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FIRST DIVISION

[G.R. No. L-48315. February 27, 1979.]


ATTY. DOMINADOR B. BORJE, petitioner, vs. HON.
COURT OF FIRST INSTANCE OF MISAMIS OCCIDENTAL,
BRANCH
II,
VIOLETA
GALICINAO;
MISAMIS
OCCIDENTAL WATER DISTRICT, and THE CHAIRMAN
OF THE BOARD, respondents.
Dominador B. Borje in his own behalf.
SYNOPSIS
Petitioner sued private defendants for damages for disconnecting his
water service, with prayer for preliminary mandatory injunction. Upon
order of the trial court the water service was reconnected
immediately. Private respondents moved to dismiss alleging: (1) lack
of jurisdiction and (2) pendency of another action between the same
parties for the same cause.
The trial court dismissed the complaint not on the grounds alleged in
the motion to dismiss but on the grounds that there was no malice or
bad faith in the severance of the water connection of petitioner and
that private respondents had already reconnected the same.
Petitioner, on petition for certiorari, alleged that the trial court acted
with grave abuse of discretion amounting to lack of jurisdiction for
dismissing the complaint without conducting any hearing despite the
existence of controverted facts that need to be proved.
The Supreme Court held that dismissal of actions on grounds not
alleged in the motion to dismiss is improper; that the trial court, motu
proprio, cannot dismiss an action except where plaintiff fails to appear
at the trial or fails to prosecute the case; that dismissal of an action
without affording the parties an opportunity to be heard and present
evidence in support of their case is violative of due process.
Petition granted and the questioned orders set aside.
SYLLABUS
1.COURT; ACTION; DISMISSAL; GRAVE ABUSE OF DISCRETION;
DISMISSAL OF ACTION ON GROUND NOT ALLEGED IN MOTION TO
DISMISS. It is a grave abuse of discretion if not in excess of
jurisdiction for a court to dismiss an action on grounds not alleged in
the motion to dismiss. Such dismissal is improper for in so doing, a
court in effect dismisses an action motu proprio without giving the
plaintiff a chance to argue the point and without receiving any
arguments or evidence on the question.
2.ID.; ID.; ID.; ID.; DISMISSAL OF ACTION WITHOUT REQUISITE
MOTION. Section 1, Rule 16 of the Rules of Court enumerates the
grounds upon which an action may be dismissed and specifically
ordains that the motion to this and be filed. In the light of this express
requirement the court has no power to dismiss the case without the
requisites motion duly presented, hence, dismissal at its own initiative
constitutes a grave abuse of its discretion if not in excess of
jurisdiction.

3.ID.; ID.; DISMISSAL UPON COURT'S OWN MOTION. The only


instance in which, according to said Rules, the Court may dismiss
upon the court's own motion an action is, when the "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 the Rules or any order
of the court."
4.ID.; ID.; DUE PROCESS; DISMISSAL OF CASE WITHOUT HEARING,
DESPITE EXISTENCE OF CONTROVERTED FACTS, VIOLATIVE OF DUE
PROCESS. Where the respective allegations of the parties requires
presentation of proof, it would be violative of due process for the trial
court to make a summary finding, from the controverted facts, of lack
of malice or bad faith on the part of defendants and then decree the
dismissal of the case. When doubtful question of facts exists, the trial
court in the exercise of sound discretion should refuse to consider and
decide the case in a summary manner, but should allow the parties to
present proof in support of their respective stand. This is because the
right to a hearing, which is the right of the parties interested or
affected to present their respective cases and submit evidence in
support thereof, is one of the primary cardinal rights of litigants.
5.ID.; ID.; ID.; DISMISSAL OF ACTIONS HEARING VIOLATIVE TO DUE
PROCESS. The dismissal of an action upon a motion to dismiss
constitutes a denial of due process, if, from a consideration of the
pleadings, it appears that there are issues of fact which cannot be
decided without a trial of the case on the merits. Summary or outright
dismissals of actions are not proper where there are factual matters in
dispute which need presentation and appreciation of evidence. The
demands of a fair, impartial and wise administration of justice call for
a faithful adherence to legal precepts on procedure which ensure to
litigants the opportunity to present their evidence and secure a ruling
on all the issues presented in their respective pleadings. "Shorts cuts"
in judicial processes are to be avoided where they impede rather than
promote a judicious dispensation of justice.
DECISION
GUERRERO, J p:
The cause for certiorari and/or mandamus brought to the attention of
this Court in this case is the alleged grave abuse of discretion
amounting to lack of jurisdiction of respondent Court of First Instance
of Misamis Occidental, Branch II, for dismissing the complaint for
damages of petitioner in Civil Case No. OZ 686, entitled "Atty.
Dominador B. Borje vs. Violeta Galicinao, et al." without conducting
any hearing despite the existence of controverted facts that needed to
be proved.
Petitioner alleged that he is the counsel of the water consuming public
of Ozamiz City who were indignant against the increase of water rates
imposed by respondent Misamis Occidental Water District and who
thereby resorted to court action for redress and/or remedy. After
acceptance of the retainer as counsel plus the consequent
representation of the consumers also in debates and discussions in

the air, he allegedly received water bills from the Water District
without indication of the meter readings, the number of cubic meters
consumed and the amounts to be paid. So he refused to pay the
"blank bills." For such failure, petitioner's water service was cut on
February 6, 1978.
By reason of these acts of "harassment" of private respondents
resulting in his "humiliation" as well as unlawful deprivation of a life's
necessity, petitioner brought Special Civil Case No. OZ 686, an action
for damages with preliminary mandatory injunction, before respondent
Court. cdrep
Acting on the prayer incorporated therein for preliminary mandatory
injunction, respondent Court issued an order dated February 8, 1978
enjoining respondents from disconnecting the water service of
petitioner. Upon learning that the same was already cut, the Court
issued another order reconnect it immediately.
On February 15, 1978, private respondents filed a motion to dismiss
the complaint on two grounds, namely: a lack of jurisdiction of
respondent Court allegedly because the "main thrust the subject and
nature of the action or suit appearing in the complaint is clearly within
the field of special civil action or suit action or special proceeding" 1
and (b) there is another action pending between the same parties for
the same cause, referring to Special Civil Case No. 0390.
On February 27, 1978, petitioner filed an opposition thereto stating
that the issues raised are justiciable and a court of general jurisdiction
has the authority to try the case. He further contended that Special
Civil Case No. 0390, which questioned the increased water rates
unilaterally imposed by the Misamis Occidental Water District, the
constitutionality of Presidential Decree No. 198 and the selection of
the members of the Board of Directors, is entirely different from Civil
Case No. OZ-686, which is an action for damages due to the
harassment committed by private respondents on petitioner.
Surprisingly though, respondent Court, through Hon. Melecio A.
Genato, a temporary judge assigned thereat, issued an order dated
March 9, 1978 dismissing the case not on the basis of the grounds
alleged by private respondents in their motion to dismiss but on the
grounds that there was no malice or bad faith in the severance of the
water connection of petitioner and that private respondent had
already reconnected the same. The dispositive portion thereof states:
"WHEREFORE, the above entitled case is hereby
dismissed for being moot and academic without
pronouncement as to costs.
SO ORDERED." 2
A motion for reconsideration was thus filed by petitioner where he
assailed the said order of dismissal for having been rendered in
violation of Section 1, Rule 36, Revised Rules of Court and for not
being correct because although his water service has been
reconnected, he has suffered damages which could be proved by him
in an impartial proceeding. He also assailed the said order,

denominating it as a "midnight order" because on March 9, 1978, "the


Clerk of Court officially showed Hon. Melecio A. Genato the telegram
of Hon. Bienvenido A. Ebarle to schedule trials from March 10, 1978 to
March 17, 1978 indicating that he has already and previously taken his
oath." 3
An opposition thereto was filed by private respondents disputing only
the claim of petitioner that the order dated March 9, 1978 was a
midnight order. Petitioner filed a "rejoinder" reiterating that the order
of dismissal is a midnight order citing the cases of Siazon vs. Hon.
Judge of CFI of Cotabato, Branch II, L-29354, January 27, 1969, 26
SCRA 664 and Li Siu Liat vs. Republic of the Philippines, L-25356,
November 25, 1967, 21 SCRA 1039. By reason of the number of
arguments on the issue of whether the order dated March 9, 1978 is a
midnight order or not, the respondent Court, through Hon. Bienvenido
A. Ebarle, considered the motion for reconsideration as mainly
anchored on the lack of authority of Judge Genato. In denying the said
motion, the Court held in an order dated April 18, 1978, as follows:
prcd
"While it may be true that Judge Genato might not
have the authority anymore to issue the said order in
view of the pertinent citations made by plaintiff, the
more important thing to consider is the intrinsic merit
of the complaint in relation to the order of dismissal.
The Court has gone over the pleadings of both parties,
closely studied the issues involved, and weighed the
preponderance of their implication carefully.
"The cause of action as admitted by plaintiff is the
alleged arbitrary disconnection by defendants of
plaintiff's water pipes. However, it appears that
plaintiff was not singled out in the matter of water
pipes disconnection, for aside from him, there were
three other consumers whose connections were
ordered cut and in fact disconnected about the same
time and/or occasion, an official act of defendants
indicating absence of malice." 4
In assailing the order of dismissal dated March 9, 1978 which was
affirmed in the order dated April 18, 1978, petitioner contends in this
instant petition for certiorari and/or mandamus with this Court that
said dismissal cannot be on lack of cause of action because the
complaint alleged sufficient facts to show that his rights have been
seriously violated by private respondents. He also argues that it
cannot be a judgment on the pleadings because the facts are
controverted. He thereby concludes that respondent Court has gravely
abused its discretion amounting to lack or excess of jurisdiction when
it dismissed the case without any evidence presented by both parties
in support of their respective positions considering that the allegations

of that he has no appeal nor any plain, speedy and adequate remedy
in the ordinary course of law, except this present petition.
Indeed, respondent Court acted with grave abuse of discretion if not in
excess of its jurisdiction in dismissing the case. Firstly, the said order
of dismissal dated March 9, 1978 is not premises on lack of jurisdiction
or on the pendency of another case between the same parties for the
same cause - the grounds alleged by private respondents in their
motion to dismiss. On this score, it has been held in the case of Malig,
et al. vs. Bush, 5 that dismissal of actions on grounds not alleged in
the motion to dismiss is improper for in so doing, a court in effect
dismisses an action motu proprio without giving the plaintiffs a chance
to argue the point and without receiving any arguments or evidence
on the question.
But while in the aforecited Malig case, the order of dismissal is based
on one of the grounds enumerated in Section 1 of Rule 16, Revised
Rules of Court, namely: prescription, the order herein brought to Us for
review is not based on any of them. In a rather summary fashion,
respondent Court made a finding on the basis merely of the pleadings
filed and without conducting any hearing, that there is no malice or
bad faith on the part of private respondents in their act of severing
petitioner's water supply. Respondent court also noted the fact that
private respondents bad reconnected the water pipes or water service
of petitioner and erroneously concluded that the case has become
moot and academic. LLpr
To all intents and purposes, respondent Court decreed the dismissal on
its own initiative as in the case of Manila Herald Publishing Co., Inc.
vs. Ramos, et al. 6 where neither a motion to dismiss nor an answer
had been made when the decision was handed down. In granting the
writ of certiorari, this Court ruled therein that: "Section 1 of Rule 8
(now Section 1 of Rule 16) enumerates the grounds upon which an
action may be dismissed, and it specifically ordains that a motion to
this end be filed. In the light of this express requirement we do not
believe that the court had power to dismiss the case without the
requisite motion duly presented. . . . The only instance in which.
according to said Rules, the court may dismiss upon the court's own
motion on action is, when the "plaintiff fails to appear at the time of
the trial or to the prosecute his action for an unreasonable length of
time or to comply with the Rules or any order of the court."
The real cause for concern, though, is not so much the dismissal of the
case for lack of presentation of the requisite motion but rather the
dismissal thereof without affording petitioner an opportunity to be
heard despite the presence of factual issues that needed to be proved.
In the case at bar, respondents premised their right to cut off the
water service connection on the violation of petitioner's water service
contract 7 which is the contract signed by petitioner with the National
Waterworks and Sewerage Authority on September 16, 1958 to which
private respondent Misamis Occidental Water District claims it has
been subrogated. The said contract provides the following:

"3.To pay monthly the NWSA for the water service


furnished upon presentation of the bill or within thirty
(30) days from its presentation."
"6.That the NWSA may disconnect the service upon
violation of the term of the contract."
In addition to the said contract, private respondents also presented
their "Notice to the Public" 8 where the water consumers were likewise
informed that upon failure to settle their bills within the connection
period, their water service will be shut off. Thirdly, they annexed to
their comment on this petition a facsimile copy of the monthly bill 9
furnished each water consumer wherein it is stated that "service may
be disconnected immediately if payment of the bill is not made to the
field collector after due date."
Indeed, all these empower the private respondents to disconnect the
water service of the consumers upon failure to pay. But the question
posed by petitioner is whether or not there is really failure to pay on
his part. It is his contention that there is no failure as he was sent
water bills that did not indicate the meter readings, the number of
cubic meters consumed and the amount to be paid.
Inasmuch as private respondents deny these allegations of petitioner,
an issue of fact exists that requires presentation of proof. If the
allegations of petitioner are true private respondents are not at an
authorized to cut off his water service as the collection period as to
him would not have even started yet. For an obligation to become due
there must be a demand. 10 Default generally begins from the
moment the creditor demands the performance of the obligation.
Without such demand, judicial or extra-judicial, the effects of default
will not arise. prcd
It is to be noted that private respondents attached to their comment
on this petition only a facsimile copy of the water bill issued to
consumers while they presented to this Court a xerox copy of the
contract between NWSA and the petitioner, and a xerox copy of the
final notice, not just facsimiles thereof. Although the issue of the
effectivity of the denial of private respondents as to the alleged
sending of blank bills is not for this Court to determine, it would not be
amiss to state that private respondents could have easily annexed
also a xerox copy of the water bill sent to petitioner, if only to belie the
latter's claims.
At any rate, private respondents also argue that petitioner could have
paid his account when the final notice 11 to pay was sent him since he
was then already certain of the amount of the bill. This final notice is
the notice of disconnection, served on the day the service was cut off.
Petitioner, however, contends that this was the first time he ever
came to know of the sum due from him and besides, he claims that
only the total amount due for the months of November and December,
1977 was stated. There is no specification of the amount due for each
month, the meter readings and the number of cubic meters
consumed, thus, leaving him uncertain as to how the amount was

arrived at. Assuming the truth of these allegations, private


respondents would not have been entitled still to cut off petitioner's
water supply at the time they cut if off as the demand did not contain
the requisite details and hence, improper. And even if the sufficiency
of the demand is conceded, petitioner has still thirty days from date of
such knowledge within which to pay the same in accordance with the
contract and the avowed policy of the water district.
Verily, the above discussion shows the need of presentation of proof
for the respective allegations of the parties. For the respondent Court
to make a summary finding of lack of malice or bad faith on the part of
private respondents from those controverted facts and then decree
the dismissal of the case is, therefore, violative of due process. In view
of the doubtful question of facts presented herein, respondent court,
in the exercise of sound discretion, should have refused to consider
and decide in a summary manner and should have allowed the parties
to present proof in support of their respective stand. This is because
the right to a hearing, which is the right of the parties interested or
affected to present their respective cases and submit evidence in
support thereof, is one of the primary cardinal rights of litigants.
The importance of this right has been underscored in several cases of
this nature decided by this Court. In one of such cases, De Leon vs.
Henson, 12 this Court ruled that the dismissal of an action upon a
motion to dismiss constitutes a denial of due process, if, from a
consideration of the pleadings, it appears that there are issues of fact
which cannot be decided without a trial of the case on the merits.
Similarly, in Constantino vs. Estenzo, 13 citing Garanciang, et al. vs.
Garanciang, et al. 14 and Boaga vs. Soler, 15 this Court held as
follows:
". . . Summary or outright dismissals of actions are not
proper where there are factual matters in dispute
which need presentation and appreciation of
evidence. The demands of a fair, impartial and wise
administration of justice call for faithful adherence to
legal precepts on procedure which ensure to litigants
the opportunity to present their evidence and secure a
ruling on all the issues presented in their respective
pleadings. `Short cuts' in judicial processes are to be
avoided where they impede rather than promote a
judicious dispensation of justice."
WHEREFORE, the petition for certiorari and/or mandamus is hereby
GRANTED, the Orders dated March 9, 1978 and April 18, 1978
dismissing the complaint of petitioner for damages and denying the
motion for reconsideration thereof, respectively, are set aside for
being null and void, and respondent Court of First Instance of Misamis
Occidental, Branch II is hereby ordered to try the case on the merits
after conducting a pre-trial conference.

