE, and another one entered DISMISSING the
complaint at bench. Without costs."5
The assailed Resolution denied petitioners’ Motion for
Reconsideration6 for lack of merit.
The Facts
The CA narrated the facts as follows:
"[Petitioners] filed a complaint before the Regional Trial Court
of Quezon City, Branch 90, against [respondent] Traders Royal
Bank, the City Sheriff of Quezon City and the Register of Deeds
of Quezon City. Docketed thereat as Civil Case No. Q-41203,
the complaint sought the annulment of the extra-judicial
foreclosure and auction sale made by [the] city sheriff of
Quezon City of a parcel of land covered by TCT No. 16711 of
the Register of Deeds of Quezon City, the conventional
redemption thereof, and prayed for damages and the issuance
of a writ of preliminary injunction.
"The complaint alleged that in mid 1977[, Petitioner] Danilo
Chua obtained a loan from [respondent] bank in the amount of
P75,000.00 secured by a real estate mortgage over a parcel of
land covered by TCT No. 16711, and owned in common by the
[petitioners]; that when the loan was not paid, [respondent]
bank commenced extra-judicial foreclosure proceedings on the
property; that the auction sale of the property was set on 10
June 1981, but was reset to 31 August 1981, on [Petitioner
Chua’s] request, which, however, was made without the
knowledge and conformity of the other [petitioners]; that on
the re-scheduled auction sale, [the] Sheriff of Quezon City sold
the property to the [respondent] bank, the highest bidder
therein, for the sum of P24,911.30; that the auction sale was
15
tainted with irregularity because, amongst others, the bid price
was shockingly or unconscionably, low; that the other
[petitioners] failed to redeem the property due to their lack of
knowledge of their right of redemption, and want of sufficient
education; that, although the period of redemption had long
expired, [Petitioner] Chua offered to buy back, and
[respondent] bank also agreed to sell back, the foreclosed
property, on the understanding that Chua would pay
[respondent] bank the amount of P40,135.53, representing the
sum that the bank paid at the auction sale, plus interest; that
[Petitioner] Chua made an initial payment thereon in the
amount of P4,000.00, covered by Interbank Check No.
09173938, dated 16 February 1984, duly receipted by
[respondent] bank; that, in a sudden change of position,
[respondent] bank wrote Chua, on 20 February 1984, asking
that he could repurchase the property, but based on the current
market value thereof; and that sometime later, or on 22 March
1984, [respondent] bank wrote Chua anew, requiring him to
tender a new offer to counter the offer made thereon by
another buyer.
"Traversing [petitioners’] complaint, [respondent] bank, upon
05 July 1984, filed its answer with counterclaim, thereunder
asserting that the foreclosure sale of the mortgaged property
was done in accordance with law; and that the bid price was
neither unconscionable, nor shockingly low; that [petitioners]
slept on their rights when they failed to redeem the property
within the one year statutory period; and that [respondent]
bank, in offering to sell the property to [Petitioner] Chua on the
basis of its current market price, was acting conformably with
law, and with legitimate banking practice and regulations.
"Pre-trial having been concluded, the parties entered upon
trial, which dragged/lengthened to several months due to
postponements. Upon 11 June 1988, however, a big
conflagration hit the City Hall of Quezon City, which destroyed,
amongst other things, the records of the case. After the records
were reconstituted, [petitioners] discovered that the foreclosed
property was sold by [respondent] bank to the Ceroferr Realty
Corporation, and that the notice of lis pendens annotated on
the certificate of title of the foreclosed property, had already
been cancelled. Accordingly, [petitioners], with leave of court,
amended their complaint, but the Trial Court dismissed the
case ‘without prejudice’ due to [petitioners’] failure to pay
additional filing fees.
"So, upon 11 June 1990, [petitioners] re-filed the complaint
with the same Court, whereat it was docketed as Civil Case No.
90-5749, and assigned to Branch 98: the amended complaint
substantially reproduced the allegations of the original
complaint. But [petitioners] this time impleaded as additional
defendants the Ceroferr Realty Corporation and/or Cesar
Roque, and Lorna Roque, and included an additional cause of
action, to wit: that said new defendants conspired with
[respondent] bank in [canceling] the notice of lis pendens by
falsifying a letter sent to and filed with the office of the Register
of Deeds of Quezon City, purportedly for the cancellation of said
notice.
"Summons was served on [respondent] bank on 26 September
1990, per Sheriff’s Return dated 08 October 1990. Supposing
that all the defendants had filed their answer, [petitioners]
filed, on 23 October 1991, a motion to set case for pre-trial,
which motion was, however, denied by the Trial Court in its
Order of 25 October 1991, on the ground that [respondent]
bank has not yet filed its answer. On 13 November 1991[,
petitioners] filed a motion for reconsideration, thereunder
alleging that they received by registered mail, on 19 October
1990, a copy of [respondent] bank’s answer with counterclaim,
dated 04 October 1990, which copy was attached to the
motion. In its Order of 14 November 1991, the trial Court
denied for lack of merit, the motion for reconsideration, therein
holding that the answer with counterclaim filed by [respondent]
bank referred to another civil case pending before Branch 90 of
the same Court.
"For this reason, [petitioners] filed on 02 December 1991 a
motion to declare [respondent] bank in default, thereunder
alleging that no answer has been filed despite the service of
summons on it on 26 September 1990.
"On 13 December 1991, the Trial Court declared the motion
submitted for resolution upon submission by [petitioners] of
proof of service of the motion on [respondent] bank.
"Thus, on 16 January 1992, upon proof that [petitioners] had
indeed served [respondent] bank with a copy of said motion,
the Trial Court issued an Order of default against [respondent]
bank.
"Upon 01 December 1992, on [petitioners’] motion, they were
by the Court allowed to present evidence ex parte on 07
January 1993, insofar as [respondent] bank was concerned.
"Thereafter, or on 08 February 1993, the Trial Court rendered
the new questioned partial decision.7
"Aggrieved, [respondent] bank filed a motion to set aside [the]
partial decision by default against Traders Royal Bank and
admit [respondent] Traders Royal Bank’s x x x Answer with
counterclaim: thereunder it averred, amongst others, that the
erroneous filing of said answer was due to an honest mistake
of the typist and inadvertence of its counsel.
"The [trial court] thumbed down the motion in its Order of 26
July 1993."8
Respondent bank appealed the Partial Decision9 to the CA.
During the pendency of that appeal, Ceroferr Realty
Corporation and/or Cesar and/or Lorna Roque filed a
Manifestation with Motion10 asking the CA to discharge them as
parties, because the case against them had already been
dismissed on the basis of their Compromise Agreement11 with
petitioners. On May 14, 1996, the CA issued a Resolution12
granting Ceroferr et al.’s Manifestation with Motion to discharge
movants as parties to the appeal. The Court, though, deferred
resolution of the matters raised in the Comment13 of
respondent bank. The latter contended that the Partial Decision
had been novated by the Compromise Agreement, whose effect
of res judicata had rendered that Decision functus officio.
Ruling of the Court of Appeals
The CA ruled in favor of respondent bank. Deemed, however,
to have rested on shaky ground was the latter’s "Motion to Set
Aside Partial Decision by Default Against Traders Royal Bank
and Admit Defendant Traders Royal Bank’s Answer."14 The
reasons offered by the bank for failing to file an answer were
considered by the appellate court to be "at once specious,
shallow and sophistical and can hardly be dignified as a
‘mistake’ or ‘excusable negligence,’ which ordinary prudence
could not have guarded against."15
In particular, the CA ruled that the erroneous docket number
placed on the Answer filed before the trial court was not an
excusable negligence by the bank’s counsel. The latter had a
bounden duty to be scrupulously careful in reviewing pleadings.
Also, there were several opportunities to discover and rectify
the mistake, but these were not taken. Moreover, the bank’s
Motion to Set Aside the Partial Decision and to Admit [the]
Answer was not accompanied by an affidavit of merit. These
16
mistakes and the inexcusable negligence committed by
respondent’s lawyer were binding on the bank.
On the issue of whether petitioners had convincingly
established their right to relief, the appellate court held that
there was no ground to invalidate the foreclosure sale of the
mortgaged property. First, under Section 3 of Act No. 3135, an
extrajudicial foreclosure sale did not require personal notice to
the mortgagor. Second, there was no allegation or proof of
noncompliance with the publication requirement and the public
posting of the notice of sale, provided under Act No. 3135, as
amended. Third, there was no showing of inadequacy of price
as no competent evidence was presented to show the real
market value of the land sold or the readiness of another buyer
to offer a price higher than that at which the property had been
sold.
Moreover, petitioners failed to prove that the bank had agreed
to sell the property back to them. After pointing out that the
redemption period had long expired, respondent’s written
communications to Petitioner Chua only showed, at most, that
the former had made a proposal for the latter to buy back the
property at the current market price; and that Petitioner Chua
was requested to make an offer to repurchase the property,
because another buyer had already made an offer to buy it. On
the other hand, respondent noted that the Interbank check for
P4,000 was for "deposit only." Thus, there was no showing that
the check had been issued to cover part of the repurchase
price.
The appellate court also held that the Compromise Agreement
had not resulted in the novation of the Partial Decision, because
the two were not incompatible. In fact, the bank was not even
a party to the Agreement. Petitioners’ recognition of Ceroferr’s
title to the mortgaged property was intended to preclude future
litigation against it.
Hence this Petition.16
Issues
In their Memorandum, petitioners raise the following issues:
"1. Whether or not the Respondent Court of Appeals erred in
failing to apply the provisions of Section 3, Rule 9 of the 1997
Rules of Civil Procedure [and in applying instead] the rule on
preponderance of evidence under Section 1, Rule 133 of the
Rules of Court.
"2. Whether or not the respondent appellate court failed to
apply the conventional redemption rule provided for under
Article 1601 of the New Civil Code.
"3. Whether or not this Honorable Court can exercise its judicial
prerogative to evaluate the findings of facts."17
The first issue is one of law and may be taken up by the Court
without hindrance, pursuant to Section 1 of Rule 45 of the Rules
of Court.18 The second and the third issues, however, would
entail an evaluation of the factual findings of the appellate
court, a function ordinarily not assumed by this Court, unless
in some excepted cases. The Court will thus rule on the first
issue before addressing the second and the third issues jointly.
The Court’s Ruling
The Petition has no merit.
First Issue:
Quantum of Proof
Petitioners challenge the CA Decision for applying Section 3 of
Rule 9 of the Rules of Court, rather than Section 1 of Rule 133
of the same Rules. In essence, petitioners argue that the
quantum of evidence for judgments flowing from a default
order under Section 3 of Rule 9 is not the same as that provided
for in Section 1 of Rule 133.
For ease of discussion, these two rules will be reproduced
below, starting with Section 3 of Rule 9 of the Rules of Court:
"Sec. 3. Default; declaration of. – If the defending party fails
to answer within the time allowed therefor, the court shall,
upon motion of the claiming party with notice to the defending
party, and proof of such failure, declare the defending party in
default. Thereupon, the court shall proceed to render judgment
granting the claimant such relief as his pleading may warrant,
unless the court in its discretion requires the claimant to submit
evidence. Such reception of evidence may be delegated to the
clerk of court.
"(a) Effect of order of default. – A party in default shall be
entitled to notice of subsequent proceedings but not to take
part in the trial.
"(b) Relief from order of default. – A party declared in default
may at any time after notice thereof and before judgment
file a motion under oath to set aside the order of default upon
proper showing that his failure to answer was due to fraud,
accident, mistake or excusable negligence and that he has a
meritorious defense. In such case, the order of default may
be set aside on such terms and conditions as the judge may
impose in the interest of justice.
"(c) Effect of partial default. – When a pleading asserting a
claim states a common cause of action against several
defending parties, some of whom answer and the others fail
to do so, the court shall try the case against all upon the
answers thus filed and render judgment upon the evidence
presented.
"(d) Extent of relief to be awarded. – A judgment rendered
against a party in default shall not exceed the amount or be
different in kind from that prayed for nor award unliquidated
damages.
"(e) Where no defaults allowed. – If the defending party in
an action for annulment or declaration of nullity of marriage
or for legal separation fails to answer, the court shall order
the prosecuting attorney to investigate whether or nor a
collusion between the parties exists, and if there is no
collusion, to intervene for the State in order to see to it that
the evidence submitted is not fabricated."
We now quote Section 1 of Rule 133:
"SECTION 1. Preponderance of evidence, how determined. – In
civil cases, the party having the burden of proof must establish
his case by a preponderance of evidence. In determining where
the preponderance or superior weight of evidence on the issues
involved lies, the court may consider all the facts and
circumstances of the case, the witnesses’ manner of testifying,
their intelligence, their means and opportunity of knowing the
facts to which they are testifying, the nature of the facts to
which they testify, the probability or improbability of their
testimony, their interest or want of interest, and also their
personal credibility so far as the same may legitimately appear
17
upon the trial. The court may also consider the number of
witnesses, though the preponderance is not necessarily with
the greater number."
Between the two rules, there is no incompatibility that would
preclude the application of either one of them. To begin with,
Section 3 of Rule 9 governs the procedure which the trial court
is directed to take when a defendant fails to file an answer.
According to this provision, the court "shall proceed to render
judgment granting the claimant such relief as his pleading may
warrant," subject to the court’s discretion on whether to require
the presentation of evidence ex parte. The same provision also
sets down guidelines on the nature and extent of the relief that
may be granted. In particular, the court’s judgment "shall not
exceed the amount or be different in kind from that prayed for
nor award unliquidated damages."
As in other civil cases, basic is the rule that the party making
allegations has the burden of proving them by a preponderance
of evidence.19 Moreover, parties must rely on the strength of
their own evidence, not upon the weakness of the defense
offered by their opponent.20 This principle holds true, especially
when the latter has had no opportunity to present evidence
because of a default order. Needless to say, the extent of the
relief that may be granted can only be as much as has been
alleged and proved21 with preponderant evidence required
under Section 1 of Rule 133.
Regarding judgments by default, it was explained in Pascua v.
Florendo22 that complainants are not automatically entitled to
the relief prayed for, once the defendants are declared in
default. Favorable relief can be granted only after the court has
ascertained that the relief is warranted by the evidence offered
and the facts proven by the presenting party. In Pascua, this
Court ruled that "x x x it would be meaningless to require
presentation of evidence if every time the other party is
declared in default, a decision would automatically be rendered
in favor of the non-defaulting party and exactly according to
the tenor of his prayer. This is not contemplated by the Rules
nor is it sanctioned by the due process clause."23
The import of a judgment by default was further clarified in Lim
Tanhu v. Ramolete.24 The following disquisition is most
instructive:
"Unequivocal, in the literal sense, as these provisions [referring
to the subject of default then under Rule 18 of the old Rules of
Civil Procedure] are, they do not readily convey the full import
of what they contemplate. To begin with, contrary to the
immediate notion that can be drawn from their language, these
provisions are not to be understood as meaning that default or
the failure of the defendant to answer should ‘be interpreted as
an admission by the said defendant that the plaintiff’s cause of
action find support in the law or that plaintiff is entitled to the
relief prayed for.’ x x x.
xxxxxxxxx
"Being declared in default does not constitute a waiver of rights
except that of being heard and of presenting evidence in the
trial court. x x x.
"In other words, a defaulted defendant is not actually thrown
out of court. While in a sense it may be said that by defaulting
he leaves himself at the mercy of the court, the rules see to it
that any judgment against him must be in accordance with law.
The evidence to support the plaintiff’s cause is, of course,
presented in his absence, but the court is not supposed to
admit that which is basically incompetent. Although the
defendant would not be in a position to object, elementary
justice requires that only legal evidence should be considered
against him. If the evidence presented should not be sufficient
to justify a judgment for the plaintiff, the complaint must be
dismissed. And if an unfavorable judgment should be
justifiable, it cannot exceed in amount or be different in kind
from what is prayed for in the complaint."25
In sum, while petitioners were allowed to present evidence ex
parte under Section 3 of Rule 9, they were not excused from
establishing their claims for damages by the required quantum
of proof under Section 1 of Rule 133. Stated differently, any
advantage they may have gained from the ex parte
presentation of evidence does not lower the degree of proof
required. Clearly then, there is no incompatibility between the
two rules.
Second and Third Issues:
Review of the Evidence
Petitioners urge this Court to depart from the general rule that
the lower courts’ findings of fact are not reviewable in a petition
for review.26 In support of their plea, they cite the conflicting
findings of the trial and the appellate courts, as well as the
alleged conjectures and surmises made by the CA in arriving at
its Decision.
Indeed, the differences between the findings of the two courts
a quo, leading to entirely disparate dispositions, is reason
enough for this Court to review the evidence in this case.27
Whether the CA indulged in surmises and conjectures when it
issued the assailed Decision will thus be determined.
At the outset, it behooves this Court to clarify the CA’s
impression that no evidence was presented in the case which
might have contributed to petitioners’ challenge to its Decision.
The appellate court’s observation was based on the notation by
the lower court’s clerk of court that there were no separate
folders for exhibits and transcripts, because "there was no
actual hearing conducted in this case."28
True, there was no hearing conducted between petitioners and
respondent, precisely because the latter had been declared in
default, and petitioners had therefore been ordered to present
their evidence ex parte. But the absence of a hearing did not
mean that no evidence was presented. The Partial Decision
dated February 8, 1993, in fact clearly enumerated the pieces
of evidence adduced by petitioners during the ex parte
presentation on January 7, 1993. The documentary evidence
they presented consisted of the following:
1. A copy of respondent bank’s Petition for the extrajudicial
foreclosure and auction sale of the mortgaged parcel of
land29
2. The Certificate of Sale that was a consequence of the
foreclosure sale30
3. A Statement of Account dated February 15, 1984,
showing Petitioner Chua’s outstanding debt in the amount
of P40,135.5331
4. A copy of the Interbank check dated February 16, 1984,
in the amount of P4,00032
5. The Official Receipt issued by the bank acknowledging
the check33
6. The bank’s letter dated February 20, 1984, advising
Petitioner Chua of the sale of the property at an
extrajudicial public auction; the lapse of the period of
18
redemption; and an invitation to purchase the property at
its current market price34
7. Another letter from the bank dated March 22, 1984,
inviting Petitioner Chua to submit, within five days, an offer
to buy the same property, which another buyer had offered
to buy35
8. A copy of the Notice of Lis Pendens, the filing of which
was done after that of the Amended Complaint36
9. A copy of the title showing the inscription of the Notice of
Lis Pendens37
10. A copy of the Absolute Deed of Sale to Cerrofer38
11. A copy of a letter dated August 29, 1986, made and
signed by petitioners’ counsel, requesting the cancellation
of the Notice of Lis Pendens39
12. A copy of a page of the Memorandum of Encumbrance
from TCT No. (314341) 7778/T-3940
Having clarified this matter, we proceed to review the facts.
Petitioners do not deny that the one-year period for legal
redemption had already lapsed when respondent bank
supposedly offered to sell the property in question. The records
clearly show that the Certificate of Sale following the
extrajudicial public auction of the property was registered on
June 21, 1982, the date from which the legal redemption period
was to be reckoned.41 Petitioners insist, though, that they had
the right to repurchase the property through conventional
redemption, as provided under Article 1601 of the Civil Code,
worded as follows:
"ART. 1601. Conventional redemption shall take place when the
vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Article 1616 and
other stipulations which may have been agreed upon."
It is true that the one-year period of redemption provided in
Act No. 3135, as amended -- the law under which the property
here was sold in a foreclosure sale -- is only directory and, as
such can be extended by agreement of the parties.42 However,
it has also been held that for legal redemption to be converted
into conventional redemption, two requisites must be
established: 1) voluntary agreement of the parties to extend
the redemption period; and 2) the debtor’s commitment to pay
the redemption price on a fixed date.43 Thus, assuming that an
offer was made to Petitioner Chua to buy back the property
after the lapse of the period of legal redemption, petitioners
needed to show that the parties had agreed to extend the
period, and that Petitioner Chua had committed to pay the
redemption price on a fixed date.
The letters sent by the bank to Petitioner Chua on February 20
and March 22, 1984, do not convincingly show that the parties
arrived at a firm agreement for the repurchase of the property.
What can be gleaned from the February 20 letter is that
Petitioner Chua proposed to pay the redemption price for the
property, but that the bank refused to accede to his request,
because the one-year redemption period had already lapsed.44
The bank, though, had offered to sell back the property to him
at the current market value. Indeed, an examination of his
earlier letter of February 17, 1984, readily reveals that he
expressed willingness to settle his account with the bank, but
that his "present financial situation precludes [him] from
effecting an immediate settlement x x x."45
On the other hand, the letter dated March 22, 1984, clearly
states that "x x x the Bank rejected [his] request to redeem
said property due to [the] lapse of [the] one (1) year legal
redemption period."46 Nonetheless, he was "[invited] to submit
an offer to buy the same property in five (5) days from receipt
[of the letter]."47 Petitioner Chua was also informed that the
bank had received an offer to purchase the foreclosed property.
As to the P4,000 check enclosed in his proposal dated February
17, 1984, as a token of his good faith, he was advised that the
amount was still outstanding in the books of the bank and could
be claimed by him if he thought the invitation was not feasible.
More important, there was no showing that petitioners had
committed to pay the redemption price on a fixed date. True,
Petitioner Chua had attempted to establish a previous
agreement to repurchase the property for less than its fair
market value. He had submitted in evidence a Statement of
Account48 dated February 15, 1984, showing a balance of
P40,135.53; the Interbank check dated February 16, 1984 , for
P4,000, which was deposited to the account of respondent
bank;49 and the Official Receipt for the check.50
In the light of the pending issue as to the validity of the sale of
the property to the third parties (Cerrofer Realty Corporation
and Spouses Roque), the trial court properly withheld judgment
on the matter and thus left the prayer for damages as the sole
issue for resolution.
To adjudge damages, paragraph (d) of Section 3 of Rule 9 of
the Rules of Court provides that a judgment against a party in
default "shall not exceed the amount or be different in kind
from that prayed for nor award unliquidated damages." The
proscription against the award of unliquidated damages is
significant, because it means that the damages to be awarded
must be proved convincingly, in accordance with the quantum
of evidence required in civil cases.
Unfortunately for petitioners, the grant of damages was not
sufficiently supported by the evidence for the following
reasons.