Teehankee (Chairman), Makasiar, Fernandez, De Castro and MelencioHerrera, JJ., concur.

FIRST DIVISION
[G.R. No. 58986. April 17, 1989.]
DANTE Y. GO, petitioner, vs. HON. FERNANDO
CRUZ, Judge, etc., CITY SHERIFF OF CALOOCAN
CITY, and CALIFORNIA MANUFACTURING CO.,
INC., respondents.
De Santos, Balgos & Perez for petitioner.
Francisco N. Carreon, Jr. for respondents.
SYLLABUS
1.REMEDIAL LAW; DISMISSAL OF ACTIONS; ADDRESSED TO THE
SOUND JUDGMENT AND DISCRETION OF THE COURT; EXCEPTION.
The dismissal of civil actions is always addressed to the sound
judgment and discretion of the court, whether dismissal is sought after
a trial has been completed or otherwise, or whether it is prayed for by
a defending party, or by a plaintiff or claimant. There is one instance
however 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. This is dealt with in Section 1, Rule 17 of the
Rules of Court, which reads as follows: "SECTION 1. 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 approval of the court."
2.ID.; ACTIONS; PLAINTIFF'S ABSOLUTE RIGHT TO DISMISS LOST UPON
SERVICE OF DEFENDANT'S ANSWER OR OF A MOTION FOR SUMMARY
JUDGMENT. What marks the loss by a plaintiff of the right to cause
dismissal of the action by mere notice is not the filing of the
defendant's answer with the Court (either personally or by mail) but
the service on the plaintiff of said answer or of a motion for summary
judgment. This is the plain and explicit message of the Rules. "The
filing of pleadings, appearances, motions, notices, orders and other
papers with the court," according to Section 1, Rule 13 of the Rules of
Court, means the delivery thereof to the clerk of the court either
personally or by registered mail. Service, on the other hand, signifies
delivery of the pleading or other paper to the parties affected thereby
through their counsel of record, unless delivery to the party himself is
ordered by the court, by any of the modes set forth in the Rules, i.e.,
by personal service, service by mail, or substituted service.
DECISION
NARVASA, J p:
The dismissal of civil actions is always addressed to the sound
judgment and discretion of the court; this, whether the dismissal is

sought after a trial has been completed or otherwise, 1 or whether it is


prayed for by a defending party, 2 or by a plaintiff or claimant. 3 There
is one instance however 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. This is dealt
with in Section 1, Rule 17 of the Rules of Court, which reads as follows:
SECTION 1.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
approval of the court.
It is this provision with which the proceedings at bar are chiefly
concerned.
On October 26, 1981, California Manufacturing Co., Inc. (hereinafter,
simply, California) brought an action in the Court of First Instance of
Manila against Dante Go, accusing him of unfair competition. 4 The
gravamen of California's complaint was that Dante Go, doing business
under the name and style of "Sugarland International Products," and
engaged like California in the manufacture of spaghetti, macaroni, and
other pasta, was selling his products in the open market under the
brand name, "Great Italian," in packages which were in colorable and
deceitful imitation of California's containers bearing its own brand,
"Royal." Its complaint contained an application for preliminary
injunction commanding Dante Go to immediately cease and desist
from the further manufacture, sale and distribution of said products,
and to retrieve those already being offered for sale. 5
About two weeks later, however, or on November 12, 1981, California
filed a notice of dismissal with the Court reading as follows: 6
COMES NOW the plaintiff in the above-entitled case,
through undersigned counsel, and unto this Honorable
Court most respectfully gives notice of dismissal
without prejudice pursuant to Sec. 1, Rule 17 of the
Rules of Court.
WHEREFORE, it is respectfully prayed that the aboveentitled case be considered dismissed without
prejudice conformably with Sec. 1, Rule 17 of the
Rules of Court.
Four days afterwards, or on November 16, 1981, California received by
registered mail a copy of Dante Go's answer with counterclaim dated

November 6, 1981, which had been filed with the Court on November
9, 1981. 7
On November 19, 1981 a fire broke out at the Manila City Hall
destroying among others the sala of Judge Tengco and the records of
cases therein kept, including that filed by California against Dante Go.
8
On December 1, 1981, California filed another complaint asserting the
same cause of action against Dante Go, this time with the Court of
First Instance at Caloocan City. 9 This second suit was docketed as
Civil Case No. C-9702 and was assigned to the branch presided over
by Judge Fernando A. Cruz. cdll
On December 3, 1981, Judge Cruz issued an ex parte restraining order
directing "the defendant . . . to immediately cease and desist from the
further manufacture, sale, promotion and distribution of spaghetti,
macaroni and other pasta products contained in packaging boxes and
labels under the name `GREAT ITALIAN,' which are similar to or copies
of those of the plaintiff, and . . . recall . . . all his spaghetti, macaroni
and other pasta products using the brand, `GREAT ITALIAN.'" 10
On the day following the rendition of the restraining order, Dante Go
filed the present petition for certiorari, etc. with this Court praying for
its nullification and perpetual inhibition. On December 11, 1981, this
Court, in turn, issued a writ of preliminary injunction restraining
California, Judge Cruz and the City Sheriff from enforcing or
implementing the restraining order of December 3, 1981, and from
continuing with the hearing on the application for preliminary
injunction in said Civil Case No. C-9702. The scope of the injunction
was subsequently enlarged by this Court's Resolution of April 14, 1982
to include the City Fiscal of Manila, who was thereby restrained from
proceeding with the case of unfair competition filed in his office by
California against Dante Go. 11
Dante Go's thesis is that the case filed against him by California in the
Manila Court remained pending despite California's notice of dismissal.
According to him, since he had already filed his answer to the
complaint before California sought dismissal of the action three (3)
days afterwards, such dismissal was no longer a matter of right and
could no longer be effected by mere notice in accordance with Section
1, Rule 17 of the Rules of Court, but only on plaintiff's motion, and by
order of the Court; hence, the Caloocan Court acted without
jurisdiction over the second action based on the same cause. He also
accused California of forum shopping, of selecting a sympathetic court
for a relief which it had failed to obtain from another. 12
The petitioner is in error. What marks the loss by a plaintiff of the right
to cause dismissal of the action by mere notice is not the filing of the
defendant's answer with the Court (either personally or by mail) but
the service on the plaintiff of said answer or of a motion for summary
judgment. This is the plain and explicit message of the Rules. 13 "The
filing of pleadings, appearances, motions, notices, orders and other
papers with the court," according to Section 1, Rule 13 of the Rules of

Court, means the delivery thereof to the clerk of the court either
personally or by registered mail. Service, on the other hand, signifies
delivery of the pleading or other paper to the parties affected thereby
through their counsel of record, unless delivery to the party himself is
ordered by the court, 14 by any of the modes set forth in the Rules,
i.e., by personal service, 15 service by mail, 16 or substituted service.
17
Here, California filed its notice of dismissal of its action in the Manila
Court after the filing of Dante Go's answer but before service thereof.
Thus having acted well within the letter and contemplation of the
afore-quoted Section 1 of Rule 17 of the Rules of Court, its 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 California 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. LLphil
There was therefore no legal obstacle to the institution of the second
action in the Caloocan Court of First Instance based on the same
claim. The filing of the complaint invested it with jurisdiction of the
subject matter or nature of the action. In truth, and contrary to what
petitioner Dante Go obviously believes, even if the first action were
still pending in the Manila Court, this circumstance would not affect
the jurisdiction of the Caloocan Court over the second suit. The
pendency of the first action would merely give the defendant the right
to move to dismiss the second action on the ground of auter action
pendant, or litis pendentia. 18
WHEREFORE, the petition is DISMISSED, with costs against petitioner.
The temporary restraining order of December 11, 1981, and the
amendatory Resolution of April 14, 1982 are SET ASIDE.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

THIRD DIVISION
[G.R. No. L-43236. December 20, 1989.]
OLYMPIA INTERNATIONAL, INC., petitioner, vs. THE
HONORABLE COURT OF APPEALS, ALPHA INSURANCE
& SURETY CO., INC., and JUDGE JOSE C. CAMPOS, JR.,
respondents.
Gonzales & Chua Law Offices for petitioner.
L.L. Reyes for respondents.
SYLLABUS
1.REMEDIAL LAW; CIVIL PROCEDURE; DISMISSAL OF ACTION WITHOUT
PREJUDICE; DOES NOT HAVE THE EFFECT OF AN ADJUDICATION ON
THE MERITS. It has been held that the dismissal of a case on motion
of both parties as in the case at bar is a dismissal contemplated under
Section 2, Rule 30 (now Rule 17) of the Rules of Court, which is a
dismissal without prejudice and not a dismissal governed by Section 4
thereof, which operates as an adjudication on the merits. Similarly, it
has been ruled that under certain attendant facts and circumstances,
and the added fact that the trial on the merits had not as yet
commenced, dismissal of the complaint is without prejudice and does
not have the effect of adjudication on the merits. Precisely, the
previous dismissal without prejudice was removed from the general
rule that it should have the effect of an adjudication on the merits,
since the lower court had provided otherwise and declared the
dismissal to be without prejudice.
2.ID.; ID.; ID.; IF COMPLETE IN DETAILS, HAS THE EFFECT OF A FINAL
DISPOSITION OF THE COMPLAINT. The dismissal without prejudice of
a complaint does not however mean that said dismissal order was any
less final. Such Order of dismissal is complete in all details, and
though without prejudice, nonetheless finally disposed of the matter. It
was not merely an interlocutory order but a final disposition of the
complaint.
3.ID.; ID.; ID.; JURISDICTION OF THE TRIAL COURT LOST AFTER
DISMISSAL ORDER HAS BECOME FINAL AND EXECUTORY. Upon the
dismissal order attaining finality for failure of either party to appeal
therefrom, the jurisdiction which the court had acquired thereon was
finally discharged and terminated, and any subsequent action filed in
accordance with the reservation cannot be considered a continuation
of the first action which was dismissed. From the foregoing, it
becomes apparent that the lower court -acted in excess of its
jurisdiction when it granted the motion to revive the case filed by
petitioner as plaintiff therein. By then (December 7, 1973), the
dismissal order of December 15, 1972 had long become final and
executory, thereby beyond the power of the court to amend, modify,
reverse or set aside. And certainly, for the court to entertain and grant
said motion to revive the case would result in the setting aside of the
subject dismissal order.
4.ID.; ID.; JUDGMENTS; MAY BE EXECUTED ON MOTION WITHIN FIVE
(5) YEARS FROM THE DEATH OF ITS ENTRY OR DATE IT BECOME FINAL

AND EXECUTORY. That the lower court retained jurisdiction to carry


into effect its final and executory order of December 15, 1972 is
beyond cavil for while Alpha's motion was filed three (3) years after
the issuance of said dismissal order, the same may still be taken
cognizance of by the lower court in accordance with Section 6, Rule 39
of the Rules of Court which states: Sec. 6. Execution by motion or by
independent action. A judgment may be executed on motion within
five (5) years from the date of its entry or from the date it becomes
final and executory. After the lapse of such time, and before it is
barred by the statute of limitations, a judgment may be enforced by
action.
5.ID.; ID.; ID.; WRIT OF REPLEVIN; PROVISIONAL IN CHARACTER ITS
EXISTENCE DEPENDS ON THE OUTCOME OF THE MAIN ACTION.
Logic and equity demand that the writ of replevin be cancelled. Being
provisional and ancillary in character, its existence and efficacy
depended on the outcome of the case. The case having been
dismissed, so must the writ's existence and efficacy be dissolved. To
let the writ stand even after the dismissal of the case would be
adjudging Olympia as the prevailing party, when precisely, no decision
on the merits had been rendered. The case having been dismissed, it
is as if no case was filed at all and the parties must revert to their
status before the litigation.
6.CIVIL LAW; PRESCRIPTION OF ACTIONS; PERIOD BEGINS TO RUN
FROM THE DISMISSAL OF ACTION OR VOLUNTARY ABANDONMENT BY
THE PLAINTIFF. It is important to note that the right to file a new
action in this case has long prescribed, for while the commencement
of a civil action stops the running of the statute of prescription or
limitations, its dismissal or voluntary abandonment by the plaintiff
leaves the parties in exactly the same position as though no action
had been commenced at all. The commencement of an action, by
reason of its dismissal or abandonment, takes no time out of the
period of prescription.
DECISION
FERNAN, C.J p:
Petitioner Olympia International, Inc. seeks a review of the Resolution
dated January 22, 1976 of the Court of Appeals 1 dismissing its
petition for certiorari as well as the Resolution dated February 19,
1976 denying its motion for reconsideration. prcd
The antecedent facts are undisputed:
On various dates from November 1965 to March 1966, petitioner
Olympia International, Inc. (hereinafter Olympia) sold several
typewriters to private respondent Alpha Insurance & Surety, Co., Inc.
(Alpha, for brevity). For alleged non-payment of the purchase price,
Olympia instituted on July 7, 1966 two (2) actions against Alpha: Civil
Case No. 15053 of the City Court of Manila and Civil Case No. 2757-P
of the Court of First Instance of Pasay City, both replevin with
damages but referring to different typewriters. LLphil

In Civil Case No. 2757-P, which is the root case of the petition at bar,
Olympia alleged that of the total purchase price of P24,430.80 of the
typewriters involved therein, only P5,500.00 had been paid by Alpha.
It therefore prayed that the court issue an order for the seizure of the
typewriters and their delivery to Olympia to protect its interest
thereon and to confirm its ownership over said personal properties;
that should delivery thereof be unavailing, that Alpha be ordered to
pay Olympia the typewriters' actual value in the sum of P18,930.80;
that the amounts deposited by Alpha be forfeited and considered as
rents for the typewriters; and that Alpha be ordered to pay 12%
interest per annum commencing from the date of payment indicated
on each invoice until the unpaid amount is fully paid, plus attorney's
fees of P4,425.20 and damages of P4,000.00.
After Olympia had posted a bond in an amount twice the value of the
typewriters involved and its assistant manager for credit and
collection had filed an affidavit showing that Olympia was entitled to
the ownership of the said typewriters, the lower court ordered on July
15, 1966 the issuance of a writ of replevin and directed the deputy
sheriff of Pasay City to seize the personal properties involved and to
retain the same in his custody "to be dealt with as prescribed in Rule
60 of the Rules of Court until further orders" from the court. 2
Consequently, the typewriters enumerated in said order were seized
from Alpha and delivered to Olympia.
In its answer to the complaint, Alpha alleged that since the invoices
presented by Olympia in its application for a writ of replevin had not
been signed by its authorized corporate officers, they were not
reflective of the real terms and conditions of the sales. It prayed for
the redelivery of the 24 typewriters seized and in addition, asked for
the delivery of six (6) more units which Olympia had allegedly failed to
deliver to it pursuant to the sale agreement embodied in its
confirmatory letter dated October 29, 1965. As counterclaim, Alpha
prayed for moral damages of P75,000.00, actual damages of
P10,000.00 and attorney's fees of P5,000.00. Olympia thereafter filed
its reply to said answer and its answer to the counterclaim. cdll
Upon failure of the parties to reach an amicable settlement, the lower
court set the case for trial on the merits. Olympia began presenting its
evidence, and on May 17, 1971, it moved for the consolidation of Civil
Case No. 2757-P with Civil Case No. 15053 of the City Court of Manila.
The record is not clear as to whether the consolidation of said cases
materialized.
It appears on record, however, that on December 15, 1972, the lower
court issued the following order:
"On joint motion of both parties in the above-entitled
case, that they will settle the case amicably out of
court, this case is hereby dismissed without
prejudice." 3

As negotiations for an amicable settlement again failed, Olympia filed


a motion to revive the case for trial on the merits, acting upon which,
the lower court in its order of December 7, 1973 provided:
"On December 1, 1973, plaintiff through counsel filed
a 'Motion to Revive Case.' It appearing from the
records that the case was dismissed without prejudice
on December 15, 1972 (almost a year ago) on joint
motion of the parties and that the defendant has
failed to comply with its commitment to arrive at an
amicable settlement of the case, the motion is
granted.
"Let the case be set for hearing on January 11, 1974
at 8:30 o'clock in the morning.
"SO ORDERED." 4
However, on January 16, 1974, the lower court issued another order
stating:
"On January 14, 1974, counsel for the defendant filed
a 'Manifestation and Motion Ex-Parte' asking that this
Court reconsider its previous order, dated December
7, 1973 reopening this case on the ground that the
parties have previously filed a joint motion to dismiss
the case and that the subject matter of this case is
presently before the military authorities. It appearing
that the plaintiff, in filing its motion for reopening the
case, failed to mention this fact and that at the
hearing in chambers on January 7, counsel for the
plaintiff admitted the allegations of the defendant that
the matter is now in the hands of the military.
"Wherefore, the previous Order, dated December 7,
1973 is lifted and set aside and that the Order of
December 15, 1972 which dismissed the case is
hereby reinstated and reiterated. As far as this Court
is concerned, this case is dismissed with prejudice.
"SO ORDERED." 5
For more than one and a half years thereafter, neither of the parties
filed a motion for reconsideration nor questioned the legality of said
order in a higher court. Sometime in October, 1975, Alpha filed a
motion in the lower court praying, on equitable grounds, for the
cancellation of the "preliminary provisional writs of replevin"
previously issued by the court "inasmuch as no judgment was even
rendered in this case affirming plaintiffs right to its possession of the
typewriters involved in this suit conformably to the provisions of Sec.
9, Rule 60 of the Rules of Court." It averred that the return of the
typewriters was necessary "to afford the military administration of a
freer hand in settling the controversy between the parties." 6
On November 7, 1975, the lower court issued an order reading:

"At today's hearing, both parties were represented by


counsel, who requested that the case be discussed in
chambers. It appearing that there is no opposition to
the motion and finding the reason for the motion to be
well taken, the motion is granted.
"Wherefore, the preliminary provisional writs of
replevin previously issued by this Court to enable
plaintiff to obtain possession of defendant's personal
property, subject matter of this suit, is (sic) hereby
cancelled and set aside in view of the dismissal of this
case, as per Order of January 16, 1974 which dismissal
is with prejudice. The plaintiff is further ordered to
return the aforesaid personal property belonging to
the defendant, to the Military Management of Alpha
Insurance & Surety Co.
"SO ORDERED." 7
Olympia moved for a reconsideration of said order on the grounds that
the lower court had lost jurisdiction over the case and that the return
of the typewriters to Alpha was tantamount to tolerance of its wrongdoing which the writ of replevin sought precisely to avoid. This was
denied in an order dated December 5, 1975.
Consequently, Olympia filed a petition for certiorari with the Court of
Appeals, charging the lower court with lack of jurisdiction and abuse of
discretion in issuing the order of November 7, 1975. In its resolution of
January 22, 1976, the Court of Appeals dismissed the petition on the
ground that manual delivery of personal property or replevin under
Rule 60 being a provisional or ancillary remedy to the main action of
recovery of personal property, the writ issued against Alpha was
provisional and temporary. The appellate court opined that since
Olympia allowed the dismissal with prejudice of the case, "its right to
replevin died with the dismissal." And, as said dismissal was allowed
by Olympia to become final, the trial judge could do no less than to
order the redelivery of the typewriters otherwise he could be accused
of "inconsistency and extralimitation of authority." 8
Its motion for reconsideration of said resolution having been denied,
Olympia filed the instant petition for review on certiorari, alleging that:
RESPONDENT JUDGE OF THE COURT OF FIRST
INSTANCE OF RIZAL, SEVENTH JUDICIAL DISTRICT,
PASAY CITY, BRANCH . . ., COMMITTED GRAVE ERROR
OF JURISDICTION IN DISMISSING ON JANUARY 16, 1974
THE CIVIL SUITS FOR REPLEVIN WITH DAMAGES FILED
BY PETITIONER AGAINST PRIVATE RESPONDENT, AND
IN ISSUING THE SUBSEQUENT ORDER DATED
NOVEMBER 7, 1975.
RESPONDENT COURT OF APPEALS ERRED IN DENYING
THE ORIGINAL PETITION FOR CERTIORARI FILED BY
PETITIONER THRU COUNSEL ON JANUARY 15, 1976.

BOTH
THE
RESPONDENT
JUDGE
AND
THE
RESPONDENT COURT OF APPEALS COMMITTED GRAVE
ERROR IN OVERESPOUSING LEGAL TECHNICALITIES TO
THE PREJUDICE AND IMPAIRMENT OF SUBSTANTIAL
JUSTICE AND EQUITY. 9
Undoubtedly, this impasse is the result of the unorthodox proceedings
in this case. The management by the military of the Fernando Jacinto
group of companies, including Alpha, during the martial law years,
deterred the lower court from judicially determining which of the
contending companies was entitled to the ownership or possession of
the typewriters. It allowed the military to take over the task of helping
the parties settle their controversy extrajudicially. However, belatedly
realizing that its military manager could not facilitate the redelivery of
the typewriters seized from it through the writ of replevin, Alpha went
back to court which issued the orders in question. Cdpr
The decisive factor in this controversy is the effect of the first
dismissal of Civil Case No. 2757-P on December 15, 1972.
Aside from the fact that the aforesaid dismissal was expressly
reserved by the trial court to be without prejudice, it has been held
that the dismissal of a case on motion of both parties as in the case at
bar is a dismissal contemplated under Section 2, Rule 30 (now Rule
17) of the Rules of Court, which is a dismissal without prejudice and
not a dismissal governed by Section 4 thereof, which operates as an
adjudication on the merits. 10 Similarly, it has been ruled that under
certain attendant facts and circumstances, and the added fact that
the trial on the merits had not as yet commenced, dismissal of the
complaint is without prejudice and does not have the effect of
adjudication on the merits. 11 Precisely, the previous dismissal
without prejudice was removed from the general rule that it should
have the effect of an adjudication on the merits, since the lower court
had provided otherwise and declared the dismissal to be without
prejudice. 12
The dismissal without prejudice of a complaint does not however
mean that said dismissal order was any less final. Such Order of
dismissal is complete in all details, and though without prejudice,
nonetheless finally disposed of the matter. 13 It was not merely an
interlocutory order but a final disposition of the complaint. 14
Thus, upon said dismissal order attaining finality for failure of either
party to appeal therefrom, the jurisdiction which the court had
acquired thereon was finally discharged and terminated, and any
subsequent action filed in accordance with the reservation cannot be
considered a continuation of the first action which was dismissed. 15
From the foregoing, it becomes apparent that the lower court -acted in
excess of its jurisdiction when it granted the motion to revive the case
filed by petitioner as plaintiff therein. By then (December 7, 1973), the
dismissal order of December 15, 1972 had long become final and
executory, thereby beyond the power of the court to amend, modify,
reverse or set aside. And certainly, for the court to entertain and grant

said motion to revive the case would result in the setting aside of the
subject dismissal order.
Under the circumstances, the step available to petitioner as plaintiff
therein if it wanted to pursue its claim against Alpha was to institute a
new action in accordance with the reservation contained in the order
of dismissal. It could not revive the dismissed case by motion or
otherwise, as said dismissal, although without prejudice, had attained
finality.
By the same token did the lower court act in excess of its jurisdiction
when it issued the Order of January 16, 1974 dismissing Civil Case No.
2757-P anew, but this time, with prejudice. The Order of January 16,
1974 had the same effect of reversing and setting aside the dismissal
order of December 15, 1972, which as above-stated could no longer
be done in view of its having become final and executory.
But while the Order of December 7, 1973 which granted petitioner's
motion to revive case and that of January 16, 1974 dismissing the
case with prejudice are null and void for having been issued in excess
of jurisdiction, the same cannot be said of the order dated January 22,
1976 which granted Alpha's motion to cancel the writ of replevin. The
crucial difference lies on the fact that while the first two orders of
December 7, 1973 and January 16, 1974 had the effect of reversing
and setting aside the long final dismissal order of December 15, 1972,
the Order of January 22, 1976 enforced and implemented it.
In other words, the motion of Alpha to cancel the writ of replevin was
in the nature and character of a motion for execution of the dismissal
order of December 15, 1972. That the lower court retained jurisdiction
to carry into effect its final and executory order of December 15, 1972
is beyond cavil for while Alpha's motion was filed three (3) years after
the issuance of said dismissal order, the same may still be taken
cognizance of by the lower court in accordance with Section 6, Rule 39
of the Rules of Court which states:
Sec. 6.Execution by motion or by independent action.
A judgment may be executed on motion within five
(5) years from the date of its entry or from the date it
becomes final and executory. After the lapse of such
time, and before it is barred by the statute of
limitations, a judgment may be enforced by action.
Indeed, logic and equity demand that the writ of replevin be cancelled.
Being provisional and ancillary in character, its existence and efficacy
depended on the outcome of the case. The case having been
dismissed, so must the writ's existence and efficacy be dissolved. To
let the writ stand even after the dismissal of the case would be
adjudging Olympia as the prevailing party, when precisely, no decision
on the merits had been rendered. The case having been dismissed, it
is as if no case was filed at all and the parties must revert to their
status before the litigation. llcd
The allegation of Olympia that to cancel the writ of replevin would
result in Alpha's unjust enrichment does not persuade. Alpha has

consistently denied liability to Olympia, and even assuming Alpha to


be liable to Olympia, the latter, having failed to properly exercise its
right of action against Alpha, must suffer the consequences thereof.
It is equally important to note that the right to file a new action in this
case has long prescribed, for while the commencement of a civil
action stops the running of the statute of prescription or limitations, its
dismissal or voluntary abandonment by the plaintiff leaves the parties
in exactly the same position as though no action had been
commenced at all. The commencement of an action, by reason of its
dismissal or abandonment, takes no time out of the period of
prescription. 16
WHEREFORE, the instant petition is hereby DENIED. Costs against
petitioner.
SO ORDERED.
Gutierrez, Jr., Bidin and Corts, JJ., concur.
Feliciano, J., is on leave.