First, petitioners were not deprived of their property without

Granting that these documents evinced an agreement,
cause. As correctly pointed out by the CA, Act No. 3135, as
petitioners were still unable to establish a firm commitment on
amended, does not require personal notice to the mortgagor.53
their part to pay the redemption price on a fixed date. On the
In the present case, there has been no allegation -- much less,
contrary, the February 17 letter of Petitioner Chua to the bank
proof -- of noncompliance with the requirement of publication
clearly manifested that he was not capable of paying the
and public posting of the notice of sale, as required by Áct No.
account immediately. For this reason, he proposed to pay in
3135. Neither has there been competent evidence to show that
"three or four installments" without a specification of dates for
the price paid at the foreclosure sale was inadequate.54 To be
the payments, but with a plea for a reduction of the interest
sure, there was no ground to invalidate the sale.
charges. That proposal was rejected.

Second, as previously stated, petitioners have not convincingly

Indeed, other than the Interbank check marked "for deposit"
established their right to damages on the basis of the purported
by respondent bank, no other evidence was presented to
agreement to repurchase. Without reiterating our prior
establish that petitioners had offered to pay the alleged
discussion on this point, we stress that entitlement to actual
redemption price of P40,135.53 on a fixed date. For that
and compensatory damages must be proved even under
matter, petitioners have not shown that they tendered
Section 3 of Rule 9 of the Rules of Court. The same is true with
payment of the balance and/or consigned the payment to the
regard to awards for moral damages and attorney’s fees, which
court, in order to fulfill their part of the purported agreement.
were also granted by the trial court.
These remedies are available to an aggrieved debtor under
Article 1256 of the Civil Code,51 when the creditor unjustly
refuses to accept the payment of an obligation. In sum, petitioners have failed to convince this Court of the
cogency of their position, notwithstanding the advantage they
enjoyed in presenting their evidence ex parte. Not in every case
The next question that presents itself for resolution is the
of default by the defendant is the complainant entitled to win
propriety of the CA’s ruling vacating the Partial Decision of the
automatically.
regional trial court (RTC) and dismissing the case. To recall, the
RTC had resolved to withhold a ruling on petitioners’ right to
redeem conventionally and/or order the reconveyance of the WHEREFORE, this Petition is hereby DENIED and the assailed
property in question, pending a determination of the validity of Decision and Resolution AFFIRMED. Costs against petitioners.
the sale to Cerrofer Realty Corporation and Spouses Cesar and
Lorna Roque. The trial court, however, granted the prayer for SO ORDERED.
damages against respondent bank. The RTC ruled as follows:

"The evidence presented by [petitioners] in so far as the cause

of action against [respondent] Traders Royal Bank is concerned
are preponderant to support the claims of the [petitioners].
However, in view of the fact that the property subject matter
of this case has already been conveyed to defendant Cerrofer
Realty Corporation thus the issue as to whether or not the said
conveyance or sale is valid is sill pending between the
[petitioners] and [respondents] Cerrofer Realty Corporation
and Cesar Roque and Lorna Roque. Hence, this Court resolves
to grant the prayer for damages against Traders Royal Bank.

"The claims of the [petitioners] as against [respondent]

Traders Royal Bank having been established and proved by
evidence, judgment is hereby rendered ordering [respondent]
Traders Royal Bank to pay [petitioners] actual damage or the
market value of the land in question in the sum of
P500,000.00; the sum of P70,000.00 as compensatory
damages; the sum of P200,000.00 to the heirs of [petitioner]
Danilo Chua; and attorney’s fees in the sum of P30,000.00."52

19
CIVPRO – RULE 17 – DISMISSAL OF ACTIONS –
MOTION TO SET ASIDE
G.R. No. 101789. April 28, 1993.
BHAGWAN RAMNANI, petitioner,
vs.
COURT OF APPEALS, HON. BUENAVENTURA J.
GUERRERO, as Regional Trial Court Judge of Makati,
Metro Manila, Branch 133, SPOUSES CENON G. DIZON
and JULIETTE B. DIZON, respondents.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; PRE-TRIAL; FAILURE
TO APPEAR AT PRE-TRIAL CONFERENCE; REMEDIES
AVAILABLE. — The basic rule is found in Section 2, Rule 20,
viz: "A party who fails to appear at a pre-trial conference may
be non-suited or considered as in default." As held in Lina v.
Court of Appeals, the remedies available to a defendant in the
regional trial court who has been declared in default are: a)
The defendant in default may, at any time after discovery
thereof and before judgment, file a motion, under oath, to set
aside the order of default on the ground that his failure to
answer was due to fraud, accident, mistake or excusable
neglect, and that he has a meritorious defense; (Sec. 3, Rule
18) b) If the judgment has already been rendered when the
defendant discovered the default, but before the same has
become final and executory, he may file a motion for new trial
under Section 1(a) of Rule 37; c) If the defendant discovered
the default after the judgment has become final and executory,
he may file a petition for relief under Section 2 of Rule 38; and
d) He may also appeal from the judgment rendered against him
as contrary to the evidence or to the law, even if no petition to
set aside the order of default has been presented by him.
2. ID.; ID.; DEFAULTS; RELIEF FROM ORDER OF DEFAULT;
REQUIREMENTS; NOT SATISFIED IN CASE AT BAR. — A
satisfactory showing by the movant of the existence of fraud,
accident, mistake or excusable neglect is an indispensable
requirement for the setting aside of a judgment of default or
the order of default. After going over the pleadings of the
parties and the decision of the respondent court, we find that
the motion to lift the order of default was properly denied for
non-compliance with this requirement. The defendants were
less than conscientious in defending themselves and protecting
their rights before the trial court. They did not pay proper
attention and respect to its directive. The petitioner has not
shown that his and his wife's failure to attend the pre-trial
hearing as required was due to excusable neglect, much less
to fraud, accident or mistake. A meritorious defense is only one
of the two conditions. Even if it be assumed for the sake of
argument that the private respondents did owe Josephine
Ramnani P900,000, as alleged in the counterclaim, that
circumstance alone is not sufficient to justify the lifting of the
order of default and the default judgment. The obvious reason
is that a meritorious defense must concur with the satisfactory
reason for the non-appearance of the defaulted party. There is
no such reason in this case.
3. ID.; ID.; ORDINARY APPEAL; APPROPRIATE REMEDY IN
CASE AT BAR; CASE OF PISC VS. HONTANOSAS, NOT
APPLICABLE. — The appropriate remedy is an ordinary appeal
under Section 2 of Rule 41 of the Rules of Court providing in
part as follows: A party who has been declared in default may
likewise appeal from the judgment rendered against him as
contrary to the evidence or to the law, even if no petition for
relief to set aside the order of default has been presented by
him in accordance with Rule 38. In questioning the dismissal of
its petition by the respondent court, the petitioner invokes the
case of Pioneer Insurance and Surety Corporation v.
20
Hontanosas, (78 SCRA 447) where the Court sustained the
challenge to an order of default in a petition for certiorari rather
than in an ordinary appeal, which was held as not an adequate
remedy. That case is not applicable to the present petition.
Certiorari was allowed in that case because the petitioner was
illegally declared in default. The Court held that, first, the
petitioner could not be compelled to attend an unnecessary
second pre-trial after it had indicated at the earlier pre-trial
that there was no possibility of an amicable settlement;
second, the pre-trial was premature because the last pleading
had not yet been filed at the time; and third, there was
insufficient notice of the pre-trial to the petitioner. In the case
at bar, no such irregularities in the pre-trial have been alleged
by the petitioner.
4. ID.; SPECIAL CIVIL ACTION; CERTIORARI; WHEN
APPROPRIATE; RATIONALE. — As we held in Pure Foods
Corporation v. NLRC (171 SCRA 415): It must emphatically be
reiterated, since so often is it overlooked, that the special civil
action for certiorari is a remedy designed for the correction of
errors of jurisdiction and not errors of judgment. The reason
for the rule is simple. When a court exercises its jurisdiction,
an error committed while so engaged does not deprive it of the
jurisdiction being exercised when the error is committed. If it
did, every error committed by a court would deprive it of its
jurisdiction and every erroneous judgment would be a void
judgment. This cannot be allowed. The administration of justice
would not survive such a rule. Consequently, an error of
judgment that the court may commit in the exercise of its
jurisdiction is not correctible through the original civil action of
certiorari.
5. ID.; ID.; ID.; NOT PROPER ABSENT SHOWING OF GRAVE
ABUSE OF DISCRETION. — Even on the supposition that
certiorari was an appropriate remedy, the petition would still
fail because it has not been clearly shown that the trial court
committed grave abuse of discretion in refusing to set aside the
default order and the default judgment. We have held in many
cases, including Pahilanga v. Luna, (164 SCRA 725) that: It is
within the sound discretion of the court to set aside an order of
default and to permit a defendant to file his answer and to be
heard on the merits even after the reglementary period for the
filing of the answer has expired, but it is not error, or an abuse
of discretion, on the part of the court to refuse to set aside its
order of default and to refuse to accept the answer where it
finds no justifiable reason for the delay in the filing of the
answer. In motions for reconsideration of an order of default,
the moving party has the burden of showing such diligence as
would justify his being excused from not filing the answer
within the reglementary period as provided by the Rules of
Court, otherwise, these guidelines for an orderly and
expeditious procedure would be rendered meaningless. Unless
it is shown clearly that a party has justifiable reason for the
delay the court will not ordinarily exercise its discretion in his
favor. The above doctrine is applicable to the inexcusable
neglect of the herein petitioner and his wife to appear at the
pre-trial hearing duly scheduled and of which they were
properly notified.
DECISION
CRUZ, J p:
On March 13, 1990, the spouses Juliette Dizon and Cenen Dizon
filed a complaint in the Regional Trial Court of Makati against
the spouses Josephine Anne Ramnani and Bhagwan Ramnani
for the collection of a sum of money representing the alleged
unremitted value of jewelry received by Josephine from Juliette
on consignment basis.
Josephine Ramnani submitted an answer with counterclaim 2
in which she alleged inter alia:
(a) That although she did receive pieces of jewelry worth
P934,347.00 from Dizon, the latter had likewise received from
her jewelries worth P1,671,842,00, including cash and unpaid
checks in the amount of P159,742.50;
(b) That she paid Dizon P50,000; and
(c) That Dizon still owes her P787,495.00;
The trial court set the case for pre-trial on August 14, 1990, 3
but the Ramnanis did not appear. Consequently, they were
declared in default. 4 On September 12, 1990, they filed a
motion to lift the order of default, but this was denied on
November 20, 1990.
On October 26, 1990, conformably to the default order,
evidence of the Dizon spouses was received ex parte. On
January 28, 1991, Judge Buenaventura J. Guerrero rendered
judgment against the Ramnanis, holding them liable to the
plaintiffs in the amounts of P884,347.00, representing the
principal obligation plus legal interest thereon from March 13,
1990, until fully paid; P100,000.00 as moral damages; and
P20,000.00 as exemplary damages. They were also required to
pay P50,000.00 as attorney's fees, and the costs of the suit.
The Ramnanis filed a motion for reconsideration on the ground
that a "personal obligation contracted by the wife without the
consent of the husband (was) being made enforceable against
the spouses' conjugal partnership despite absence of any
allegation and proof that the same redounded to the benefit of
the family as required by Article 121 of the Family Code." 7 The
motion was denied on April 11, 1991.
On April 29, 1991, Bhagwan Ramnani filed a petition for
certiorari before the respondent Court of Appeals imputing
error to the trial court:
(1) in denying the motion to lift order declaring petitioner as in
default despite a clear showing of a meritorious defense;
(2) in not considering petitioner's reason for failure to attend
pre-trial as excusable neglect.
In a decision dated May 10, 1991, the Court of Appeals
dismissed the petition, holding that certiorari was not the
proper remedy. 9
The respondent court said:
Petitioners alleged that the respondent court erred and
committed grave abuse of discretion and/or acted in excess of
jurisdiction in assigning its Branch Clerk of Court as the hearing
commissioner for the purpose of the ex parte reception of
plaintiffs' evidence (par. 19, Petition); that the questioned
Decision failed to specify whether defendants are solidarily or
only jointly liable (par. 20, Petition); and that petitioner had a
valid and meritorious defense (par. 21, Petition). These are
matters that could very well be ventilated in an ordinary
appeal. It should be stressed that the writ of certiorari issues
for the correction of errors of jurisdiction only or grave abuse
of discretion amounting to lack or excess of jurisdiction. It
cannot be legally used for any other purpose (Silverio vs. Court
of Appeals, 141 SCRA 527). Mere error of judgment cannot be
a proper subject of the special civil action for certiorari (Zapata
vs. NLRC, 175 SCRA 56). Further, it is a settled rule that
21
certiorari cannot be made a substitute for an perform the
function of an appeal (People vs. Cuaresma, 172 SCRA 415).
The petitioner has come to this Court to challenge that decision.
He avers that the Court of Appeals erred in upholding the
refusal of the trial court to set aside the order of default and
the default judgment thereafter issued.
The basic rule is found in Section 2, Rule 20, viz: "A party who
fails to appear at a pre-trial conference may be non-suited or
considered as in default."
As held in Lina v. Court of Appeals, 10 the remedies available
to a defendant in the regional trial court who has been declared
in default are:
a) The defendant in default may, at any time after discovery
thereof and before judgment, file a motion, under oath, to set
aside the order of default on the ground that his failure to
answer was due to fraud, accident, mistake or excusable
neglect, and that he has a meritorious defense; (Sec. 3, Rule
18)
b) If the judgment has already been rendered when the
defendant discovered the default, but before the same has
become final and executory, he may file a motion for new trial
under Section 1(a) of Rule 37;
c) If the defendant discovered the default after the judgment
has become final and executory, he may file a petition for relief
under Section 2 of Rule 38; and
d) He may also appeal from the judgment rendered against him
as contrary to the evidence or to the law, even if no petition to
set aside the order of default has been presented by him. (Sec.
2, Rule 41)
The first remedy was adopted by the petitioner but his motion
to lift the order of default was denied. According to the trial
court:
Defendants' non-appearance is inexcusable. It is unbelievable
their former lawyer did not explain to them the mandatory
character of their appearance. Their invocation of the
deteriorating health of defendant Josephine necessitating her
trip abroad for appropriate medical treatment, is unavailing.
There is no medical certificate to attest such illness. Besides,
at the time of the hearing of the motion on October 19, 1990,
counsel for the defendants admitted that Josephine had not yet
arrived from the States, despite their averment in their motion
she would "only be back late September or early October of
this year." This only indicates her light regard of her duty to
appear in court. Moreover, the other defendant Bhagwan
Ramnani did not submit any other plausible explanation for his
absence in the pre-trial.
A satisfactory showing by the movant of the existence of fraud,
accident, mistake or excusable neglect is an indispensable
requirement for the setting aside of a judgment of default or
the order of default. After going over the pleadings of the
parties and the decision of the respondent court, we find that
the motion to lift the order of default was properly denied for
non-compliance with this requirement.
The defendants were less than conscientious in defending
themselves and protecting their rights before the trial court.
They did not pay proper attention and respect to its directive.
The petitioner has not shown that his and his wife's failure to
attend the pre-trial hearing as required was due to excusable refuse to set aside its order of default and to refuse to accept
neglect, much less to fraud, accident or mistake. the answer where it finds no justifiable reason for the delay in
the filing of the answer. In motions for reconsideration of an
order of default, the moving party has the burden of showing
The petitioner insists, however, that they had a meritorious
such diligence as would justify his being excused from not filing
defense which the trial court should not have disregarded. A
the answer within the reglementary period as provided by the
meritorious defense is only one of the two conditions. Even if it
Rules of Court, otherwise, these guidelines for an orderly and
be assumed for the sake of argument that the private
expeditious procedure would be rendered meaningless. Unless
respondents did owe Josephine Ramnani P900,000, as alleged
it is shown clearly that a party has justifiable reason for the
in the counterclaim, that circumstance alone is not sufficient to
delay the court will not ordinarily exercise its discretion in his
justify the lifting of the order of default and the default
favor.
judgment. The obvious reason is that a meritorious defense
must concur with the satisfactory reason for the non-
appearance of the defaulted party. There is no such reason in The above doctrine is applicable to the inexcusable neglect of
this case. the herein petitioner and his wife to appear at the pre-trial
hearing duly scheduled and of which they were properly
notified.
The appropriate remedy is an ordinary appeal under Section 2
of Rule 41 of the Rules of Court providing in part as follows:
We must, however, moderate the award of damages by the
trial court as we feel it is rather harsh upon the petitioner. In
A party who has been declared in default may likewise appeal
the exercise of our discretion, we hereby reduce the moral
from the judgment rendered against him as contrary to the
damages to P20,000.00 and the attorney's fees to P10,000.00,
evidence or to the law, even if no petition for relief to set aside
and disallow the exemplary damages. The rest of the award is
the order of default has been presented by him in accordance
approved.
with Rule 38.