SECOND DIVISION
[G.R. No. 101883. December 11, 1992.]
SPOUSES LYDIA and VIRGILIO MELITON, *
petitioners, vs. COURT OF APPEALS and NELIA A.
ZIGA, represented by her Attorney-in-Fact
RAMON A. AREJOLA, ** respondents.
Adan Marcelo B. Botor for petitioner.
SYLLABUS
1.REMEDIAL
LAW;
COMPULSORY
COUNTERCLAIM,
TEST
OF
"COMPULSORINESS". Considering Section 4 of Rule 9 of the Rules of
Court, a counterclaim is compulsory if (a) it arises out of, or is
necessarily connected with, the transaction or occurrence which is the
subject matter of the opposing party's claim; (b) it does not require for
its adjudication the presence of third parties of whom the court cannot
acquire jurisdiction; and (c) the court has jurisdiction to entertain the
claim. It has been postulated that while a number of criteria have
been advanced for the determination of whether the counterclaim is
compulsory
or
permissive,
the
"one
compelling
test
of
compulsoriness" is the logical relationship between the claim alleged
in the complaint and that in the counterclaim, that is, where
conducting separate trials of the respective claims of the parties
would entail a substantial duplication of effort and time, as where they
involve many of the same factual and/or legal issues.
2.ID.; ID.; ID.; PHRASE "LOGICAL RELATIONSHIP," CONSTRUED. The
phrase "logical relationship" is given meaning by the purpose of the
rule which it was designed to implement. Thus, a counterclaim is
logically related to the opposing party's claim where, as already
stated, separate trials of each of their respective claims would involve
a substantial duplication of effort and time by the parties and the
courts. Where multiple claims involve many of the same factual
issues, or where they are offshoots of the same basic controversy
between the parties, fairness and considerations of convenience and
of economy require that the counterclaimant be permitted to maintain
his cause of action.
3.ID.; ACTION FOR RECOVERY OF POSSESSION OF REAL PROPERTY
SUBJECT MATTER OF COUNTERCLAIM IN CASE AT BAR. As we have
ruled, in actions for ejectment or for recovery of possession of real
property, it is well settled that the defendant's claims for the value of
the improvements on the property or necessary expenses for its
preservation are required to be interposed in the same action as
compulsory counterclaims. In such cases, it is the refusal of the
defendant to vacate or surrender possession of the premises that
serves as the vital link in the chain of facts and events, and which
constitutes the transaction upon which the plaintiff bases his cause of
action. It is likewise an "important part of the transaction constituting
the subject matter of the counterclaim" of defendant for the value of
the improvements or the necessary expenses incurred for the
preservation of the property. They are offshoots of the same basic

controversy between the parties, that is, the right of either to the
possession of the property.
4.ID.; ID.; INSTANCES WHEN COUNTERCLAIM NOT SET UP SHALL BE
BARRED UNDER SEC. 4, RULE 9, RULES OF COURT. It is indeed the
rule, embodied in Section 4, Rule 9 of the Rules of Court, that a
counterclaim not set up shall be barred if it arises out of or is
necessarily connected with the transaction or occurrence that is the
subject matter of the opposing party's claim and does not require for
its adjudication the presence of third parties of whom the court cannot
acquire jurisdiction.
5.ID.; RES JUDICATA; REQUISITES. In order that a prior judgment will
constitute a bar to a subsequent case, the following requisites must
concur: (1) the judgment must be final; (2) the judgment must have
been rendered by a court having jurisdiction over the subject matter
and the parties; (3) the judgment must be on the merits; and (4) there
must be between the first and second actions, identity of parties, of
subject matter, and of causes of action.
6.ID.; DISMISSAL OF CASE WITHOUT PREJUDICE; EXPLAINED. The
dismissal of the case without prejudice indicates the absence of a
decision on the merits and leaves the parties free to litigate the
matter in a subsequent action as though the dismissal action had not
been commenced. The discontinuance of a case not on the merits
does not bar another action on the same subject matter. Evidently,
therefore, the prior dismissal of herein petitioners' counterclaims is
not res judicata and will not bar the filing of another action based on
the same causes of action.
7.ID.; DISMISSAL OF ACTIONS AFTER FILING OF ANSWER; GOVERNING
RULE. As laid down in Rule 17 of the Rules of Court, which is
summarized as follows: An action shall not be dismissed at the
request of the plaintiff after the service of the answer, except by order
of the court and upon such terms and conditions as the court deems
proper. The trial court has the judicial discretion in ruling on a motion
to dismiss at the instance of the plaintiff. It has to decide whether the
dismissal of the case should be allowed, and if so, on what terms and
conditions.
8.CIVIL LAW; ACTION FOR DAMAGES FOR VIOLATION OF LEASE
AGREEMENT; CASE AT BAR. Specifically applicable in a lessor-lessee
relationship is authorized in Article 1659 of the Civil Code which
provides that: "Art. 1659. If the lessor or the lessee should not comply
with the obligations set forth in articles 1654 and 1657, the aggrieved
party may ask for the rescission of the contract and indemnification
for damages, or only the latter, allowing the contract to remain in
force." The act of private respondent in demolishing the structures
introduced by petitioners on the property leased and the
improvements therein during the existence of the lease contract is a
clear violation by her, as lessor, of her obligation mandated by
paragraph 3, Article 1654 of the Civil Code. The said violation gave
rise to a cause of action for damages in favor of herein petitioners.

9.REMEDIAL LAW; DISMISSAL OF COUNTERCLAIM FOR NON-PAYMENT


OF DOCKET FEES; RULING IN MANCHESTER CASE APPLIES TO
PERMISSIVE COUNTERCLAIMS ONLY. The court a quo dismissed
petitioners' counterclaims for non-payment of docket fees pursuant to
our then ruling in Manchester Development Corporation, et al., vs.
Court of Appeals, et al., before its modification. The failure of
petitioners to seek reconsideration of or to take an appeal from the
order of dismissal of the counterclaim should not prejudice their right
to file their claims in a separate action because they were thereby
made to understand and believe that their counterclaims were merely
permissive and could be the subject of a separate and independent
action. Under the Rules, there is no need to pay docket fee for a
compulsory counterclaim. The ruling in Manchester applies specifically
to permissive counterclaims only, thereby excluding compulsory
counterclaims from its purview, and that was the ruling of the court
below to which the litigants therein submitted. Had the trial court
correctly specified that petitioners' counterclaims were compulsory,
petitioners could have objected to the dismissal sought by private
respondent on the ground that said counterclaims could not remain
pending for independent adjudication.
10.ID.; RULES ON PROCEDURE; SHOULD BE LIBERALLY CONSTRUED TO
THE END THAT NO PARTY SHOULD BE DEPRIVED OF HIS DAY IN COURT
ON TECHNICALITIES. This, is one case where it is necessary to heed
the injunction that the rules of procedure are not to be applied in a
rigid and technical sense. After all, rules of procedure are used only to
help secure substantial justice. They cannot be applied to prevent the
achievement of that goal. Form cannot and should not prevail over
substance. Absent a specific requirement for stringent application, the
Rules of Court are to be liberally construed to the end that no party
shall be deprived of his day in court on technicalities. The courts in our
jurisdiction are tribunals both of law and equity. Hence, under the
antecedents of this case, we are persuaded that even if only to
approximate that desirable measure of justice we are sworn to
dispense, this controversy should be resolved on the merits.
DECISION
REGALADO, J p:
In its judgment in CA-G.R. No. 25091 1 promulgated on August 9,
1991, respondent Court of Appeals annulled and set aside the orders
dated February 22, 1991 and March 18, 1991 of the Regional Trial
Court of Naga City, Branch 27, in Civil Case No. RTC 89-1942 thereof
and ordered the dismissal of petitioner's complaint filed therein, hence
this appeal by certiorari.
On June 22, 1988, private respondent Nelia Ziga, in her own behalf
and as attorney-in-fact of Alex A. Ziga and Emma A. Ziga-Siy, filed a
complaint, docketed as Civil Case No. RTC 88-1480 of the Regional
Trial Court, Branch 27, Naga City, 2 against herein petitioner Lydia
Meliton for rescission of a contract of lease over a parcel of land
situated at Elias Angeles Street, Naga City. Alleged as grounds therefor

were said petitioner's failure, as lessee, to deposit the one month


rental and to pay the monthly rentals due; her construction of a
concrete wall and roof on the site of a demolished house on the leased
premises without the lessor's written consent; and her unauthorized
sublease of the leased property to a third party. prLL
On July 29, 1988, petitioner Lydia Meliton filed an answer to the
complaint denying the material averments thereof and setting up
three counterclaims for recovery of the value of her kitchenette
constructed on the leased parcel of land and which was demolished by
private respondent, in the amount of P34,000.00; the value of the
improvements introduced in the kitchenette to beautify it, in the
amount of P10,000.00, plus the value of the furniture and fixtures
purchased for use in the kitchenette in the amount of P23,000.00; and
moral damages in the amount of P20,000.00 aside from attorney's
fees of P50,000.00 and P250.00 per court appearance, with litigation
expenses in the amount of P1,000.00. 3
On May 29, 1989, the trial court, on motion of private respondent
contending that her cause of action had already become moot and
academic by the expiration of the lease contract on February 7, 1989,
dismissed the complaint. The counterclaims of petitioner Lydia Meliton
were also dismissed for non-payment of the docket fees, ergo the trial
court's holding that thereby it had not acquired jurisdiction over the
same. 4
On December 6, 1989, petitioners Lydia Meliton and Virgilio Meliton
filed a complaint against private respondent for recovery of the same
amounts involved and alleged in their counterclaims in Civil Case No.
RTC 88-1480, which complaint was docketed as Civil Case No. RTC 891942 5 and likewise assigned to Branch 27 of the same trial court.
On February 15, 1991, private respondent filed a motion to dismiss
the complaint on the ground that the cause of action therein was
barred by prior judgment in Civil Case No. RTC 88-1480, the order of
dismissal wherein was rendered on May 29, 1989. 6
On February 22, 1991, the court below denied private respondent's
motion to dismiss the complaint in Civil Case No. RTC 89-1942 on the
ground that the dismissal of the petitioner's counterclaims in Civil
Case No. RTC 88-1480 is not an adjudication on the merits as the court
did not acquire jurisdiction over the counterclaims for failure of
petitioner Lydia Meliton to pay the docket fees, hence the said
dismissal does not constitute a bar to the filing of the later complaint.
7
Private respondent's motion for reconsideration of the foregoing order
was denied by the lower court for lack of merit in its order of March
18, 1991. 8 Dissatisfied therewith, private respondent file a petition
for certiorari with this Court. In our resolution dated April 29, 1991, we
referred this case to the Court of Appeals for proper determination and
disposition pursuant to Section 9, paragraph 1 of B.P. Blg. 129, 9
where it was docketed as CA-G.R. SP No. 25093.

In a decision promulgated on August 9, 1991, the Court of Appeals


granted the petition, the pertinent part of which reads:
xxx xxx xxx
"The respondents' counterclaim against the petitioner
in Civil Case No. RTC 88-1480 (Annex E, petition) is a
compulsory counterclaim, it having (arisen) out of or
being necessarily connected with the transaction or
occurrence subject matter of the petitioner's
complaint. The failure of the respondents to seek a
reconsideration of the dismissal of their counterclaim
or to take an appeal therefrom rendered the dismissal
final. Such dismissal barred the prosecution of their
counterclaim by another action (Section 4, Rule 9,
Revised Rules of Court; Javier vs. IAC, 171 SCRA 605).
"The respondent Court, therefore, in issuing the orders
complained of (Annexes G and I, petition), gravely
abused its discretion amounting to lack of jurisdiction.
"WHEREFORE, the petition for certiorari is GRANTED.
Accordingly, the orders complained of (Annexes G and
I, petition) are annulled and set aside and the
respondents' complaint in Civil Case No. RTC 89-1942
before the respondent Court, DISMISSED. Costs
against the respondents, except the respondent
Court." 10
Petitioners are now before us, assailing the said judgment of the Court
of Appeals and praying for the annulment thereof.
The present petition requires the resolution of two principal issues, to
wit: (1) whether or not the counterclaims of petitioners are
compulsory in nature; and (2) whether or not petitioners, having failed
to seek reconsideration of or to take an appeal from the order of
dismissal of their counterclaims, are already barred from asserting the
same in another action.
1.Considering Section 4 of Rule 9 of the Rules of Court, a counterclaim
is compulsory if (a) it arises out of, or is necessarily connected with,
the transaction or occurrence which is the subject matter of the
opposing party's claim; (b) it does not require for its adjudication the
presence of third parties of whom the court cannot acquire
jurisdiction; and (c) the court has jurisdiction to entertain the claim.
It has been postulated that while a number of criteria have been
advanced for the determination of whether the counterclaim is
compulsory
or
permissive,
the
"one
compelling
test
of
compulsoriness" is the logical relationship between the claim alleged
in the complaint and that in the counterclaim, that is, where
conducting separate trials of the respective claims of the parties
would entail a substantial duplication of effort and time, as where they
involve many of the same factual and/or legal issues.
The phrase "logical relationship" is given meaning by the purpose of
the rule which it was designed to implement. Thus, a counterclaim is

logically related to the opposing party's claim where, as already


stated, separate trials of each of their respective claims would involve
a substantial duplication of effort and time by the parties and the
courts. Where multiple claims involve many of the same factual
issues, or where they are offshoots of the same basic controversy
between the parties, fairness and considerations of convenience and
of economy require that the counterclaimant be permitted to maintain
his cause of action. 11
In the aforesaid Civil Case No. 88-1480, all the requisites of a
compulsory counterclaim are present. The counterclaims, as this term
is now broadly defined, are logically related to the complaint. Private
respondent's complaint was for rescission of the contract of lease due
to petitioner Lydia Meliton's breach of her obligations under the said
contract. On the other hand, petitioner's counterclaims were for
damages for unlawful demolition of the improvements she introduced
pursuant to her leasehold occupancy of the premises, as well as for
the filing of that civil suit which is contended to be clearly unfounded.
LLphil
Both the claims therein of petitioners and private respondent arose
from the same contract of lease. The rights and obligations of the
parties, as well as their potential liability for damages, emanated from
the same contractual relation. Petitioners' right to claim damages for
the unlawful demolition of the improvements they introduced on the
land was based on their right of possession under the contract of lease
which is precisely the very same contract sought to be rescinded by
private respondent in her complaint. The two actions are but the
consequences of the reciprocal obligations imposed by law upon and
assumed by the parties under their aforesaid lease contract. That
contract of lease pleaded by private respondent constitutes the
foundation and basis relied on by both parties for recovery of their
respective claims.
The relationship between petitioners' counterclaims and private
respondent's complaint is substantially the same as that which exists
between a complaint for recovery of land by the owner and the claim
for improvements introduced therein by the possessor. As we have
ruled, in actions for ejectment or for recovery of possession of real
property, it is well settled that the defendant's claims for the value of
the improvements on the property or necessary expenses for its
preservation are required to be interposed in the same action as
compulsory counterclaims. In such cases, it is the refusal of the
defendant to vacate or surrender possession of the premises that
serves as the vital link in the chain of facts and events, and which
constitutes the transaction upon which the plaintiff bases his cause of
action. It is likewise an "important part of the transaction constituting
the subject matter of the counterclaim" of defendant for the value of
the improvements or the necessary expenses incurred for the
preservation of the property. They are offshoots of the same basic