WHEREFORE, the challenged decision is AFFIRMED as above

In questioning the dismissal of its petition by the respondent
modified, with costs against the petitioner. It is so ordered.
court, the petitioner invokes the case of Pioneer Insurance and
Surety Corporation v. Hontanosas, 11 where the Court
sustained the challenge to an order of default in a petition for
certiorari rather than in an ordinary appeal, which was held as
not an adequate remedy.

That case is not applicable to the present petition. Certiorari

was allowed in that case because the petitioner was illegally
declared in default. The Court held that, first, the petitioner
could not be compelled to attend an unnecessary second pre-
trial after it had indicated at the earlier pre-trial that there was
no possibility of an amicable settlement; second, the pre-trial
was premature because the last pleading had not yet been filed
at the time; and third, there was insufficient notice of the pre-
trial to the petitioner. In the case at bar, no such irregularities
in the pre-trial have been alleged by the petitioner.

As we held in Pure Foods Corporation v. NLRC:

It must emphatically be reiterated, since so often is it

overlooked, that the special civil action for certiorari is a
remedy designed for the correction of errors of jurisdiction and
not errors of judgment. The reason for the rule is simple. When
a court exercises its jurisdiction, an error committed while so
engaged does not deprive it of the jurisdiction being exercised
when the error is committed. If it did, every error committed
by a court would deprive it of its jurisdiction and every
erroneous judgment would be a void judgment. This cannot be
allowed. The administration of justice would not survive such a
rule. Consequently, an error of judgment that the court may
commit in the exercise of its jurisdiction is not correctible
through the original civil action of certiorari.

Even on the supposition that certiorari was an appropriate

remedy, the petition would still fail because it has not been
clearly shown that the trial court committed grave abuse of
discretion in refusing to set aside the default order and the
default judgment. We have held in many cases, including
Pahilanga v. Luna, 13 that:

It is within the sound discretion of the court to set aside an

order of default and to permit a defendant to file his answer
and to be heard on the merits even after the reglementary
period for the filing of the answer has expired, but it is not
error, or an abuse of discretion, on the part of the court to

22
CIVPRO – RULE 17 – DISMISSAL OF ACTIONS – APPEAL
G.R. No. 160895 October 30, 2006
JOSE R. MARTINEZ, petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, respondents.
DECISION
TINGA, J.:
The central issue presented in this Petition for Review is
whether an order of general default issued by a trial court in a
land registration case bars the Republic of the Philippines,
through the Office of the Solicitor General, from interposing an
appeal from the trial court’s subsequent decision in favor of the
applicant.
The antecedent facts follow.
On 24 February 1999, petitioner Jose R. Martinez (Martinez)
filed a petition for the registration in his name of three (3)
parcels of land included in the Cortes, Surigao del Sur Cadastre.
The lots, individually identified as Lot No. 464-A, Lot No. 464-
B, and Lot No. 370, Cad No. 597, collectively comprised around
3,700 square meters. Martinez alleged that he had purchased
lots in 1952 from his uncle, whose predecessors-in-interest
were traceable up to the 1870s. It was claimed that Martinez
had remained in continuous possession of the lots; that the lots
had remained unencumbered; and that they became private
property through prescription pursuant to Section 48(b) of
Commonwealth Act No. 141. Martinez further claimed that he
had been constrained to initiate the proceedings because the
Director of the Land Management Services had failed to do so
despite the completion of the cadastral survey of Cortes,
Surigao del Sur.1
The case was docketed as Land Registration Case No. N-30 and
raffled to the Regional Trial Court (RTC) of Surigao del Sur,
Branch 27. The Office of the Solicitor General (OSG) was
furnished a copy of the petition. The trial court set the case for
hearing and directed the publication of the corresponding
Notice of Hearing in the Official Gazette. On 30 September
1999, the OSG, in behalf of the Republic of the Philippines,
opposed the petition on the grounds that appellee’s possession
was not in accordance with Section 48(b) of Commonwealth
Act No. 141; that his muniments of title were insufficient to
prove bona-fide acquisition and possession of the subject
parcels; and that the properties formed part of the public
domain and thus not susceptible to private appropriation.2
Despite the opposition filed by the OSG, the RTC issued an
order of general default, even against the Republic of the
Philippines, on 29 March 2000. This ensued when during the
hearing of even date, no party appeared before the Court to
oppose Martinez’s petition.3
Afterwards, the trial court proceeded to receive Martinez’s oral
and documentary evidence in support of his petition. On 1
August 2000, the RTC rendered a Decision4 concluding that
Martinez and his predecessors-in-interest had been for over
100 years in possession characterized as continuous, open,
public, and in the concept of an owner. The RTC thus decreed
the registration of the three (3) lots in the name of Martinez.
From this Decision, the OSG filed a Notice of Appeal dated 28
August 2000,5 which was approved by the RTC. However, after
the records had been transmitted to the Court of Appeals, the
23
RTC received a letter dated 21 February 20016 from the Land
Registration Authority (LRA) stating that only Lot Nos. 464-A
and 464-B were referred to in the Notice of Hearing published
in the Official Gazette; and that Lot No. 370, Cad No. 597 had
been deliberately omitted due to the lack of an approved survey
plan for that property. Accordingly, the LRA manifested that
this lot should not have been adjudicated to Martinez for lack
of jurisdiction. This letter was referred by the RTC to the Court
of Appeals for appropriate action.7
On 10 October 2003, the Court of Appeals promulgated the
assailed Decision,8 reversing the RTC and instead ordering the
dismissal of the petition for registration. In light of the
opposition filed by the OSG, the appellate court found the
evidence presented by Martinez as insufficient to support the
registration of the subject lots. The Court of Appeals concluded
that the oral evidence presented by Martinez merely consisted
of general declarations of ownership, without alluding to
specific acts of ownership performed by him or his
predecessors-in-interest. It likewise debunked the
documentary evidence presented by Martinez, adjudging the
same as either inadmissible or ineffective to establish proof of
ownership.
No motion for reconsideration appears to have been filed with
the Court of Appeals by Martinez, who instead directly assailed
its Decision before this Court through the present petition.
We cannot help but observe that the petition, eight (8) pages
in all, was apparently prepared with all deliberate effort to
attain nothing more but the perfunctory. The arguments raised
center almost exclusively on the claim that the OSG no longer
had personality to oppose the petition, or appeal its allowance
by the RTC, following the order of general default. Starkly put,
"the [OSG] has no personality to raise any issue at all under
the circumstances pointed out hereinabove."9 Otherwise, it is
content in alleging that "[Martinez] presented sufficient and
persuasive proof to substantiate the fact that his title to Lot
Nos. 464-A and 464-B is worth the confirmation he seeks to be
done in this registration case";10 and that the RTC had since
issued a new Order dated 1 September 2003, confirming
Martinez’s title over Lot No. 370.
In its Comment dated 24 May 2004,11 the OSG raises several
substantial points, including the fact that it had duly opposed
Martinez’s application for registration before the RTC; that
jurisprudence and the Rules of Court acknowledge that a party
in default is not precluded from appealing the unfavorable
judgment; that the RTC had no jurisdiction over Lot No. 370
since its technical description was not published in the Official
Gazette; and that as found by the Court of Appeals the
evidence presented by Martinez is insufficient for registering
the lots in his name.12 Despite an order from the Court
requiring him to file a Reply to the Comment, counsel for
Martinez declined to do so, explaining, among others, that "he
felt he would only be taxing the collective patience of this
[Court] if he merely repeats x x x what petitioner had succinctly
stated x x x on pages four (4) to seven (7) of his said petition."
Counsel for petitioner was accordingly fined by the Court.13
The Court’s patience is taxed less by redundant pleadings than
by insubstantial arguments. The inability of Martinez to offer
an effective rebuttal to the arguments of the OSG further
debilitates what is an already weak petition.
The central question, as posed by Martinez, is whether the OSG
could have still appealed the RTC decision after it had been
declared in default. The OSG argues that a party in default is
not precluded from filing an appeal, citing Metropolitan Bank &
Trust Co. v. Court of Appeals,14 and asserts that "[t]he Rules
of Court expressly provides that a party who has been declared
in default may appeal from the judgment rendered against
him."15
There is error in that latter, unequivocal averment, though one
which does not deter from the ultimate correctness of the
general postulate that a party declared in default is allowed to
pose an appeal. Elaboration is in order.
We note at the onset that the OSG does not impute before this
Court that the RTC acted improperly in declaring public
respondent in default, even though an opposition had been filed
to Martinez’s petition. Under Section 26 of Presidential Decree
No. 1529, as amended, the order of default may be issued "[i]f
no person appears and answers within the time allowed." The
RTC appears to have issued the order of general default simply
on the premise that no oppositor appeared before it on the
hearing of 29 March 2000. But it cannot be denied that the OSG
had already duly filed its Opposition to Martinez’s petition long
before the said hearing. As we held in Director of Lands v.
Santiago:16
[The] opposition or answer, which is based on substantial
grounds, having been formally filed, it was improper for the
respondent Judge taking cognizance of such registration case
to declare the oppositor in default simply because he failed
to appear on the day set for the initial healing. The pertinent
provision of law which states: "If no person appears and
answers within the time allowed, the court may at once upon
motion of the applicant, no reason to the contrary appearing,
order a general default to be recorded . . . ," cannot be
interpreted to mean that the court can just disregard the
answer before it, which has long been filed, for such an
interpretation would be nothing less than illogical,
unwarranted, and unjust. Had the law intended that failure
of the oppositor to appear on the date of the initial hearing
would be a ground for default despite his having filed an
answer, it would have been so stated in unmistakable terms,
considering the serious consequences of an order of default.
Especially in this case where the greater public interest is
involved as the land sought to be registered is alleged to be
public land, the respondent Judge should have received the
applicant's evidence and set another date for the reception
of the oppositor's evidence. The oppositor in the Court below
and petitioner herein should have been accorded ample
opportunity to establish the government's claim.17
Strangely, the OSG did not challenge the propriety of the
default order, whether in its appeal before the Court of Appeals
or in its petition before this Court. It would thus be improper
for the Court to make a pronouncement on the validity of the
default order since the same has not been put into issue.
Nonetheless, we can, with comfort, proceed from same
apparent premise of the OSG that the default order was proper
or regular.
The juridical utility of a declaration of default cannot be
disputed. By forgoing the need for adversarial proceedings, it
affords the opportunity for the speedy resolution of cases even
as it penalizes parties who fail to give regard or obedience to
the judicial processes.
The extent to which a party in default loses standing in court
has been the subject of considerable jurisprudential debate.
Way back in 1920, in Velez v. Ramas,18 we declared that the
defaulting defendant "loses his standing in court, he not being
entitled to the service of notices in the case, nor to appear in
the suit in any way. He cannot adduce evidence; nor can he be
heard at the final hearing."19 These restrictions were
controversially expanded in Lim Toco v. Go Fay,20 decided in
1948, where a divided Court pronounced that a defendant in
default had no right to appeal the judgment rendered by the
24
trial court, except where a motion to set aside the order of
default had been filed. This, despite the point raised by Justice
Perfecto in dissent that there was no provision in the then Rules
of Court or any law "depriving a defaulted defendant of the
right to be heard on appeal."21
The enactment of the 1964 Rules of Court incontestably
countermanded the Lim Toco ruling. Section 2, Rule 41 therein
expressly stated that "[a] party who has been declared in
default may likewise appeal from the judgment rendered
against him as contrary to the evidence or to the law, even if
no petition for relief to set aside the order of default has been
presented by him in accordance with Rule 38."22 By clearly
specifying that the right to appeal was available even if no
petition for relief to set aside the order of default had been
filed, the then fresh Rules clearly rendered the Lim Toco ruling
as moot.
Another provision in the 1964 Rules concerning the effect of an
order of default acknowledged that "a party declared in default
shall not be entitled to notice of subsequent proceedings, nor
to take part in the trial."23 Though it might be argued that
appellate proceedings fall part of "the trial" since there is no
final termination of the case as of then, the clear intent of the
1964 Rules was to nonetheless allow the defaulted defendant
to file an appeal from the trial court decision. Indeed,
jurisprudence applying the 1964 Rules was unhesitant to affirm
a defaulted defendant’s right to appeal, as guaranteed under
Section 2 of Rule 41, even as Lim Toco was not explicitly
abandoned.
In the 1965 case of Antonio, et al. v. Jacinto,24 the Court
acknowledged that the prior necessity of a ruling setting aside
the order of default "however, was changed by the Revised
Rules of Court. Under Rule 41, section 2, paragraph 3, a party
who has been declared in default may likewise appeal from the
judgment rendered against him as contrary to the evidence or
to the law, even if no petition for relief to set aside the order of
default has been presented by him in accordance with Rule
38."25 It was further qualified in Matute v. Court of Appeals26
that the new availability of a defaulted defendant’s right to
appeal did not preclude "a defendant who has been illegally
declared in default from pursuing a more speedy and
efficacious remedy, like a petition for certiorari to have the
judgment by default set aside as a nullity."27
In Tanhu v. Ramolete,28 the Court cited with approval the
commentaries of Chief Justice Moran, expressing the
reformulated doctrine that following Lim Toco, a defaulted
defendant "cannot adduce evidence; nor can he be heard at
the final hearing, although [under Section 2, Rule 41,] he may
appeal the judgment rendered against him on the merits."29
Thus, for around thirty-odd years, there was no cause to doubt
that a defaulted defendant had the right to appeal the adverse
decision of the trial court even without seeking to set aside the
order of default. Then, in 1997, the Rules of Civil Procedure
were amended, providing for a new Section 2, Rule 41. The
new provision reads:
SECTION 1. Subject of appeal.—An appeal may be taken
from a judgment or final order that completely disposes of
the case, or of a particular matter therein when declared by
these Rules to be appealable.
No appeal may be taken from:
(a) An order denying a motion for new trial or
reconsideration;
 (b) An order denying a petition for relief or any similar motion
seeking relief from judgment;
(c) An interlocutory order;
(d) An order disallowing or dismissing an appeal;
(e) An order denying a motion to set aside a judgment by
consent, confession or compromise on the ground of fraud,
mistake or duress, or any other ground vitiating consent;
(f) An order of execution;
(g) A judgment or final order for or against or one or more
of several parties or in separate claims, counterclaims, cross-
claims and third-party complaints, while the main case is
pending, unless the court allows an appeal therefrom; and
(h) An order dismissing an action without prejudice.
In all the above instances where the judgment or final order
is not appealable, the aggrieved party may file an
appropriate special civil action under Rule 65.
Evidently, the prior warrant that a defaulted defendant had the
right to appeal was removed from Section 2, Rule 41. On the
other hand, Section 3 of Rule 9 of the 1997 Rules incorporated
the particular effects on the parties of an order of default:
Sec. 3. Default; declaration of.—If the defending party fails
to answer within the time allowed therefor, the court shall,
upon motion of the claiming party with notice to the
defending party, and proof of such failure, declare the
defending party in default. Thereupon, the court shall
proceed to render judgment granting the claimant such relief
as his pleading may warrant, unless the court in its discretion
requires the claimant to submit evidence. Such reception of
evidence may be delegated to the clerk of court.
(a) Effect of order of default.—A party in default shall be
entitled to notice of subsequent proceedings but shall not
take part in the trial.
(b) Relief from order of default.—A party declared in default
may any time after notice thereof and before judgment file a
motion under oath to set aside the order of default upon
proper showing that his failure to answer was due to fraud,
accident, mistake or excusable negligence and that he has a
meritorious defense. In such case, the order of default may
be set aside on such terms and conditions as the judge may
impose in the interest of justice.
(c) Effect of partial default.—When a pleading asserting a
claim states a common cause of action against several
defending parties, some of whom answer and the others fail
to do so, the court shall try the case against all upon the
answers thus filed and render judgment upon the evidence
presented.
(d) Extent of relief to be awarded.—A judgment rendered
against a party in default shall not exceed the amount or be
different in kind from that prayed for nor award unliquidated
damages.
xxx
It cannot be escaped that the old provision expressly
guaranteeing the right of a defendant declared in default to
appeal the adverse decision was not replicated in the 1997
Rules of Civil Procedure. Should this be taken as a sign that
under the 1997 Rules a defaulted defendant no longer has the
25
right to appeal the trial court decision, or that the Lim Toco
doctrine has been reinstated?
If post-1997 jurisprudence and the published commentaries to
the 1997 Rules were taken as an indication, the answer should
be in the negative. The right of a defaulted defendant to appeal
remains extant.
By 1997, the doctrinal rule concerning the remedies of a party
declared in default had evolved into a fairly comprehensive
restatement as offered in Lina v. Court of Appeals:30
a) The defendant in default may, at any time after discovery
thereof and before judgment, file a motion, under oath, to
set aside the order of default on the ground that his failure
to answer was due to fraud, accident, mistake or excusable
neglect, and that he has meritorious defenses; (Sec 3, Rule
18)
b) If the judgment has already been rendered when the
defendant discovered the default, but before the same has
become final and executory, he may file a motion for new
trial under Section 1(a) of Rule 37;
c) If the defendant discovered the default after the judgment
has become final and executory, he may file a petition for
relief under Section 2 of Rule 38; and
d) He may also appeal from the judgment rendered against
him as contrary to the evidence or to the law, even if no
petition to set aside the order of default has been presented
by him. (Sec. 2, Rule 41)31
The fourth remedy, that of appeal, is anchored on Section 2,
Rule 41 of the 1964 Rules. Yet even after that provision’s
deletion under the 1997 Rules, the Court did not hesitate to
expressly rely again on the Lina doctrine, including the
pronouncement that a defaulted defendant may appeal from
the judgment rendered against him. This can be seen in the
cases of Indiana Aerospace University v. Commission on Higher
Education,32 Tan v. Dumarpa,33 and Crisologo v. Globe
Telecom, Inc.34
Annotated textbooks on the 1997 Rules of Civil Procedure
similarly acknowledge that even under the new rules, a
defaulted defendant retains the right to appeal as previously
confirmed under the old Section 2, Rule 41. In his textbook on
Civil Procedure, Justice Francisco answers the question "What
are the remedies available to a defending party in default?"
with a reiteration of the Lina doctrine, including the remedy
that a defaulted defendant "may also appeal from the judgment
rendered against him as contrary to the evidence or to the law,
even if no petition to set aside the order of default has been
presented by him."35 Justice Regalado also restates the Lina
rule in his textbook on Civil Procedure, opining that the
remedies enumerated therein, even if under the former Rules
of Procedure, "would hold true under the present amended
Rules."36 Former Court of Appeals Justice Herrerra likewise
reiterates the Lina doctrine, though with the caveat that an
appeal from an order denying a petition for relief from
judgment was no longer appealable under Section 1, Rule 41
of the 1997 Rules.37 Herrera further adds:
Section 2, paragraph [2] of the former Rule 41, which allows
an appeal from a denial of a petition for relief, was deleted
from the present Rule, and confined appeals to cases from a
final judgment or final order that completely disposes of the
case, or of a particular matter therein, when declared by
these rules to be appealable. A judgment by default may
 be considered as one that completely disposes of the
case.38
We are hard-pressed to find a published view that the
enactment of the 1997 Rules of Civil Procedure accordingly
withdrew the right, previously granted under the 1964 Rules,
of a defaulted defendant to appeal the judgment by default
against him. Neither is there any provision under the 1997
Rules which expressly denies the defaulted defendant such a
right. If it is perplexing why the 1997 Rules deleted the
previous authorization under the old Section 2, Rule 41 (on
subject of appeal), it is perhaps worth noting that its
counterpart provision in the 1997 Rules, now Section 1, Rule
41, is different in orientation even as it also covers "subject of
appeal." Unlike in the old provision, the bulk of the new
provision is devoted to enumerating the various rulings from
which no appeal may be taken, and nowhere therein is a
judgment by default included. A declaration therein that a
defaulted defendant may still appeal the judgment by default
would have seemed out of place.
Yet even if it were to assume the doubtful proposition that this
contested right of appeal finds no anchor in the 1997 Rules, the
doctrine still exists, applying the principle of stare decisis.
Jurisprudence applying the 1997 Rules has continued to
acknowledge the Lina doctrine which embodies this right to
appeal as among the remedies of a defendant, and no
argument in this petition persuades the Court to rule otherwise.
In Rural Bank of Sta. Catalina v. Land Bank of the Philippines,39
the Court, through Justice Callejo, Sr., again provided a
comprehensive restatement of the remedies of the defending
party declared in default, which we adopt for purposes of this
decision:
It bears stressing that a defending party declared in default
loses his standing in court and his right to adduce evidence
and to present his defense. He, however, has the right to
appeal from the judgment by default and assail said
judgment on the ground, inter alia, that the amount of the
judgment is excessive or is different in kind from that prayed
for, or that the plaintiff failed to prove the material
allegations of his complaint, or that the decision is contrary
to law. Such party declared in default is proscribed from
seeking a modification or reversal of the assailed decision on
the basis of the evidence submitted by him in the Court of
Appeals, for if it were otherwise, he would thereby be allowed
to regain his right to adduce evidence, a right which he lost
in the trial court when he was declared in default, and which
he failed to have vacated. In this case, the petitioner sought
the modification of the decision of the trial court based on
the evidence submitted by it only in the Court of Appeals.40
If it cannot be made any clearer, we hold that a defendant party
declared in default retains the right to appeal from the
judgment by default on the ground that the plaintiff failed to
prove the material allegations of the complaint, or that the
decision is contrary to law, even without need of the prior filing
of a motion to set aside the order of default. We reaffirm that
the Lim Toco doctrine, denying such right to appeal unless the
order of default has been set aside, was no longer controlling
in this jurisdiction upon the effectivity of the 1964 Rules of
Court, and up to this day.
Turning to the other issues, we affirm the conclusion of the
Court of Appeals that Martinez failed to adduce the evidence
needed to secure the registration of the subject lots in his
name.
26
It should be noted that the OSG, in appealing the case to the
Court of Appeals, did not introduce any new evidence, but
simply pointed to the insufficiency of the evidence presented
by Martinez before the trial court. The Court of Appeals was
careful to point out that the case against Martinez was
established not by the OSG’s evidence, but by petitioner’s own
insufficient evidence. We adopt with approval the following
findings arrived at by the Court of Appeals, thus:
The burden of proof in land registration cases is incumbent
on the applicant who must show that he is the real and
absolute owner in fee simple of the land applied for. Unless
the applicant succeeds in showing by clear and convincing
evidence that the property involved was acquired by him or
his ancestors by any of the means provided for the proper
acquisition of public lands, the rule is settled that the
property must be held to be a part of the public domain.
The applicant must, therefore, present competent and
persuasive proof to substantiate his claim. He may not rely
on general statements, or mere conclusions of law other
than factual evidence of possession and title.
Considered in the light of the opposition filed by the Office
of the Solicitor General, we find the evidence adduced by
appellee, on the whole, insufficient to support the
registration of the subject parcels in his name. To prove the
provenance of the land, for one, all that appellee proffered
by way of oral evidence is the following cursory testimony
during his direct examination, viz:
xxxx
Q You mentioned that you are the owner of these three (3)
parcels of land. How did you begin the ownership of the
same?
A I bought it from my uncles Julian Martinez and Juan
Martinez.
xxxx
Q x x x x Who took possession of these parcels of land from
then on?
A I took possession, sir
Q As owner?
A Yes, as owner.
Q Up to the present who is in possession as owner of these
parcels of land?
A I took possession.
Q Before Julian Martinez and Juan Martinez sold these
parcels of land before you took possession who were the
owners and in possession of these?
A Hilarion Martinez, the father of my predecessors-in-
interest and also my grandfather.
xxxx
Court:
Q Of your own knowledge[,] where [sic] did your
grandfather Hilarion Martinez acquire these lands?
A According to my grandfather he bought that land from a
certain Juan Casano in the year 1870’s[,] I think.
xxxx
Q By the way[,] when did your grandfather Hilarion
Martinez die?
 A Either in 1920 or 1921.