controversy between the parties, that is, the right of either to the
possession of the property. 12
On the foregoing considerations, respondent Court of Appeals
correctly held that the counterclaims of petitioners are compulsory in
nature.
2.Petitioners having alleged compulsory counterclaims, the next point
of inquiry is whether or not petitioners are already barred from
asserting said claims in a separate suit, the same having being
dismissed in the preceding one. The answer is in the negative.
It is indeed the rule, embodied in Section 4, Rule 9 of the Rules of
Court, that a counterclaim not set up shall be barred if it arises out of
or is necessarily connected with the transaction or occurrence that is
the subject matter of the opposing party's claim and does not require
for its adjudication the presence of third parties of whom the court
cannot acquire jurisdiction. However, said rule is not applicable to the
case at bar.
Contrary to the claim of private respondent, it cannot be said that
herein petitioners failed to duly interpose their causes of action as
counterclaims in the previous action. Petitioners' claims were duly set
up as counterclaims in the prior case but the same were dismissed by
reason of non-payment of docket fees. The ruling of respondent Court
of Appeals to the effect that the failure of petitioners to appeal or to
move for reconsideration of the said order of dismissal bars them from
asserting their claims in another action cannot be upheld.
Firstly, where a compulsory counterclaim is made the subject of a
separate suit, it may be abated upon a plea of auter action pendant or
litis pendentia and/or dismissed on the ground of res judicata, 13
depending on the stage or status of the other suit.
Both defenses are unavailing to private respondents. The present
action cannot be dismissed either on the ground of litis pendentia
since there is no other pending action between the same parties and
for the same cause, nor on the ground of res judicata.
In order that a prior judgment will constitute a bar to a subsequent
case, the following requisites must concur: (1) the judgment must be
final; (2) the judgment must have been rendered by a court having
jurisdiction over the subject matter and the parties; (3) the judgment
must be on the merits; and (4) there must be between the first and
second actions, identity of parties, of subject matter, and of causes of
action. 14
The first case, Civil Case No. RTC 88-1480, was dismissed upon motion
of private respondent, plaintiff therein, under Section 2 of Rule 17.
Dismissal thereunder is without prejudice, except when otherwise
stated in the motion to dismiss or when stated to be with prejudice in
the order of the court. 15 The order of dismissal of the first case was
unqualified, hence without prejudice and, therefore, does not have the
effect of an adjudication on the merits. On a parity of rationale, the

same rule should apply to a counterclaim duly interposed therein and


which is likewise dismissed but not on the merits thereof. llcd
Moreover, in the same order of dismissal of the complaint, the
counterclaims of herein petitioners were dismissed by reason of the
fact that the court a quo had not acquired jurisdiction over the same
for non-payment of the docket fees. On that score, the said dismissal
was also without prejudice, since a dismissal on the ground of lack of
jurisdiction does not constitute res judicata, 16 there having been no
consideration and adjudication of the case on the merits.
The dismissal of the case without prejudice indicates the absence of a
decision on the merits and leaves the parties free to litigate the
matter in a subsequent action as though the dismissal action had not
been commenced. 17 The discontinuance of a case not on the merits
does not bar another action on the same subject matter. 18 Evidently,
therefore, the prior dismissal of herein petitioners' counterclaims is
not res judicata and will not bar the filing of another action based on
the same causes of action.
Secondly, a reading of the order of dismissal will show that the trial
court, in dismissing the complaint of private respondent, did not
intend to prejudice the claims of petitioners by barring the subsequent
judicial enforcement thereof. As stated therein, "(t)he court in
dismissing the counterclaim(s) has taken into account the fact that a
counterclaim partakes of the nature of a complaint and/or a cause of
action against the plaintiffs." 19 This is a clear indication, deducible by
necessary implication, that the lower court was aware of the fact that
petitioners could avail of the causes of action in said counterclaims in
a subsequent independent suit based thereon and that there was no
legal obstacle thereto. That this was the import and intendment of
that statement in its order dismissing petitioners' counterclaims in
Civil Case No. RTC 88-1480 was categorically confirmed by the very
same court, wherein Civil Case No. RTC 89-1942 was also
subsequently filed, in its assailed orders denying private respondent's
motion to dismiss the latter case on the ground of res judicata.
This is also concordant with the rule governing dismissal of actions by
the plaintiff after the answer has been served as laid down in Rule 17
of the Rules of Court, which is summarized as follows: An action shall
not be dismissed at the request of the plaintiff after the service of the
answer, except by order of the court and upon such terms and
conditions as the court deems proper. The trial court has the judicial
discretion in ruling on a motion to dismiss at the instance of the
plaintiff. It has to decide whether the dismissal of the case should be
allowed, and if so, on what terms and conditions. 20
In dismissing private respondent's complaint, the trial court could not
but have reserved to petitioners, as a condition for such dismissal, the
right to maintain a separate action for damages. Petitioners' claims for
damages in the three counterclaims interposed in said case, although
in the nature of compulsory counterclaims but in light of the aforesaid
reservation in the dismissal order, are consequently independent

causes of action which can be the subject of a separate action against


private respondent.
An action for damages specifically applicable in a lessor-lessee
relationship is authorized in Article 1659 of the Civil Code which
provides that:
"ARTICLE 1659.If the lessor or the lessee should not
comply with the obligations set forth in articles 1654
and 1657, the aggrieved party may ask for the
rescission of the contract and indemnification for
damages, or only the latter, allowing the contract to
remain in force."
Paragraph 3 of Article 1654 of the same Code requires that the lessor
must "maintain the lessee in the peaceful and adequate enjoyment of
the lease for the entire duration of the contract." 21 The aggrieved
party has the alternative remedies, in case of contractual breach, of
rescission with damages, or for damages only "allowing the contract
to remain in force."
The act of private respondent in demolishing the structures introduced
by petitioners on the property leased and the improvements therein
during the existence of the lease contract is a clear violation by her,
as lessor, of her obligation mandated by paragraph 3, Article 1654 of
the Civil Code. The said violation gave rise to a cause of action for
damages in favor of herein petitioners.
Lastly, even assuming arguendo that the bar under the rule on
compulsory counterclaims may be invoked, the peculiar circumstances
of this case irresistibly and justifiedly warrant the relaxation of such
rule.
The court a quo dismissed petitioners' counterclaims for non-payment
of docket fees pursuant to our then ruling in Manchester Development
Corporation, et al., vs. Court of Appeals, et al., 22 before its
modification. The failure of petitioners to seek reconsideration of or to
take an appeal from the order of dismissal of the counterclaim should
not prejudice their right to file their claims in a separate action
because they were thereby made to understand and believe that their
counterclaims were merely permissive and could be the subject of a
separate and independent action. Under the Rules, there is no need to
pay docket fee for a compulsory counterclaim. 23 The ruling in
Manchester applies specifically to permissive counterclaims only,
thereby excluding compulsory counterclaims from its purview, 24 and
that was the ruling of the court below to which the litigants therein
submitted. Had the trial court correctly specified that petitioners'
counterclaims were compulsory, petitioners could have objected to
the dismissal sought by private respondent on the ground that said
counterclaims could not remain pending for independent adjudication.
25
Furthermore, under the Manchester doctrine, the defect cannot be
cured by an amendment of the complaint or similar pleadings, much
less the payment of the docket fee. Hence, the only remedy left for

the petitioners was to file a separate action for their claims and to pay
the prescribed docket fees therein within the applicable and
reglementary period, which is what they did in the case at bar in
obedience and deference to the judicial mandate laid down in their
case. At any rate, the ambivalent positions adopted by the lower court
can be considered cured by what we have construed as effectively a
reservation in its order of dismissal for the filing of a complaint based
on the causes of action in the dismissed counterclaims. LLjur
This, then, is one case where it is necessary to heed the injunction
that the rules of procedure are not to be applied in a rigid and
technical sense. After all, rules of procedure are used only to help
secure substantial justice. They cannot be applied to prevent the
achievement of that goal. Form cannot and should not prevail over
substance. 26 Absent a specific requirement for stringent application,
the Rules of Court are to be liberally construed to the end that no
party shall be deprived of his day in court on technicalities. The courts
in our jurisdiction are tribunals both of law and equity. Hence, under
the antecedents of this case, we are persuaded that even if only to
approximate that desirable measure of justice we are sworn to
dispense, this controversy should be resolved on the merits.
WHEREFORE, the questioned judgment of respondent Court of Appeals
is hereby REVERSED and SET ASIDE. Civil Case No. RTC 89-1942 is
hereby REINSTATED and the Regional Trial Court of Naga City, Branch
27, or wherever the case has been assigned, is directed to proceed
with deliberate dispatch in the adjudication thereof.
SO ORDERED.
Narvasa, C .J . , Feliciano, Nocon, and Campos, JJ ., concur.
EN BANC
[G.R. No. 105751. June 30, 1993.]
BA FINANCE CORPORATION, petitioner, vs.
RUFINO CO, HIGHLINE MERCANTILE, INC.,
LUCITA
VELOSO
YAP,
CLOVERLEAF
SUPERMARKET, INC., SAN ANDRES COMMERCIAL
and COURT OF APPEALS, respondents.
Agbayani, Leal, Ebarle & Venturanza Law Office for petitioner.
Angara, Abello, Concepcion, Regala & Cruz Law Office for respondent.
SYLLABUS
1.REMEDIAL LAW; CIVIL PROCEDURE; COUNTERCLAIM; "COMPULSORY"
IN CASE AT BAR. The counterclaim of private respondents is not
merely permissive but compulsory in nature: it arises out of, or is
necessarily connected with, the transaction or occurrence that is the
subject matter of the opposing party's claim; it does not require the
presence of third parties of whom the court cannot acquire
jurisdiction; and, the trial court has jurisdiction to entertain the claim.
The counterclaim of private respondents is denominated "compulsory"
and consists of claims for alleged overpayments and damages. They
assert that they are no longer indebted to petitioner and are in fact
entitled to reimbursement for overpayments. They ask for damages

for expenses incurred and inconveniences suffered by them as a result


of the filing of the present action. Clearly, the same evidence needed
to sustain the counterclaim of private respondents would also refute
the cause of action in petitioner's complaint. For, if private
respondents could successfully show that they actually made
overpayments on the credit accommodations extended by petitioner,
then the complaint must fail. The counterclaim is therefore
compulsory.
2.ID.; ID.; COMPULSORY COUNTERCLAIM; AUXILIARY TO ORIGINAL
SUIT; EFFECT THEREIN. The rule is that a compulsory counterclaim
cannot "remain pending for independent adjudication by the court."
This is because a compulsory counterclaim is auxiliary to the
proceeding in the original suit and merely derives its jurisdictional
support therefrom. Thus, it necessarily follows that if the trial court no
longer possesses jurisdiction to entertain the main action of the case,
as when it dismisses the same, then the compulsory counterclaim
being ancillary to the principal controversy, must likewise be similarly
dismissed since no jurisdiction remains for the grant of any relief
under the counterclaim.
3.ID.; ID.; DISMISSAL OF ACTIONS; REMEDY TO RECOVER
COUNTERCLAIM. We are not unaware of the seeming unfairness, if
not harshness, of the application of the Rule herein enunciated that
dismissal of the complaint for failure to prosecute automatically
carries with it dismissal of the compulsory counterclaim to a
defendant who may be compelled to hire counsel to protect him in a
frivolous complaint. Equity and justice dictate that he be accorded
adequate relief under the circumstances. Henceforth, for the guidance
of Bench and Bar, if any of the grounds to dismiss under Sec. 3, Rule
17, of the Rules of Court arises, the proper recourse for a defendant
who desires to pursue his compulsory counterclaim in the same
proceeding is not to move for the dismissal of the complaint; instead,
he should only move to have plaintiff declared non-suited on the
complaint so that the latter can no longer present his evidence
thereon, and simultaneously move that he be declared as in default on
the compulsory counterclaim, and reserve the right to present
evidence ex parte on his counterclaim. This will enable defendant who
was unjustly haled to court to prove his compulsory counterclaim,
which is intertwined with the complaint, because the trial court retains
jurisdiction over the complaint and of the whole case. The nondismissal of the complaint, the non-suit notwithstanding, provides the
basis for the compulsory counterclaim to remain active and subsisting.
4.ID.; ID.; ID.; ID.; NOT EXERCISED IN CASE AT BAR. The Rules of
Court provides a remedy to recover on defendant's counterclaim if
plaintiff moves to dismiss the case. Under Sec. 2, Rule 17, defendant
may raise objection to the dismissal of the complaint; in such case,
the trial court may not dismiss the main action. In the instant petition,
private respondents themselves moved for the dismissal of the
complaint. They could have simply asked the trial court to declare

petitioners to be "non-suited" on their complaint, and "as in default"


on their compulsory counterclaim, for their failure to appear at the
pre-trial despite due notice. But private respondents did not. Neither
did they reserve their right to maintain their counterclaim.
Consequently, the dismissal of the complaint carried with it the
dismissal of the compulsory counterclaim.
DECISION
BELLOSILLO, J p:
Does the dismissal of the complaint for nonappearance of plaintiff at
the pre-trial, upon motion of defendants, carry with it the dismissal of
their compulsory counterclaim?
Petitioner BA Finance Corporation brought this action as plaintiff in the
court below to recover a sum of money arising from a credit
accommodation in the form of a discounting line which it granted to
defendant Rufino Co, and from certain suretyship agreements
executed in its favor by his co-defendants Highline Mercantile, Inc.,
Lucita Veloso Yap, Cloverleaf Supermarket, Inc., and San Andres
Commercial.
After defendants' Amended Answer to Complaint with Compulsory
Counterclaim was admitted, the case was set for Pre-Trial Conference.
For various reasons, however, the conference was repeatedly reset.
On 19 December 1989, counsel for plaintiff, petitioner herein, failed to
attend the Pre-Trial Conference. Consequently, defendants moved for
dismissal of the case without prejudice. The motion was granted thus