Q Since you said your immediate predecessors-in-interest

Julian Martinez and Juan Martinez inherited the same from
your grandfather. Can you say it the same that your
predecessors-in-interest were the owners and possessors of
the same since 1921 up to the time they sold the land to
you in 1952?

A Yes, sir.

xxxx

In the dreary tradition of most land registration cases,

appellee has apparently taken the absence of
representation for appellant at the hearing of his
petition as license to be perfunctory in the
presentation of his evidence. Actual possession of
land, however, consists in the manifestation of acts of
dominion over it of such a nature as a party would
naturally exercise over his own property. It is not
enough for an applicant to declare himself or his
predecessors-in-interest the possessors and owners
of the land for which registration is sought. He must
present specific acts of ownership to substantiate the
claim and cannot just offer general statements which
are mere conclusions of law requiring evidentiary
support and substantiation.

The record shows that appellee did not fare any better with
the documentary evidence he adduced before the trial court.
The October 20, 1952 Deed of Sale by which appellee
claims to have purchased the subject parcels from his
uncle, Julian Martinez, was not translated from the
vernacular in which it was executed and, by said
token, was inadmissible in evidence. Having submitted
a white print copy of the survey plan for Lot Nos. 464-
A and 464-B, appellee also submitted the tracing cloth
plan for Lot No. 370 which does not, however, appear
to be approved by the Director of Lands. In much the
same manner that the submission of the original tracing cloth
plan is a mandatory statutory requirement which cannot be
waived, the rule is settled that a survey plan not approved
by the Director of Lands is not admissible in evidence.41

These findings of the Court of Appeals, arrived at after a

sufficiently extensive evaluation of the evidence, stand in
contrast to that contained in the RTC decision, encapsulated in
a one-paragraph précis of the factual allegations of Martinez
concerning how he acquired possession of the subject
properties. The Court of Appeals, of course, is an appropriate
trier of facts, and a comparison between the findings of fact of
the Court of Appeals and that of the RTC clearly demonstrates
that it was the appellate court which reached a more thorough
and considered evaluation of the evidence.

As correctly held by the Court of Appeals, the burden of proof

expected of the petitioner in a land registration case has not
been matched in this case.

WHEREFORE, the petition is DISMISSED. Costs against

petitioner.

SO ORDERED.

27
CIVPRO – RULE 17 – DISMISSAL OF ACTIONS –
CERTIORARI A PROPER REMEDY?
G.R. No. 93233 December 19, 1995
JAO & COMPANY, INC. petitioner,
vs.
HON. COURT OF APPEALS, HON. ROSALIO DE LA ROSA,
as Presiding Judge of Br. 51, Regional Trial Court of
Manila, THE SHERIFF OF THE CITY OF MANILA, DEPUTY
SHERIFF OF MANILA RODOLFO P. TORRELLA, TOP
SERVICE, INC., HENRY CASTILLO, QUINTIN S. GO, and
CARLITO N. ABADILLA, respondents.
RESOLUTION
PANGANIBAN, J.:
Due to the non-appearance of defendant (the petitioner herein)
Jao & Company, Inc., during the hearing on the merits, the
Regional Trial Court of Manila, Branch 51 — upon motion of
herein private respondent Top Service, Inc. — issued an order
dated April 14, 1989 declaring said petitioner in default and
allowed evidence to be presented ex-parte. The petitioner
however filed an answer. Thereafter, on May 26, 1989, the trial
court rendered a decision ordering petitioner Jao to pay private
respondent Top Service P150,920.00 representing agreed
rentals with 12% interest per annum from date of filing of the
suit, attorney's fees of P5,000.00, plus costs.
After receipt of the decision, petitioner filed on November 10,
1989 a motion for reconsideration and/or to set aside decision
(Rollo, p. 9). Pending resolution of the motion, respondent
judge restrained the sheriff from holding an auction sale of two
barges he earlier levied on. Thereafter, on January 10, 1990,
the trial court denied the said motion and lifted the restraining
order against the auction sale. On January 12, 1990, the sheriff
of Manila gave petitioner a Notice of Resetting of Execution Sale
of Personal Properties on January 15, 1990.
On January 15, 1990, petitioner filed a petition for certiorari
with the Court of Appeals, docketed as CA-G.R. No. SP-19680,
contesting the jurisdiction of the trial court. The following day,
January 16, 1990, the respondent appellate court issued a
temporary restraining order to stop the sheriff from conducting
the auction sale. However, it appears that the auction took
place one day before, on January 15, 1990, although the
petitioner contends that no such sale actually took place. The
barges in question were purchased during the auction by
respondent Henry Castillo, who later sold them to Quintin Go,
who in turn sold them to Carlito Abadilla. On March 13, 1990,
respondent Court of Appeals promulgated a Resolution denying
petitioner's motion for a writ of preliminary injunction, the
dispositive portion of which reads:
ACCORDINGLY, the prayer for the issuance of the writ of
preliminary injunction is hereby DENIED for lack of merit.
(Rollo, p. 86)
The respondent Court held that the motion has become moot
and academic because the properties have already been sold
to third parties and because the decision of the trial court dated
May 26, 1989 "has long become final and executory on the
basis that petitioner failed to appeal . . . ." Upon denial of its
motion for reconsideration via the Court of Appeals' Resolution
dated April 25, 1990, petitioner brought to the Supreme Court
the instant petition for certiorari and mandamus under Rule 65,
28
inter alia, to nullify the said Resolutions of the respondent Court
dated March 13, 1990 and April 25, 1990 and to command the
said Court to declare as void the auction sale of January 15,
1990, for grave abuse of discretion and/or lack/excess of
jurisdiction.
In their respective Comments, private respondents argued that
the trial court's decision has become final and executory and
that the barges have been bought and resold to buyers in good
faith, and that at any rate, the parties have another pending
case for replevin of said properties pending in Branch I of the
Regional Trial Court of Manila. In its Consolidated Reply,
petitioner averred that the decision could not become final
because the trial court "improperly declared defendant-
petitioner in default and unjustifiably allowed private
respondent-plaintiff to present its evidence ex-parte" (Rollo, p.
203) because it (petitioner) was not given notice of the order
of April 14, 1989 declaring it in default and of the decision of
May 26, 1989. It also assailed the respondent Court's
suggestion that petitioner's remedy is a "separate action for
the nullification of the sale or such other remedies or process
sanctioned by accepted rules and procedure." It also contended
that the case for preliminary injunction has not become moot
and academic by the auction sale of the subject barges, citing
the factual circumstances why, in its view, the said sale on
January 15, 1990 did not actually take place. In their Rejoinder,
private respondents stated that petitioner's counsel had
withdrawn his appearance in the trial court and left no
forwarding address. Hence, no notice of the said order of
default and the decision could be given it. At any rate,
petitioner's remedy, they concluded, was timely appeal, which
petitioner failed to perfect.
Deliberating on the petition together with the various other
submissions of the parties, the Court believes that, in sum and
stripped of non-essentials, these various issues and questions
submitted by the parties could be summarized in two:
(1) Did the respondent Court of Appeals gravely abuse its
discretion in refusing to issue a writ of preliminary injunction?
and,
(2) Has the decision of the trial court, promulgated on May
26, 1989, become final?
On the first question, it must be stressed at the outset that the
grant or denial of the writ of preliminary injunction rests upon
the sound discretion of the court (Avila vs. Tapucar, G.R. No.
45947, 201 SCRA 148 [1991], citing Belisle Investment &
Finance Co., Inc. vs. State Investment House, Inc., 151 SCRA
630 [1987]). And in evaluating whether to issue it or not, the
court is called upon to be careful and circumspect, "with the
caveat that extreme caution be observed in the exercise of such
discretion" to prevent a denial of procedural due process and
avoid causing "irreparable prejudice to a party" (Bataclan vs.
Court of Appeals, G.R. No. 78148, 175 SCRA 764 [1989]). Its
main purpose is to preserve the status quo and not to grant
the very subject of the petition on the merits. The Supreme
Court in Unciano Paramedical College, Inc. vs. Court of
Appeals,1 quoting with approval from the case of Capitol
Medical Center, Inc., et al. vs. Court of Appeals, et al.2 stated:
The sole object of a preliminary injunction, whether
prohibitory or mandatory, is to preserve the status quo until
the merits of the case can be heard. The status quo is the
last actual peaceable uncontested status which preceded the
controversy (Rodulfa vs. Alfonso, 76 Phil. 225). It may only
be resorted to by a litigant for the preservation or protection
of his rights or interests and for no other purpose during the
pendency of the principal action (Calo vs. Roldan, 76 Phil.
445). It should only be granted if the party asking for it is
 clearly entitled thereto (Climaco vs. Macaraeg, 4 SCRA 930;
Subido vs. Gopengco, 27 SCRA 455; Police Commission vs.
Bello, 37 SCRA 230).

In the instant case, the respondent Court promptly issued a

temporary restraining order one day after an application
therefor was filed by the petitioner. From this, it can be inferred
that said Court was alert and sensitive to the need for
immediate action. However, as the sale took place the day
before, i.e., on January 15, 1990, the TRO was useless in
preventing/stopping the act complained of.

This being the case, it is reasonable to expect that even if the

said Court was minded to issue the Writ, it would have been
also functus oficio, since a preventive writ can not be used to
restore the parties' status ante bellum (vide, Unciano
Paramedical College, Inc. vs. Court of Appeals, supra.),
particularly because the subject properties were already in the
possession of persons who were not parties in the proceedings
before said Court. As to petitioner's contention that the auction
sale and the subsequent sale to third parties were fraudulent,
we cannot disagree with the finding of the respondent Court
that the allegation involves "factual issues" which require "trial
on the merits", and which cannot be decided on the mere say-
so of the parties in their pleadings.

On the second issue, it is well-settled that, under ordinary

circumstances, the proper remedy of a party wrongly declared
in default is either to appeal from the judgment by default or
to file a petition for relief from judgment, and not certiorari
(Pacete vs. Carriaga, Jr., 231 SCRA 321 [1994]). A default
judgment is an adjudication on the merits and is, thus,
appealable. Since appeal is the proper remedy, the
extraordinary writ of certiorari will not lie.

Petitioner contends that it could not be bound by the

questioned Order of April 14, 1989 declaring it in default and
the subsequent Decision of May 20, 1989 because it did not
receive copies thereof. Respondents counter that such non-
service was due to petitioner's fault in not furnishing the trial
court with its "forwarding address" after its counsel withdrew
his appearance. This Court is not in a position to settle this
issue of fact — as indeed the Supreme Court does not decide
such questions.

But it is not disputed that after receipt of the decision,

petitioner filed a motion for reconsideration. Thus, whatever
defects — if indeed there was any — may have been committed
by the trial court in failing to give constructive notice of its
erroneous default order was cured by petitioner's voluntary
filing of the said motion for reconsideration. Upon denial
thereof, petitioner should have appealed. But instead of doing
that, it opted for the wrong remedy of certiorari.

WHEREFORE, the petition is DISMISSED as petitioner failed to

show that respondent Court of Appeals acted with grave abuse
of discretion and/or lack of jurisdiction. Costs against
petitioner.

SO ORDERED.