"The plaintiff's representative and counsel having


failed to appear for today's setting, Atty. Luis Vera
Cruz, Jr., for the defendants moved that the aboveentitled case be dismissed, without prejudice. Finding
merit in said motion, the same is hereby granted."
On 22 January 1990, private respondents moved to set the reception
of their evidence in support of their counterclaim. Petitioner opposed
the motion.
On 2 April 1990, the trial court denied the motion of private
respondents, prompting them to elevate the order of denial to the
Court of Appeals which, on 18 December 1991, reversed the
questioned order and directed the trial court to set the reception of
their evidence on their counterclaim. Its motion for reconsideration
having on 2 June 1992 been denied, petitioner instituted the instant
petition.
Petitioner contends that the dismissal of the complaint carries with it
the dismissal of the counterclaim. Private respondents, on the other
hand, claim that their compulsory counterclaim should not have been
included in the dismissal.
There is merit in the petition.
The counterclaim of private respondents is not merely permissive but
compulsory in nature: it arises out of, or is necessarily connected with,
the transaction or occurrence that is the subject matter of the

opposing party's claim; it does not require the presence of third


parties of whom the court cannot acquire jurisdiction; and, the trial
court has jurisdiction to entertain the claim. 1 The counterclaim of
private respondents is denominated "compulsory" and consists of
claims for alleged overpayments and damages. They assert that they
are no longer indebted to petitioner and are in fact entitled to
reimbursement for overpayments. They ask for damages for expenses
incurred and inconveniences suffered by them as a result of the filing
of the present action. 2
Clearly, the same evidence needed to sustain the counterclaim of
private respondents would also refute the cause of action in
petitioner's complaint. For, if private respondents could successfully
show that they actually made overpayments on the credit
accommodations extended by petitioner, then the complaint must fail.
The counterclaim is therefore compulsory. LLphil
The rule is that a compulsory counterclaim cannot "remain pending for
independent adjudication by the court." 3 This is because a
compulsory counterclaim is auxiliary to the proceeding in the original
suit and merely derives its jurisdictional support therefrom. 4
Thus, it necessarily follows that if the trial court no longer possesses
jurisdiction to entertain the main action of the case, as when it
dismisses the same, then the compulsory counterclaim being ancillary
to the principal controversy, must likewise be similarly dismissed since
no jurisdiction remains for the grant of any relief under the
counterclaim. 5 Indeed, as Justice Vicente Abad Santos succinctly puts
it
". . . The petitioner does not object to the dismissal of
the civil case but nonetheless wants her counterclaim
therein to subsist. Impossible. A person cannot eat his
cake and have it at the same time. If the civil case is
dismissed, so also is the counterclaim filed therein." 6
More recently, this Court ruled that the dismissal of the complaint on
defendant's own motion operated likewise to dismiss the counterclaim
questioning the complaint. 7
The Rules of Court provides a remedy to recover on defendant's
counterclaim if plaintiff moves to dismiss the case. Under Sec. 2, Rule
17, defendant may raise objection to the dismissal of the complaint; in
such case, the trial court may not dismiss the main action.
In the instant petition, private respondents themselves moved for the
dismissal of the complaint. They could have simply asked the trial
court to declare petitioners to be "non-suited" on their complaint, and
"as in default" on their compulsory counterclaim, for their failure to
appear at the pre-trial despite due notice. But private respondents did
not. Neither did they reserve their right to maintain their counterclaim.
Consequently, the dismissal of the complaint carried with it the
dismissal of the compulsory counterclaim.
It may also be stressed that private respondents moved to set for
hearing the reception of evidence to support their counterclaim more

than a month after the case was dismissed, i.e., they filed their motion
after the lapse of thirty-three (33) days. By then, the order of dismissal
had already become final. Thereafter, it was error for the appellate
court to set it aside, there being no ground to warrant it. Only error of
judgment, not error of jurisdiction, was involved.
However, we are not unaware of the seeming unfairness, if not
harshness, of the application of the Rule herein enunciated that
dismissal of the complaint for failure to prosecute automatically
carries with it dismissal of the compulsory counterclaim to a
defendant who may be compelled to hire counsel to protect him in a
frivolous complaint. Equity and justice dictate that he be accorded
adequate relief under the circumstances.
Henceforth, for the guidance of Bench and Bar, if any of the grounds
to dismiss under Sec. 3, Rule 17, of the Rules of Court arises, 8 the
proper recourse for a defendant who desires to pursue his compulsory
counterclaim in the same proceeding is not to move for the dismissal
of the complaint; instead, he should only move to have plaintiff
declared non-suited on the complaint so that the latter can no longer
present his evidence thereon, and simultaneously move that he be
declared as in default on the compulsory counterclaim, and reserve
the right to present evidence ex parte on his counterclaim. This will
enable defendant who was unjustly haled to court to prove his
compulsory counterclaim, which is intertwined with the complaint,
because the trial court retains jurisdiction over the complaint and of
the whole case. The non-dismissal of the complaint, the non-suit
notwithstanding, provides the basis for the compulsory counterclaim
to remain active and subsisting.
But the procedure above stated, unfortunately, was not adopted by
private respondents herein in the court below, hence, we reverse the
Court of Appeals and sustain the trial court.
WHEREFORE, the instant petition is GRANTED. The Decision of the
Court of Appeals of 18 December 1991 in CA-G.R. No. CV-28420 is
REVERSED and SET ASIDE.
The Order of the Regional Trial Court of Manila, Branch 40, of 19
December 1989 dismissing Civil Case No. 84-26040 is REINSTATED
and REITERATED.
SO ORDERED.
Cruz, Bidin, Grio-Aquino, Romero, Nocon and Melo, JJ., concur.
Feliciano and Davide, Jr., JJ., In the result.
Padilla, J ., On official leave.
Quiason, J., No part.
Separate Opinions
REGALADO, J., concurring:
I concur in the result, whereby the ponencia sustains the order of the
trial court dismissing herein petitioner's complaint and consequently
barring private respondents from introducing evidence on their

compulsory counterclaim by reason of such dismissal, but only for this


reason stated therein, to wit:
"It may also be stressed that private respondents
moved to set for hearing the reception of evidence to
support their counterclaim more than a month after
the case was dismissed, i.e., they filed their motion
after the lapse of thirty-three (33) days. By then the
order of dismissal had already become final.
Thereafter, it was error for the appellate court to set it
aside, there being no ground to warrant it. Only error
of judgment, not error of jurisdiction was involved."
I take exception, however, to so much of the ratiocinations therein,
although supportive of the same disposition, insofar as they are at
variance with the observations in this separate opinion which I hope
may yield some clarifications applicable to the present controversy.
Involved in this case are the issues on the propriety and effects of the
application of Sections 2 and 3, Rule 17 of the Rules of Court to
Section 2, Rule 20 which provides that "(a) party who fails to appear at
a pre-trial conference may be non-suited or considered as in default."
We have heretofore held that the provisions of Section 3 of Rule 17,
whereby a plaintiff may be nonsuited and the dismissal of the
complaint has the effect of an adjudication upon the merits unless
otherwise provided by the trial court, shall have the same equivalent
effect on a plaintiff who fails to appear at a pre-trial conference. 1 We
have perforce to now resolve whether Section 2 of Rule 17 is likewise
applicable to that plaintiff who is nonsuited for non-appearance at
such pre-trial conference. cdll
For referential facility, the aforesaid provisions of Rule 17 are
hereunder reproduced, with pertinent emphases supplied:
"Sec. 2.Dismissal by order of the court. Except as
provided in the preceding section, an action shall not
be dismissed at the plaintiff's instance save upon
order of the court and upon such terms and conditions
as the court deems proper. If a counterclaim has been
pleaded by a defendant prior to the service upon him
of the plaintiff's motion 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. Unless otherwise specified
in the order, a dismissal under this paragraph shall be
without prejudice."
"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 the court."
Also, the concept of nonsuit which we have adopted from American
procedural law 2 is that it is a term broadly applied to a variety of
terminations of an action which do not adjudicate issues on the
merits. 3 More specifically, it is the name of a judgment given against
plaintiff when he is unable to prove a case, or when he refuses or
neglects to proceed to trial and leaves the issue undetermined. 4 In
our jurisdiction, a declaration of nonsuit necessarily involves the
rendition of a final order or judgment which terminates plaintiff's
cause of action or right of recovery under his complaint which is
thereby dismissed.
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. 5 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 of 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. The 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.

Thus, in Sta. Maria, Jr., et al., vs. Court of Appeals, et al., 6 plaintiff
having been declared nonsuited for his failure to appear at the pretrial, his complaint was dismissed without prejudice and the deputy
clerk of court was commissioned to receive defendant's evidence on
their compulsory counterclaim. This action of the trial court was later
reconsidered and the case was reset for hearing but since neither
plaintiffs nor their counsel appeared despite due notice, they were
again nonsuited, the case was dismissed without prejudice, and
plaintiffs were declared in default on the counterclaim. Defendants
adopted the evidence they had earlier presented and the trial court
rendered judgment on their counterclaim.
Plaintiffs therein raised virtually the same objections and arguments
as those which herein petitioner now relies upon to impugn the order
of the trial court. That case eventually reached this Court which,
speaking through Justice J.B.L. Reyes, disposed of plaintiffs'
contentions in this wise:
"Also pointed out as error is the hearing of the
counterclaim after the plaintiffs were non-suited, the
argument being that the issues in the counterclaim
are so inseparable with those in the complaint that the
former may not be heard unless the latter is also
heard. Petitioners misapply the doctrine; first, because
in the instant case, the adjudication of the
counterclaim 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; and second, the doctrine
invoked is not available to plaintiffs like the
petitioners, who prevent or delay the hearing of their
own claims and allegations. LexLib
"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 or hearing 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 counter
claimants. 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 [Ynotorio vs. Lira, L-16677,
27 November 1964]." (Emphasis mine.)

The cases of Dalman vs. The City Court of Dipolog, etc., et al. 7 and
International Container Terminal Services, Inc. vs. Court of Appeals, et
al., 8 relied upon in the main opinion, both involved the application of
the rule in Section 2, not Section 3, of Rule 17. In Dalman, the
dismissal of the complaint was at the instance of therein plaintiff,
which dismissal was ordered by the trial court despite defendant's
compulsory counterclaim therein since, as noted by this Court on
appeal, defendant did not object to such dismissal hence her
counterclaim was also dismissed. In International Container Terminal
Services, Inc., the complaint of private respondent Sharp, Inc. in the
court a quo was dismissed and petitioner itself, as defendant therein,
joined in moving for such dismissal which likewise resulted in the
dismissal of its compulsory counterclaim. In effect, petitioner
consented to or, at least, did not object to the dismissal of its
counterclaim for, as stated by the Court, "(i)f it wanted the
counterclaim to subsist, it should have objected to the dismissal of the
complaint or at least reserved its right to prosecute it, . . ." which it
could have done by invoking the provisions of Section 2, Rule 17. As
earlier explained, a different procedure obtains under Section 3 of said
Rule which is the provision applicable to the case at bar.
All told, my concurrence in the dispositive portion of the judgment in
this case is founded only upon the fact that the assailed order of the
trial court was already final and executory, hence petitioner's present
recourse is indisputably time-barred. However, it is my respectful
submission that in determining whether or not the dismissal of a
complaint ipso jure results in the dismissal likewise of a compulsory
counterclaim thereto, the distinctions between the situations
contemplated in and provided for by Sections 2 and 3 of Rule 17
should be observed, with the difference in effects as explained in the
foregoing disquisition. Otherwise, we may be indulging in judicial
legislation although, ironically, it is within the power of the Court itself
to change or revise the aforesaid provisions should the same be
considered inadequate to meet its normative perceptions of what the
rules should be.
Narvasa, C . J., concur.

SECOND DIVISION
[G.R. No. L-35989. October 28, 1977.]
FERMIN JALOVER, petitioner, vs. PORFERIO
YTORIAGA, CONSOLACION LOPEZ and HON.
VENICIO ESCOLIN, in his capacity as Presiding
Judge, Branch V, Court of First Instance of Iloilo,
respondents.
Lorenzo C. Coloso for petitioner.
Amado B. Atol for private respondents.
DECISION
CASTRO, J p:
This is an original action for certiorari, with prayer for a writ of
preliminary injunction, asking this Court to declare null and void the
Orders dated August 24, 1972 and November 10, 1972, issued by the
respondent Judge in civil case No. 5429 of the Court of First Instance
of Iloilo, Branch V. On December 27, 1972, a temporary restraining
order was issued by this Court.
Sometime in April, 1960, private respondents Porferio Ytoriaga and
Consolacion Lopez filed against Ana Hedriana and petitioner Fermin
Jalover a complaint dated April 6, 1960, in the Court of First Instance
of Iloilo (Civil Case No. 5429), alleging, inter alia, that they are owners
pro indiviso of Lot No. 2255 of the Cadastral Survey of Jaro, covered by
TCT No. 6738 and containing an area of 8,153 square meters; that the
said parcel of land is bounded on the southwest by the Salog River;
that as of January, 1958, by virtue of the effects of the current of the
river, there was a gradual increase of the land on its southwestern
portion of around 900 square meters; that since before the war, the
plaintiffs have been in continuous possession of the increased portion
of the land, which, under the principle of alluvion, automatically
belongs to them; that sometime in January, 1958, the defendants had
the land increase surveyed, placed concrete monuments thereon and
took possession thereof, without the knowledge and consent of the
plaintiffs; and that the defendants, who destroyed plants standing on
the land in question which belong to the plaintiffs, have remained in
possession of the land in spite of repeated demands made by the
latter for them to return the said possession. The plaintiffs prayed that
they be declared the owners of the increased portion of the land, and
that the defendants be ordered to vacate the premises and restore
their possession to the plaintiffs, to pay the plaintiffs the sum of
P147.00 as actual damages, the sum of P300.00 as attorney's fees,
and the sum of P200.00 annually from the time the plaintiffs were
deprived of possession up to the time the said possession shall have
been restored, and to pay the costs of suit. prcd
In his answer dated April 21, 1960, petitioner Fermin Jalover, as a
defendant, alleged, inter alia, that his mother and co-defendant, Ana
Hedriana, died on July 21, 1959; that the land in question was formerly
a river bed, which, less than 10 years before, was abandoned through
the natural change in the course of the waters; that the said land

rightfully belongs to the defendant as sole heir of his mother, who


owned the land pursuant to Article 461 of the Civil Code of the
Philippines; that it is not true that the plaintiffs were ever in
possession of the land, or that they had made demands upon the
defendant to vacate the land; that the plaintiffs had filed an ejectment
suit against the defendant with the Municipal Court of Iloilo City on
March 12, 1958, and the same was decided against the plaintiffs: and
that by virtue of the malicious filing of the complaint, the defendant
suffered damages and had to hire the services of counsel. The
defendant prayed the court to dismiss the complaint with costs
against the plaintiffs and to order the plaintiffs to pay the defendant
the sum of P1,000.00 as damages and the sum of P300.00 by way of
attorney's fees.
Issues having been joined, the case was set for trial. On September 4,
1963, private respondents, as plaintiffs, formally offered documentary
evidence, and upon the admission thereof, they rested their case;
whereupon, continuation of trial was ordered transferred until further
assignment. Trial was postponed many times stretching to a period of
more than 6 years, until January 26, 1970, when the case was called
for trial, and then Presiding Judge Ramon Blanco dismissed the case,
for failure of private respondents to appear in court, in an order which
reads:
"The complaint was filed on April 6, 1960. Up to the
present the trial of the case has not been finished. The
counsel of record for the plaintiff is Atty. Amado Atol
who since several years ago has been appointed Chief
of the Secret Service of the Iloilo City Police
Department. Plaintiff did not take the necessary steps
to engage the service of another lawyer in lieu of Atty.
Atol.
"WHEREFORE, for failure to prosecute this case is
dismissed without pronouncement as to costs."
Two years later, or on January 17, 1972, private respondents' lawyer,
Atty. Amado B. Atol, filed a motion for reconsideration of the order
dated January 26, 1970 dismissing the case, alleging that the said
respondents did not fail to prosecute because, during the times that
the case was set for hearing, at least one of said respondents was
always present, and the record would show that the transfers of
hearing were all made at the instance of petitioner or his counsel; and,
moreover, private respondents had already finished presenting their
evidence. Petitioner opposed the motion on the ground that the order
of dismissal issued two years before was an adjudication on the merits
and had long become final. On June 23, 1972, respondent Judge
Venicio Escolin, who succeeded Judge Blanco in Branch V, issued an
order denying the motion for reconsideration on the ground that the
order of dismissal had become final long ago and was beyond the
court's power to amend or change. Cdpr

Private respondents then filed a Petition for Relief from Judgment


dated July 10, 1972, claiming that the order of dismissal dated January
26, 1970 was void because of lack of due process and for having been
obtained thru fraud, for the petitioner had misrepresented to the court
the status of the case by making Judge Blanco who was not the
Presiding Judge when private respondents presented their evidence
and rested their case in 1963 believe that trial had not even begun.
Petitioner opposed the petition for relief, contending that private
respondents were served a copy of the order of dismissal on February
5, 1970, and, therefore, pursuant to Section 3, Rule 38 of the Revised
Rules of Court, the petition for relief should have been filed within 60
days from February 5, 1970, and within 6 months from January 26,
1970, when the order was issued; hence, the filing of the petition was
beyond the reglementary period.
The petition for relief was given due course, and on August 24, 1972,
respondent Judge issued an order setting aside the orders dated
January 26, 1970 and June 23, 1972, and setting the continuation of
the trial for September 15, 1972. The reasons stated by respondent
Judge in support of this order are: (1) the record shows that while
respondent Porferio Ytoriaga was furnished with a copy of the
dismissal order dated January 26, 1970, his counsel, Atty. Atol, was
never served with a copy thereof, hence, pursuant to the settled rule
that where a party appears by attorney, a notice to the client and not
to his attorney is not a notice of law, the said order of dismissal never
became final; and (2) the order dated January 26, 1970 was without
legal basis, considering that private respondents had already
presented their evidence and rested their case on September 4, 1963,
and the hearing scheduled for January 26, 1970 was for the reception
of petitioner's evidence; consequently, the non-appearance of private
respondents and their counsel at the said hearing could not mean
failure to prosecute on their part, but may at worst only be construed
as a waiver on private respondents' part of the right to cross-examine
the witnesses whom petitioner might present and to object to the
admissibility of petitioner's evidence. Petitioner, in a motion dated
October 16, 1972, moved for a reconsideration of the order dated
August 24, 1972, on the grounds that the court had full authority to
issue the order of dismissal, and that the said order, which had long
become final, was beyond the court's power to reconsider. On
November 10, 1972, respondent Judge issued an order denying the
motion for reconsideration and setting the continuation of trial for
December 12, 1972. prLL
Hence, the present recourse by petitioner.
The main thrust of the petition is that respondent Judge acted without
or in excess of jurisdiction or with grave abuse of discretion in setting
aside the orders dated January 26, 1970 and June 23, 1972, because
the said orders have long become final and executory, hence, may no
longer be disturbed.

It is uncontroverted that the order of January 26, 1970, dismissing the


case for private respondents' "failure to prosecute," was served upon
private respondents themselves, and not upon their attorney of
record, Atty. Amado B. Atol, and that there was no court order
directing that the court's processes, particularly the order of January
26, 1970, should be served directly upon private respondents. It is
settled that when a party is represented by counsel, notice should be
made upon the counsel, and notice upon the party himself is not
considered notice in law unless service upon the party is ordered by
the court. 1 The term "every written notice" used in Section 2 of Rule
13 includes notice of decisions or orders. 2 Private respondents'
counsel of record not having been served with notice of the order
dismissing the case, the said order did not become final.
Petitioner argues that since private respondents' counsel of record,
Atty. Atol, had been appointed Chief of the Secret Service of the Iloilo
City Police Department, he was not anymore allowed to practice law,
hence, private respondents being no longer represented by counsel,
notice to them should be deemed legally effective. The argument is
not valid, for it fails to consider the need of observing a legal formality
before a counsel of record may be considered relieved of his
responsibility as such counsel on account of withdrawal. A lawyer's
withdrawal as counsel must be made in a formal petition filed in the
case, and where no such petition has been accomplished, notice of
judgment rendered in the case served on the counsel of record is, for
all legal purposes, notice to the client, the date of receipt of which is
considered the starting point from which the period of appeal
prescribed by law shall begin to run. 3 Not having withdrawn formally
as counsel in the case, nor having been substituted by his clients with
another lawyer, or dismissed as such counsel, Atty. Atol was, for all
legal purposes, private respondents' attorney upon whom the court's
processes should have been served.
It will also be noted that, as found by respondent Judge, private
respondents, as plaintiffs, adduced their evidence and rested their
case on September 4, 1963, or more than six years before the
dismissal of the case on January 26, 1970. It was, therefore, the turn
of petitioner, as defendant, to present his evidence. In the premises,
private respondents could not possibly have failed to prosecute; they
were already past the stage where they could still be charged with
such failure. As correctly held by respondent Judge, private
respondents' absence at the hearing scheduled on January 26, 1970
"can only be construed as a waiver on their part to cross-examine the
witnesses that defendants might present at the continuation of trial
and to object to the admissibility of the latter's evidence." The right to
cross-examine petitioner's witnesses and/or object to his evidence is a
right that belongs to private respondents which they can certainly
waive. Such waiver could be nothing more than the "intentional

relinquishment of a known right," 4 and, as such, should not have


been taken against private respondents.
To dismiss the case after private respondents had submitted their
evidence and rested their case, would not only be to hold said
respondents accountable for waiving a right, but also to deny them
one of the cardinal primary rights of a litigant, which is, corollary to
the right to adduce evidence, the right to have the said evidence
considered by the court. 5 The dismissal of the case for failure to
prosecute, when in truth private respondents had already presented
their evidence and rested their case, and, therefore, had duly
prosecuted their case, would in effect mean a total disregard by the
court of evidence presented by a party in the regular course of trial
and now forming part of the record. The ends of justice would be
better served if, in its deliberative function, the court would consider
the raid evidence together with the evidence to be adduced by
petitioner. LibLex
However, we are of the view that relief from judgment under Rule 38
of the Revised Rules of Court is not the appropriate remedy. A petition
for relief is available only if the judgment or order complained of has
already become final and executory; 6 but here, as earlier noted, the
order of January 26, 1970 never attained finality for the reason that
notice thereof was not served upon private respondents' counsel of
record. The petition for relief may nevertheless be considered as a
second motion for reconsideration or a motion for new trial based on
fraud and lack of procedural due process.
Under the circumstances of the case, the issuance of the orders now
complained of cannot be said to have been characterized with abuse
of discretion.
ACCORDINGLY, the instant petition is denied. The temporary
restraining order issued by this Court on December 27, 1972 is hereby
dissolved. No costs.
Fernando, Antonio, Concepcion Jr. and Santos, JJ., concur.
Aquino, J., concurs in the result.
Separate Opinions
BARREDO, J., concurring:
I concur and I am writing this separate concurring opinion only to
make more patent and to stress why I believe the order of dismissal
had not yet become final when the trial court ordered the reopening of
the case.
I fully agree with the holding in the main opinion that the dismissal of
respondents' case ordered by Judge Blanco on January 26, 1970 was
legally erroneous. Indeed, to my mind, it constituted grave abuse of
discretion, and the contention of respondents that the situation on
hand had been misrepresented by counsel for petitioner only makes it
even more patent that due care was not exercised in the preparation
of said order. Such being the case, there is ample warrant to disregard
procedural technicalities that might stand in the way of the complete
setting aside thereof to give way to substantial justice.

It is not disputed that Atty. Amado B. Atol, counsel for plaintiffs the
herein respondents was not served with notice of such order of
dismissal. Accordingly, when he filed his motion for reconsideration on
January 17, 1972, the running of the period for the finality of that
order had not yet started. This motion was denied on June 23, 1972.
As there is no showing when Atty. Atol received copy of the order of
denial, the least that can be said in his favor is that when he filed his
so called petition for relief on July 10, 1972, he still had not less than
thirteen (13) days within which to perfect an appeal. Now, assuming
that his petition for relief, not being the proper remedy as held in
the man opinion, which view I am also fully in accord with should be
deemed a second motion for reconsideration, the question that would
arise would be whether or not such a second motion for
reconsideration could be filed.
In this connection, it is to be noted that Atty. Atol's first motion for
reconsideration was based on the sole ground then apparent, namely,
that the order of dismissal was improper, since plaintiffs could not be
considered as having failed to prosecute their case, it appearing that
they had already closed their evidence and, therefore, their absence
of the resumption of the trial for the reception of the evidence of the
defendants could signify no more than they had waived their right to
contest the admissibility of the evidence presented by said
defendants. But the court, in its order of June 23, 1972, denied said
first motion on a ground which had nothing to do with the issue raised
in the motion. Such being the case, it was but fair and proper for the
plaintiffs to be allowed to move to reconsider the order of denial
before taking any remedy against it in a higher court with a view to
giving the trial court an opportunity to correct itself on the new matter
treated in its order. In a sense, therefore, respondents' petition for
relief which the Court is treating as a second motion for
reconsideration is allowable under the rules and had the effect of
suspending the respondents' period to appeal. Thus, at the time the
trial court gave due course to the petition for relief and granted the
same on August 24, 1972 it acted within its jurisdiction. LibLex
And inasmuch as, as I have stated at the outset, there can be no
doubt as to the right of respondents to the nullification of the
dismissal order of January 26, 1970 as well as the subsequent order of
June 23, 1972, it little matters that the trial court's order of August 24,
1972 is premised on the assumption that what was being acted upon
is a petition for relief instead of on a second motion for
reconsideration. What is important and decisive is that the reopening
was done within the period for finality of the order of dismissal and
before the trial court had lost jurisdiction over the same. The mistake
of respondents in filing the wrong remedy is a matter of form which
under the circumstances of this particular case could not affect the
efficacy of the actual relief sought.

EN BANC
[G.R. No. L-17828. August 31, 1963.]
LIGAYA MINA, JAIME MINA, SILVINA MINA,
FAUSTA MINA, PABLO MINA and MIGUEL MINA,
the minors represented by PILAR LAZO as
guardian-ad-litem,
plaintiffs-appellants,
vs.
ANTONIO PACSON, CRISPINO MEDINA and
CRESENCIA MINA, defendants-appellees.
F. A. Pelmoka for plaintiffs-appellants.
Castelo Law Office for defendants-appellees.
SYLLABUS
1.DISMISSAL OF ACTIONS; FAILURE TO PROSECUTE; FAILURE TO
COMPLY WITH ORDER TO IMPLEAD INDISPENSABLE PARTY.
Appellants' contention that the dismissal of the complaint in the
previous action was "at the indirect instance of the plaintiffs through
inaction or omission," is not supported by the facts of the case,
because the order of the court dismissing the complaint in the first
case contained the warning that should the plaintiffs fail to comply
with its order to implead the surviving widow of the deceased and
other necessary parties, the case would be dismissed, and it was
because of plaintiffs' refusal to comply with this express mandate that
the dismissal was ordered. The dismissal was, therefore, justified
under Rule 30, Section 3 of the Rules of Court. (Garchitorena, et al. vs.
De los Santos, et al., G. R. No. L-17045, June 20, 1962.)
2.ID.; ID.; NEGLIGENCE OF CLIENT AND COUNSEL. The argument of
appellants that the dismissal of the previous case was due to the
negligence of plaintiffs' lawyer for which the plaintiffs-appellants
should not be made to suffer, is not correct; it was not due to the
negligence of their counsel alone but that of themselves also that the
required amendment was not made. Besides, even if the failure was
due to the lawyer alone, such failure would not relieve them of the
responsibility resulting from the neglect of their lawyer, for the client
is bound by the action of his counsel. (Valerio vs. Sec. of Agriculture,
G. R. No. L-18587, April 23, 1963, and other cases cited.)
3.JUDGMENTS; RES JUDICATA; COMPLETE IDENTITY NECESSARY;
PARTIES NOT INCLUDED AND MATTERS NOT RAISED IN PREVIOUS CASE
NOT BARRED. The previous order of dismissal bars the present
complaint only as to matters already presented in the previous care,
like the action for annulment of the deeds of sale as regards the
defendants named therein, but matters not raised and parties not
included in the previous case are not barred, like the action for the
recognition of the filiation of the plaintiffs against the defendant
widow of the deceased alleged father.
DECISION
LABRADOR, J p:
This is an appeal from an order of the Court of First Instance of Nueva
Ecija, Hon. Felix Makasiar, presiding, in its Civil Case No. 3296, entitled
"Ligaya Mina, et al., plaintiffs vs. Crispino Medina, et al., defendants,"

dismissing the complaint filed in this case. The appellant also appeals
against the order denying the motion for reconsideration of the order
of dismissal.
The facts necessary to understand the nature of the issues presented
in this appeal, as gleaned from the pleadings, may be briefly stated as
follows: Plaintiffs Ligaya, Jaime, Silvina, Fausta, Pablo and Miguel, all
surnamed Mina, are alleged to be the illegitimate children of the
deceased Joaquin Mina with plaintiff Pilar Lazo from 1933-1958, while
married to Antonia Pacson. Joaquin Mina died in August, 1958, leaving
no descendants nor ascendants except his widow, the defendant
herein Antonia Pacson. On April 9, 1958, Joaquin Mina, then still living,
executed a deed of absolute sale (Annex "B" to Complaint) of three
parcels of land situated in the municipality of Muoz, Nueva Ecija, in
favor of the defendants Crispino Medina and Cresencia Mina for the
sum of P12,000. On April 15, 1958 again he executed another deed of
sale (Annex "C" to Complaint) of 13 parcels of land covered by 12
transfer certificates of title to the same spouses Crispino Medina and
Cresencia Mina. Both deeds of sale bear the conformity of his wife
Antonia Pacson.
In the complaint filed in the Court of First Instance of Nueva Ecija in
the case which originated this appeal, it is alleged that plaintiffs are
illegitimate children of the deceased Joaquin Mina begotten by him
with Pilar Lazo during the period from 1933 to 1958 while Joaquin Mina
was lawfully married to Antonia Pacson; that the plaintiff Pablo Mina is
a recognized illegitimate child of the deceased Joaquin Mina; that
Joaquin Mina died intestate leaving no ascendants or descendants,
except his widow Antonio Pacson; that he left various parcels of land
enumerated in the complaint but that on April 9, 1950 the defendants
connived and secured from Joaquin Mina, who was ill and did not know
what he was doing, the execution of the two deeds of sale without
consideration, fictitiously and fraudulently, transferring his properties
to the spouses Crispino Medina and Cresencia Mina; and that by
reason of said acts, defendants have caused moral anguish, anxiety
and embarrassment to plaintiffs, causing them damages amounting to
P10,000; that plaintiffs pray that they be declared recognized
illegitimate children of the deceased Joaquin Mina, entitled to share in
the properties left by him as such illegitimate children; that the deeds
of sale, Annexes "B" and "C" be declared fictitious, fraudulent and,
therefore, null and void; and that defendants be required to deliver to
plaintiffs' possession one- fourth of said properties together with
P10,000 for moral damages.
Upon the filing of the complaint the defendants presented a motion to
dismiss the complaint on the ground of res judicata, alleging that a
similar action had previously been presented as Civil Case No. 3015 in
the same court, and by the same parties against Crispino Medina and
Cresencia Mina, in which the same allegations of plaintiffs' status and
fraudulent conveyance of the properties to defendants are alleged,
together with a prayer for moral damages in the sum of P20,000. It