29
CIVPRO – RULE 17 – DISMISSAL OF ACTIONS – 'x x x xxx xxx
CERTIORARI A PROPER REMEDY?
'To recall it was in the month of May 1996, [that] Director
G.R. No. 139371 April 4, 2001 Ma. Lilia Gaduyon met the school [p]resident in the regional
office and verbally talked [with] and advised them not to use
University when it first came out in an advertisement column
INDIANA AEROSPACE UNIVERSITY, petitioner,
of a local daily newspaper in Cebu City. It was explained that
vs.
there was a violation [committed by] his institution [when it
COMMISSION ON HIGHER EDUCATION (CHED),
used] the term university unless the school ha[d] complied
respondent.
[with] the basic requirement of being a university as
prescribed in CHED Memorandum Order No. 48, s. 1996.'
PANGANIBAN, J.:
xxx xxx x x x.'
When the delayed filing of an answer causes no prejudice to
the plaintiff, default orders should be avoided. Inasmuch as
"As a consequence of said Report, [respondent's] Legal
herein respondent was improvidently declared in default, its
Affairs Service was requested to take legal action against
Petition for Certiorari to annul its default may be given due
[petitioner]. Subsequently, on February 3, 1997,
course. The act of the Commission on Higher Education
[respondent] directed [petitioner] to desist from using the
enjoining petitioner from using the word "university" in its
term University, including the use of the same in any of its
corporate name and ordering it to revert to its authorized name
alleged branches. In the course of its investigation,
does not violate its proprietary rights or constitute irreparable
[respondent] was able to verify from the Securities and
damage to the school. Indeed, petitioner has no vested right
Exchange Commission (SEC) that [petitioner had] filed a
to misrepresent itself to the public. An injunction is a remedy
proposal to amend its corporate name from Indiana School
in equity and should not be used to perpetuate a falsehood.
of Aeronautics to Indiana Aerospace University, which was
supposedly favorably recommended by the Department of
The Case Education, Culture and Sports (DECS) per its Indorsement
dated 17 July 1995, and on [that] basis, SEC issued to
Before us is a Petition for Review on Certiorari under Rule 45 [petitioner] Certificate of Registration No. AS-083-002689
of the Rules of Court, challenging the July 21, 1999 Decision1 dated August 7, 1995. Surprisingly, however, it ought to be
of the Court of Appeals (CA) in CA-GR SP No. 51346. The noted, that SEC Chairman Perfecto R. Yasay, Jr. wrote the
appellate court directed the Regional Trial Court (RTC) of following letter to the [c]hairman of [respondent]:
Makati City, Branch 136, to cease and desist from proceeding
with Civil Case No. 98-811 and to dismiss the Complaint for 'Hon. Angel C. Alcala
Damages filed by the "Indiana Aerospace University" against Chairman
the Commission on Higher Education (CHED). The dispositive Commission on Higher Education
portion of the CA Decision reads as follows: DAP Bldg., San Miguel Avenue
Ortigas Center, Pasig City
"WHEREFORE, in the light of the foregoing consideration, and
pursuant to pertinent existing laws and jurisprudence on the Dear Chairman Alcala:
matter, [the trial court] is hereby DIRECTED to cease and
desist from proceeding with Civil Case No. 98-811 and to
This refers to your letter dated September 18, 1997
order the dismissal of [petitioner's] Petition dated March 31,
requesting this Commission to make appropriate changes
1999 in Civil Case No. 98-911 for lack of merit and valid
in the Articles of Incorporation of Indiana School of
cause of action."2
Aeronautics, Inc. due to its unauthorized use of the term
'University' in its corporate name.
The Facts
Relative thereto, please be informed that our records show
The facts of this case are summarized by the CA, as follows: that the above-mentioned corporation has not filed any
amended articles of incorporation that changed its
"Sometime in October 1996, Dr. Reynaldo B. Vera, corporate name to include the term 'University.'
Chairman, Technical Panel for Engineering, Architecture, and
Maritime Education (TPRAM) of [CHED], received a letter In case the corporation submit[s] an application for change
dated October 18, 1998 (Annex 'C') from Douglas R. Macias, of name, your Cease and Desist Order shall be considered
Chairman, Board of Aeronautical Engineering, Professional accordingly.
Regulat[ory] Commission (PRC) and Chairman, Technical
Committee for Aeronautical Engineering (TPRAME) inquiring
V
whether [petitioner] had already acquired [u]niversity status
e
in view of the latter's advertisement in [the] Manila Bulletin.
r
y
"In a letter dated October 24, 1996, Dr. Vera formally T
referred the aforesaid letter to Chairman Alcala with a r
request that the concerned Regional Office of [CHED] be u
directed to conduct appropriate investigation on the alleged l
misrepresentation by [petitioner]. Thereafter, [CHED] y
referred the matter to its Regional Director in Cebu City, y
requesting said office to conduct an investigation and o
submit its report. The [R]eport submitted in January 1997, u
stated in substance: r
s
,

30
 ( "The appeal of [petitioner] was however rejected by
S [respondent] in its decision dated July 30, 1998 and [the
G latter] ordered the former to cease and desist from using the
D word 'University.' However, prior to said date, on April 2,
. 1998, [petitioner] filed a Complaint for Damages with prayer
) for Writ of Preliminary and Mandatory Injunction and
P Temporary Restraining Order against [respondent],
E docketed as Civil Case No. 98-811 before public respondent
R judge.
F
E
"On April 7, 1998, [respondent] filed a Special Appearance
C
with Motion to Dismiss, based on 1) improper venue; 2) lack
T
of authority of the person instituting the action; and 3) lack
O
of cause of action. On April 17, 1998, [petitioner] filed its
R
Opposition to the Motion to Dismiss [on] grounds stated
.
therein, to which [respondent] filed a Reply on April 21,
Y
1998, reiterating the same arguments in its Motion to
A
Dismiss. After due hearing, [petitioner] formally offered its
S
evidence on July 23, 1998 while [respondent] made a formal
A
offer of evidence on July 28, 1998 to which [petitioner] filed
Y
its Comments/Objections and finally, [respondent]
,
submitted its Memorandum relative thereto on October 1,
J
1998.
R
.
C "Public respondent judge, in an Order dated August 14,
h 1998, denied [respondent's] Motion to Dismiss and at the
a same time, issued a Writ of Preliminary Injunction in favor of
i [petitioner]. [Respondent], in the same Order, was directed
r to file its Answer within fifteen (15) days from receipt of said
m Order, which was August 15, 1998.
a
n xxx xxx xxx
'

'WHEREFORE, and in consideration of all the foregoing,

"In reaction to [respondent's] order for [petitioner] to desist
from using the word 'University', Jovenal Toring, [c]hairman
and [f]ounder of [petitioner] wrote a letter dated February
24, 1997 (Annex 'G') appealing for reconsideration of
[respondent's] Order, with a promise to follow the provisions
of CMO No. 48, pertinent portions of which have been quoted
in the Petition, to wit:
'On 07 August 1995, in line with the call of the government
to go for global competitiveness and our vision to help in
the development of aerospace technology, the Board of
Directors applied with the SEC for the amendment of Article
I of the Articles of Incorporation to read as 'Indiana
Aerospace University' instead of 'Indiana School of
Aeronautics, Inc.'
xxx xxx xxx
[respondent's] Motion to Dismiss is hereby denied, and the
[respondent] is directed to file its [A]nswer to the
[C]omplaint within fifteen (15) days from receipt of this
order.
In the meantime, [respondent], its officials, employees
and all parties acting under its authority are hereby
enjoined to observe the following during the pendency of
this case:
1. Not to publish or circulate any announcement in the
newspaper, radio or television regarding its Cease and
Desist Order against x x x [petitioner];
2. Not to enforce the Cease and Desist Order issued
against x x x [petitioner];

'In view thereof, we would like to appeal to you Fr. Delagoza
to please reconsider your order of February 3, 1997,
otherwise the school will encounter financial difficulties and
suffer damages which will eventually result in the mass
dislocation of x x x thousand[s] of students. The
undersigned, being the [c]hairman and [f]ounder, will try
our very best to follow the provisions of CHED MEMO No.
48, series of 1996 that took effect last June 18, 1996.
3. To maintain the status quo by not withholding the
issuance of yearly school permits and special order to all
graduates.
Let a Writ of Preliminary Injunction to that effect issue
upon posting by [petitioner] of an injunction bond in the
amount of One Hundred Thousand Pesos (P100,000.00),
and subject to the approval of the Court.

xxx xxx xxx SO ORDERED.'

Thank you very much for giving me a copy of said CHED "On September 22, 1998, [petitioner] filed before public
MEMO Order No. 48. More power and God Bless You. respondent a Motion To Declare [Respondent] in [D]efault
pursuant to Section 3, Rule 9 in relation to Section 4, Rule
xxx xxx xxx 16 of the Rules of Court, as amended, and at the same time
praying [for] the Motion to [S]et for [H]earing on October
30, 1998 at 8:30 a.m. On the same date, [respondent] filed
a Motion For Extension of Time to File its Answer, x x x until

31
 November 18, 1998. On November 17, 1998, [respondent]
filed its [A]nswer.
"[Petitioner], on November 11, 1998 filed its Opposition to
the Motion for Extension of Time to File [Respondent's]
Answer and on November 9, 1998, a Motion to Expunge
[Respondent's] Answer and at the same time praying that its
[M]otion be heard on November 27, 1998 at 9:00 a.m. On
even date, public respondent judge issued an Order directing
the Office of the Solicitor General to file within a period of
ten (10) days from date its written Opposition to the Motion
to Expunge [Respondent's] Answer and within the same
period to file a written [N]otice of [A]ppearance in the case.
Unable to file their written Opposition to the Motion to
Expunge within the period given by public respondent, the
OSG filed a Motion to Admit Written Opposition stating the
reasons for the same, attaching thereto the Opposition with
[F]ormal [E]ntry of [A]ppearance.
"In an Order dated December 9, 1998, (Annex 'A'), public
respondent judge ruled on [Petitioner's] Motion to Declare
[Respondent in Default], to wit:
"WHEREFORE, and in view of all the foregoing, the present
motion is granted. [Petitioner] is hereby directed to
present its evidence ex-parte before the [b]ranch [c]lerk
of [c]ourt, who is designated as [c]ommissioner for the
purpose, within ten (10) days from receipt of this [O]rder,
and for the latter to submit his report within twenty (20)
days from the date the case is submitted for decision."
SO ORDERED.'"3
On February 23, 1999, respondent filed with the CA a Petition
for Certiorari, arguing that the RTC had committed grave abuse
of discretion (a) in denying the former's Motion to Dismiss, (b)
in issuing a Writ of Preliminary Injunction, and (c) in declaring
respondent in default despite its filing an Answer.
Ruling of the Court of Appeals
The CA ruled that petitioner had no cause of action against
respondent. Petitioner failed to show any evidence that it had
been granted university status by respondent as required
under existing law and CHED rules and regulations. A certificate
of incorporation under an unauthorized name does not confer
upon petitioner the right to use the word "university" in its
name. The evidence submitted by respondent showed that the
Securities and Exchange Commission (SEC) had denied that
petitioner had ever amended its Articles of Incorporation to
include "university" in its corporate name. For its part, the
Department of Education, Culture and Sports (DECS) denied
having issued the alleged Certification dated May 18, 1998,
indorsing the change in petitioner's corporate name. Besides,
neither the Corporation Code nor the SEC Charter vests the
latter with the authority to confer university status on a
corporation that it regulates.
For the same reason, the appellate court also ruled that the
Writ of Preliminary Injunction had improvidently been issued.
The doubtful right claimed by petitioner is subordinate to the
public interest to protect unsuspecting students and their
parents from the unauthorized operation and
misrepresentation of an educational institution.
Respondent should not have been declared in default, because
its Answer had been filed long before the RTC ruled upon
petitioner's Motion to declare respondent in default. Thus,
respondent had not obstinately refused to file an Answer; on
the contrary, its failure to do so on time was due to excusable
32
negligence. Declaring it in default did not serve the ends of
justice, but only prevented it from pursuing the merits of its
case.1âwphi1.nêt
Hence, this Petition.4
Issues
Petitioner alleges that the appellate court committed the
following reversible errors:
"A. In giving due course to respondent CHED's
Petition for Certiorari filed way beyond the 60-day
reglementary period prescribed by Section 4, Rule 65
of the Rules of Court;
B. In not requiring Respondent CHED to first file a
Motion to Set Aside the Order of Default dated
December 9, 1998; and
C. In ordering the dismissal of Civil Case No. 98-
811."5
In its Memorandum, petitioner adds that the CA erred in
dissolving the Writ of Preliminary Injunction issued by the RTC.
We shall take up these issues in the following order: (1)
timeliness of the certiorari petition, (2) validity of the default
order, 93) validity of the preliminary injunction, and (4)
dismissal of the Complaint.
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Timeliness of Certiorari
Petitioner claims that the Petition for Certiorari of respondent
should have been dismissed by the CA, because it was filed out
of time and was not preceded by a motion for reconsideration
in the RTC. The copy of the Order of August 14, 1998 had been
served at respondent's office on August 15, 1998, but its
Answer was filed only after 180 days which, according to
petitioner, could not be considered a reasonable period. On the
other hand, the Office of the Solicitor General (OSG) argues
that the Order is null and void and, hence, may be assailed at
any time.
We hold that respondent's Petition for Certiorari was
seasonably filed. In computing its timeliness, what should have
been considered was not the Order of august 14, 1998, but the
date when respondent received the December 9, 1998 Order
declaring it in default. Since it received this Order only on
January 13, 1999, and filed its Petition for Certiorari on
February 23, 1999, it obviously complied with the sixty-day
reglementary period stated in Section 4, Rule 65 of the 1997
Rules of Court. Moreover, the August 14, 1998 Order was not
a proper subject of certiorari or appeal, since it was merely an
interlocutory order.
Exhaustion of Available Remedies
Petitioner also contends that certiorari cannot prosper in this
case, because respondent did not file a motion for
reconsideration before filing its Petition for Certiorari with the
CA. Respondent counters that reconsideration should be
dispensed with, because the December 9, 1998 Order is a
patent nullity.
The general rule is that, in order to give the lower court the
opportunity to correct itself, a motion for reconsideration is a
prerequisite to certiorari. It is also basic that a petitioner must
exhaust all other available remedies before resorting to
certiorari. This rule, however, is subject to certain exceptions
such as any of the following: (1) the issues raised are purely
legal in nature, (2) public interest is involved, (3) extreme
urgency is obvious or (4) special circumstances warrant
immediate or more direct action.6 It is patently clear that the
regulation or administration of educational institutions,
especially on the tertiary level, is invested with public interest.
Hence, the haste with which the solicitor general raised these
issues before the appellate court is understandable. For the
reason mentioned, we rule that respondent's Petition for
Certiorari did not require prior resort to a motion for
reconsideration.
Second Issue:
Validity of the Default Order
Petitioner avers that the RTC was justified in declaring
respondent in default, because the August 14, 1998 Order
directing the filing of an answer had been served on August 25,
1998. And as late as October 30, 1998, respondent could only
file a Motion for Extension of Time, which the trial court denied
because of the expiry of the fifteen-day period. Petitioner adds
that respondent's proper remedy would have been a Motion to
Set Aside the Order of Default, pursuant to Section 3(b), Rule
9 of the Rules of Court.
Respondent, in turn, avers that certiorari was the only plain,
speedy and adequate remedy in the ordinary course of law,
because the default Order had improvidently been issued.
We agree with respondent. Lina v. Court of Appeals7 discussed
the remedies available to a defendant declared in default, as
follows: (1) a motion to set aside the order of default under
Section 3(b), Rule 9 of the Rules of Court, if the default was
discovered before judgment could be rendered; (2) a motion
for new trial under Section 1(a) of Rule 37, if the default was
discovered after judgment but while appeal is still available;
(3) a petition for relief under Rule 38, if judgment has become
final and executory; and (4) an appeal from the judgment
under Section 1, Rule 41, even if no petition to set aside the
order of default has been resorted to.
These remedies, however, are available only to a defendant
who has been validly declared in default. Such defendant
irreparably loses the right to participate in the trial. On the
other hand, a defendant improvidently declared in default may
retain and exercise such right after the order of default and the
subsequent judgment by default are annulled, and the case
remander to the court of origin. The former is limited to the
remedy set forth in Section 2, paragraph 3 of Rule 41 of the
pre 997 Rules of Court, and can therefore contest only the
judgment by default on the designated ground that it is
contrary to evidence or law. The latter, however, has the
following options: to resort to this same remedy; to interpose
a petition for certiorari seeking the nullification of the order of
default, even before the promulgation of a judgment by
default; or in the event that judgment has been rendered, to
have such order and judgment declared void.
In prohibiting appeals from interlocutory orders, the law does
not intend to accord executory force to such writs, particularly
when the effect would be to cause irreparable damage. If, in
the course of trial, a judge proceeds without or in excess of
33
jurisdiction, this rule prohibiting an appeal does not leave the
aggrieved party without any remedy.8 In a case like this, a
special civil action of certiorari is the plain, speedy and
adequate remedy.
Herein respondent controverts the judgment by default, not on
the ground that it is unsubstantiated by evidence or that it is
contrary to law, but on the ground that it is intrinsically void
for having been rendered pursuant to a patently invalid order
of default.9
Grave Abuse of Discretion
Petitioner claims that in issuing the default Order, the RTC did
not act with grave abuse of discretion, because respondent had
failed to file its answer within fifteen days after receiving the
August 14, 1998 Order.
We disagree. Quite the contrary, the trial court gravely abused
its discretion when it declared respondent in default despite the
latter's filing of an Answer.10 Placing respondent in default
thereafter served no practical purpose.
Petitioner was lax in calling the attention of the Court to the
fifteen-day period for filing an Answer. It moved to declare
respondent in default only on September 20, 1998, when the
filing period had expired on August 30, 1998. The only
conclusion in this case is that petitioner has not been
prejudiced by the delay. The same leniency can also be
accorded to the RTC, which declared respondent in default only
on December 9, 1998, or twenty-two days after the latter had
filed its Answer on November 17, 1998. Defendant's Answer
should be admitted, because it had been filed before it was
declared in default, and no prejudice was caused to plaintiff.
The hornbook rule is that default judgments are generally
disfavored.11
While there are instances when a party may be properly
declared in default, these cases should be deemed exceptions
to the rule and should be resorted to only in clear cases of
obstinate refusal or inordinate neglect in complying with the
orders of the court.12 In the present case, however, no such
refusal or neglect can be attributed to respondent.
It appears that respondent failed to file its Answer because of
excusable negligence. Atty. Joel Voltaire Mayo, director of the
Legal Affairs Services of CHED, had to relinquish his position in
accordance with the Memorandum dated July 7, 1998,
requiring all non-CESO eligibles holding non-career positions to
vacate their respective offices. It was only on September 25,
1998, after CHED Special Order No. 63 had been issued, when
he resumed his former position. Respondent also presented a
meritorious defense in its Answer – that it was duty-bound to
pursue the state policy of protecting, fostering and promoting
the right of all citizens to affordable quality education at all
levels. In stark contrast, petitioner neither qualified for nor was
ever conferred university status by respondent.
Judges, as a rule, should avoid issuing default orders that deny
litigants the chance to be heard. Instead, the former should
give the latter every opportunity to present their conflicting
claims on the merits of the controversy, as much as possible
avoiding any resort to procedural technicalities.13
Third Issue:
Preliminary Injunction
Petitioner contends that the RTC validly issued the Writ of
Preliminary Injunction. According to the trial court,
respondent's actions adversely affected petitioner's interests,
faculty and students. In fact, the very existence of petitioner
as a business concern would have been jeopardized had its
proprietary rights not been protected.
We disagree. We concur with the CA that the trial court acted
with grave abuse of discretion in issuing the Writ of Preliminary
Injunction against respondent. Petitioner failed to establish a
clear right to continue representing itself to the public as a
university. Indeed, it has no vested right to misrepresent itself.
Before an injunction can be issued, it is essential that (1) there
must be a right in esse to be protected, and (2) the act against
which the injunction is to be directed must have violated such
right.14 The establishment and the operation of schools are
subject to prior authorization from the government. No school
may claim to be a university unless it has first complied with
the prerequisites provided in Section 34 of the Manual of
Regulations for Private Schools. Section 3, Rule 58 of the Rules
of Court, limits the grant of preliminary injunction to cases in
which the plaintiff is clearly entitled to the relief prayed for.
We also agree with the finding of the CA that the act sought to
be enjoined by petitioner is not violative of the latter's rights.
Respondent's Cease and Desist Order of July 30, 1997 merely
restrained petitioner from using the term "university" in its
name. It was not ordered to close, but merely to revert to its
authorized name; hence, its proprietary rights were not
violated.
Fourth Issue:
Dismissal of the Complaint
Petitioner claims that the CA went beyond its limited
jurisdiction under Rule 65 when it reversed the trial court and
dismissed the Complaint on the ground that petitioner had
failed to state a cause of action. The RTC had yet to conduct
trial, but the CA already determined the factual issue regarding
petitioner's acquisition of university status, a determination
that is not permitted in certiorari proceedings.
The CA ruled that the trial court gravely abused its discretion
in denying respondent's Motion to Dismiss on the ground of
lack of cause of action because of petitioner's lack of legal
authority or right to use the word "university." Said the
appellate court:
"x x x. No matter how we interpret the Corporation Code and
the law granting the Securities and Exchange Commission its
powers and duties, there is nothing there which grants it the
power or authority to confer University Status to an
educational institution. Fundamental is the rule that when
there is no power granted, none exist[s], not even implied
ones for there is none from where to infer. The mere fact of
securing an alleged Certificate of Incorporation under an
unauthorized name does not confer the right to use such
name.
"But what makes the conclusion of [the trial court] even
anomalous, to say the least, is that no less than the
Chairman of the SEC in his letter to the [respondent] (Exh.
"J") expressly said that [petitioner] never filed any Amended
Articles of Incorporation so as to have a change of corporate
name to include the term "University". Worse, the records
officer of DECS issued a Certification dated May 18, 1998
(Annex "AA") to the effect that there was no Indorsement
made by that office addressed to the SEC or the Proposed
Amended Article of Incorporation of Indiana Aeronautics. x x
x.
34
"Under such clear pattern of deceitful maneuvering to
circumvent the requirement for acquiring University Status,
it is [a] patently reversible error for [the trial court] to hold
that [petitioner] has a right to use the word "University"
which must be protected. Dismissal of [petitioner's]
Complaint for lack of a valid cause of action should have been
the proper action taken by [the trial court] judge."15
An order denying a motion to dismiss is interlocutory, and so
the proper remedy in such a case is to appeal after a decision
has been rendered. A writ of certiorari is not intended to correct
every controversial interlocutory ruling; it is resorted to only to
correct a grave abuse of discretion or a whimsical exercise of
judgment equivalent to lack of jurisdiction. Its function is
limited to keeping an inferior court within its jurisdiction and to
relieve persons from arbitrary acts – acts which courts or
judges have no power or authority in law to perform. It is not
designed to correct erroneous findings and conclusions made
by the court.16
In the case at bar, we find no grave abuse of discretion in the
RTC's denial of the Motion to Dismiss, as contained in the
August 14, 1998 Order. The CA erred in ruling otherwise. The
trial court stated in its Decision that petitioner was an
educational institution, originally registered with the Securities
and Exchange Commission as the "Indiana School of
Aeronautics, Inc." That name was subsequently changed to
"Indiana Aerospace University" after the Department of
Education, Culture and Sports had interposed no objection to
such change.17
Respondent issued a formal Cease and Desist Order directing
petitioner to stop using the word "university" in its corporate
name. The former also published an announcement in the
March 21, 1998 issue of Freeman, a local newspaper in Cebu
City, that there was no institution of learning by that name.
The counsel of respondent was quoted as saying in the March
28, 1998 issue of the newspaper Today that petitioner had
been ordered closed by the respondent for illegal
advertisement, fraud and misrepresentation of itself as a
university. Such acts, according to the RTC undermined the
public's confidence in petitioner as an educational institution.18
This was a clear statement of a sufficient cause of action.
When a motion to dismiss is grounded on the failure to state a
cause of action, a ruling thereon should be based only on the
facts alleged in the complaint.19 The court must pass upon this
issue based solely on such allegations, assuming them to be
true. For it to do otherwise would be a procedural error and a
denial of plaintiff's right to due process.20
WHEREFORE, the Petition is hereby GRANTED IN PART, and
the assailed Decision MODIFIED. The trial court is DIRECTED
to SET ASIDE the Order of Default of December 9, 1998; to
ADMIT the Answer dated November 5, 1998; to LIFT the
preliminary injunction; and to CONTINUE, with all deliberate
speed, the proceedings in Civil Case NO. 98-811.
SO ORDERED.