appears, however, that in the complaint filed in said Civil Case No.
3015, no prayer is made for the declaration of the filiation of the
plaintiffs in relation or with respect to the deceased Joaquin Mina.
The Motion to dismiss also copied an order of the court issued in said
Civil Case No. 3015 which reads as follows:
"Acting on the Motion filed by the defendants on
December 22, 1958 for the reconsideration of the
order dated December 8, 1958, and considering that
the present action is not only for annulment of deeds
of sale but also for partition (paragraphs 8 and 11 of
the complaint and paragraph 4 of the prayer thereof);
that to avoid multiplicity of suits, the complex action
to establish filiation and for partition or for recovery of
inheritance may be brought in the same case (Lopez
v. Lopez, 68 Phil. 227; Escoval v. Escoval, 48 O.G. 615;
Edades v. Edades, L-8964, July 31, 1956); and that
Antonia Pacson, the surviving widow and the other
intestate heirs of the deceased Joaquin Mina, or
necessary parties are not made a party in this case
(Briz v. Briz, 43 Phil. 763), the plaintiffs are hereby
directed to amend their complaint within fifteen (15)
days from receipt hereof by including as party
defendant the surviving widow of the deceased
Joaquin Mina and other necessary parties.
"Should the plaintiffs fail to comply with this order,
this case will be dismissed."
Lastly, another order of the same court dated February 9, 1959 was
quoted, the dispositive part of which reads:
"The fifteen-day period granted to the
plaintiffs having elapsed without said order
having been complied with, the Court hereby
dismisses this case, without pronouncement as
to costs."
Opposition to the motion to dismiss was presented on behalf of the
plaintiffs by their attorney to which a reply was filed on behalf of the
defendants. A rejoinder was also filed after which Judge Genaro Tan
Torres, then presiding over the court, sustained the motion to dismiss
in an order which reads as follows:
"After a careful consideration of the joint
motion to dismiss of defendants Antonia Pacson
and the spouses Crispino Medina and Cresencia
Mina, dated November 11, 1959, the opposition
thereto dated November 24, 1959, and the reply
of the defendants to the opposition, dated
December 7, 1959, the Court is of the opinion
that said motion to dismiss is well taken; hence
this case is hereby dismissed without costs.

"Plaintiffs' motion for time to submit


rejoinder, dated December 10, 1959, is hereby
denied because it will only unnecessarily delay
the termination of this case.
"So ordered.
"Cabanatuan City, December 18, 1959."
A motion for the reconsideration of the order of the court dismissing
the action having been denied, the plaintiffs in the present case
prosecuted this appeal directly to this Court.
As shown above the question to be resolved is whether or not the
order dismissing the previous Civil Case No. 3015 bars the present
civil action No. 3296 of the Court of First Instance of Nueva Ecija.
In the first error assigned by the appellants in their brief it is argued
that the dismissal of the complaint in the previous action was in fact
"at the indirect instance of the plaintiffs through inaction or omission."
We do not find this claim justified by the facts of the case. The order of
the court dismissing the complaint in the first case contains the
following warning: "Should the plaintiffs fail to comply with this order,
this case will be dismissed." In the face of this express warning given
in the court's order the dismissal can not be said to have been "at the
indirect instance of the plaintiffs;" it was in fact caused by plaintiffs'
refusal to comply with the express mandate contained in the order of
dismissal. The dismissal, therefore, was justified under Rule 30,
Section 3 of the Rules of Court, which reads:
"SEC. 3.Failure to prosecute. When
plaintiff fails to appear at the time of the trial, or
to prosecute his action for an unreasonable
length of time, or to comply with these rules or
any order of the court, the action may be
dismissed upon motion of the defendant or upon
the court's own motion. This dismissal shall have
the effect of an adjudication upon the merits,
unless otherwise provided by court."
The above provision of the Rules was invoked in the case of
Garchitorena, et al. vs. De los Santos, et al., G.R. No. L-17045, June
30, 1962, wherein this Court held:
"To order an amendment to a complaint
within a certain period in order to implead as
party plaintiff or defendant one who is not a
party to the case lies within the discretion of the
Court. And where it appears that the person to
be impleaded is an indispensable party, the
party to whom such order is directed has no
other choice but to comply with it. His refusal or
failure to comply with the order is a ground for
the dismissal of his complaint pursuant to
Section 3, Rule 30, of the Rules of Court . . ."

Under the second assignment of error it is argued that the dismissal of


the previous case was brought about by the negligence, gross or
criminal, of plaintiffs' lawyer for which the plaintiffs- appellants should
not be made to suffer. The argument is not true to fact. The failure to
amend was a result not of the neglect of the lawyer alone but also of
the plaintiffs-appellants themselves. Had the plaintiffs taken even an
ordinary interest in the result of the action that they had filed, they
would have been able to secure information from their lawyer that the
case had been dismissed for failure to amend. Upon receipt of such
information, plaintiffs could have applied to the court for relief under
Rule 38 of the Rules of Court and could have had the complaint
amended as directed in the order of dismissal. It is not alone
negligence of their counsel, therefore, but of themselves also that the
required amendment was not made. But assuming for the sake of
argument that the failure was due to the lawyer alone, such failure
would not relieve them of the responsibility resulting from the neglect
of their lawyer, for the client is bound by the action of his counsel.
(Isaac v. Mendoza, G.R. No. L-2830, June 21, 1951; Vivero v. Santos, et
al., G.R. No. L-8105, Feb. 28, 1956; Fernandez v. Tan Tiong Tick, G.R.
No. L-15877, April 28, 1961; Gordulan v. Gordulan, G.R. No. L-17722,
Oct. 9, 1962; Valerio v. Sec. of Agriculture, G.R. No. L-18587, April 23,
1963.)
In the third assignment of error it is claimed that there is no complete
identity between the parties in the first case and those in the case at
bar. The statement is true because in the previous case Antonia
Pacson was not included as party-defendant. As a matter of fact the
order decided that Pacson was to be included as party- defendant. As
the latter, therefore, the previous order of dismissal does not bar the
present complaint, not only because she was not made a party but
also because the issue of filiation of the parties- plaintiffs was not
raised in the previous case, although such issue was necessary for the
plaintiffs to be able to maintain their right of action. In view of this fact
the present action should be considered barred in respect to the
action for the annulment of the deeds of sale and as regards the
defendants spouses Crispino Medina and Cresencia Mina; but as to the
case for the declaration of the plaintiffs as illegitimate children and
heirs of the deceased Joaquin Mina this latter case is not barred by the
previous action as above explained and may still be prosecuted.
WHEREFORE, the order of dismissal is hereby modified in the sense
that the action for the recognition of the filiation of the plaintiffs
should be allowed to continue against the defendant Antonia Pacson;
but the dismissal of the action for the annulment of the deeds of sale
in affirmed. Without costs.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L.,
Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.

FIRST DIVISION
[G.R. No. 54287. September 28, 1988.]
REPUBLIC PLANTERS BANK, petitioner, vs. HON.
CONRADO M. MOLINA, as Presiding Judge, Court of
First Instance of Manila, Branch XX, SARMIENTO
EXPORT CORPORATION, SARMIENTO SECURITIES
CORPORATION and FELICIANO SARMIENTO, JR.,
respondents.
Paco, Gutierrez, Dorado, Asia & Associates for petitioner.
Benjamin M. Reyes for respondents.
SYLLABUS
1.REMEDIAL LAW; CIVIL PROCEDURE; ACTION; DISMISSAL DESPITE
LACK OF JURISDICTION OVER THE PERSON OF THE DEFENDANTS NOT
AN ADJUDICATION ON THE MERITS. A judgment, to be considered
res judicata, must be binding, and must be rendered by a court of
competent jurisdiction. Otherwise, the judgment is a nullity. The order
of dismissal in Civil Case No. 116820 does not have the effect of an
adjudication on the merits of the case because the court that rendered
the same did not have the requisite jurisdiction over the persons of
the defendants therein. This being so, it cannot be the basis of res
judicata and it cannot be a bar to a lawful claim. If at all, such a
dismissal may be considered as one without prejudice.
2.ID.; ID.; ID.; ID.; ORDER OF DISMISSAL AND DENIAL OF MOTION FOR
RECONSIDERATION, ISSUED WITH GRAVE ABUSE OF DISCRETION.
Trial courts have the duty to dispose of controversies after trial on the
merits whenever possible. In this case, there are no indications that
petitioner intentionally failed to prosecute the case. The delay could
not be attributed to its fault. Petitioner pursued the case with diligence
but jurisdiction could not be acquired over defendants-private
respondents. The sheriff had not yet submitted his return of the alias
summons when the action was precipitately dismissed by the trial
court. These are proven circumstances that negate the action of
respondent judge that the dismissal of Civil Case No. 116028 has the
effect of an adjudication upon the merits and constitutes a bar to the
prosecution of Civil Case No. 129829. The court finds that the two
questioned orders of the trial court are irregular, improper, and were
issued with grave abuse of discretion amounting to excess of
jurisdiction.
3.ID.; CERTIORARI; ADEQUATE REMEDY WHERE ISSUE INVOLVED ONE
OF JURISDICTION. petitioner correctly states that its appeal to the
Court of Appeals in CA-G.R. No. 67288 pertaining to the questioned
orders of the trial court is not an adequate remedy, because petitioner
was not able to present evidence in the trial court. The sole issue
involved in this case is one of jurisdiction, which is appropriate for
resolution by the instant petition.
DECISION
GANCAYCO, J p:

The principal issue raised in this case is whether the trial court
committed a grave abuse of discretion when it ordered Civil Case No.
129829 dismissed on the ground of res judicata it appearing that Civil
Case No. 116028 was dismissed on May 21, 1979, for failure of
petitioner to prosecute within a reasonable length of time, although in
the said case, the trial court never acquired jurisdiction over the
persons of private respondents. llcd
It is not disputed that both complaints in Civil Case No. 116028
(Branch XXXVI, Manila, Judge Alfredo C. Florendo) and in Civil Case No.
129829 (Branch XX, Manila, Judge Conrado M. Molina) were filed by
petitioner Republic Planters Bank against private respondent, for the
collection of a sum of money based on a promissory note dated
January 26, 1970, in the amount of P100,000.00.
On May 21, 1979, Judge Alfredo C. Florendo dismissed Civil Case No.
116028 for failure of the petitioner "to prosecute its case within a
reasonable length of time." 1 A motion for reconsideration of that
order was denied on January 15, 1979. 2
When Civil Case No. 129829 was filed by petitioner, a motion to
dismiss was submitted by private respondents on the ground that the
cause of action is barred by a prior judgment (res judicata) in Civil
Case No. 116028. Private respondents opined that said order was an
adjudication upon the merits. Petitioner opposed the motion to
dismiss, claiming that res judicata does not apply because the
summons and complaint in Civil Case No. 116028 were never served
upon private respondents and, as such, the trial court never acquired
jurisdiction over private respondents and, consequently, over the
case. Petitioner maintains that the order of dismissal in Civil Case No.
116028 never became final as against private respondents. Cdpr
The trial court (Branch XX), in its order dated May 8, 1980, dismissed
the complaint in Civil Case No. 129829 on the ground that the orders
dated May 21, 1979 and June 15, 1979 issued by Judge Alfredo C.
Florendo, dismissing Civil Case No. 116028, had become final. The
trial court ruled that the dismissal of Civil Case No. 116028 had the
effect of an adjudication upon the merits, that the dismissal was with
prejudice since the order was unconditional, and that the lack of
jurisdiction over defendants (private respondents) in Civil Case No.
116028 was of no moment. 3
In a motion for reconsideration of the order of May 8, 1980, petitioner
reiterated its allegation that in Civil Case No. 116028, the court did not
acquire jurisdiction over private respondents and that at the time the
court ordered its dismissal, a motion for an alias writ of summons was
pending resolution inasmuch as the sheriff had not acted on the same.
4 The motion for reconsideration was denied by the trial court on June
26, 1980 in Civil Case No. 129829. 5
Petitioner appealed to the Court of Appeals both questioned orders of
respondent court in Civil Case No. 129829. 6 But then, petitioner
sought a more speedy remedy in questioning said orders by filing this
petition for certiorari before this Court.

Under the foregoing undisputed facts, the Court finds this petition to
be impressed with merit.
The questioned orders of the trial court in Civil Case No. 129829
supporting private respondent's motion to dismiss on the ground of
res judicata are without cogent basis. We sustain petitioner's claim
that respondent trial judge acted without or in excess of jurisdiction
when he issued said orders because he thereby traversed the
constitutional precept that "no person shall be deprived of property
without due process of law" and that jurisdiction is vitally essential for
any order or adjudication to be binding. Justice cannot be sacrificed for
technicality. Originally, the action for collection of the loan, evidenced
by a promissory note, was only for P100,000.00 but petitioner claims
that as of March 5, 1981, the obligation was already P429,219.74. It is
a cardinal rule that no one must be allowed to enrich himself at the
expense of another without just cause. cdrep
In the very order of dismissal of Civil Case No. 116028, the trial court
admitted that it did not acquire jurisdiction over the persons of private
respondents and yet, it held that it was of no moment as to the
dismissal of the case. We disagree. For the court to have authority to
dispose of the case on the merits, it must acquire jurisdiction over the
subject matter and the parties. If it did not acquire jurisdiction over
the private respondents as parties to Civil Case No. 116028, it cannot
render any binding decision, favorable or adverse to them, or dismiss
the case with prejudice which, in effect, is an adjudication on the
merits. 7 The controverted orders in Civil Case No. 116028
disregarded the fundamental principles of remedial law and the
meaning and the effect of jurisdiction. A judgment, to be considered
res judicata, must be binding, and must be rendered by a court of
competent jurisdiction. Otherwise, the judgment is a nullity.
The order of dismissal in Civil Case No. 116028 does not have the
effect of an adjudication on the merits of the case because the court
that rendered the same did not have the requisite jurisdiction over the
persons of the defendants therein. This being so, it cannot be the
basis of res judicata and it cannot be a bar to a lawful claim. If at all,
such a dismissal may be considered as one without prejudice. 8
Trial courts have the duty to dispose of controversies after trial on the
merits whenever possible. In this case, there are no indications that
petitioner intentionally failed to prosecute the case. The delay could
not be attributed to its fault. Petitioner pursued the case with
diligence, but jurisdiction could not be acquired over defendantsprivate respondents. The sheriff had not yet submitted his return of
the alias summons when the action was precipitately dismissed by the
trial court. These are proven circumstances that negate the action of
respondent judge that the dismissal of Civil Case No. 116028 has the
effect of an adjudication upon the merits and constitutes a bar to the
prosecution of Civil Case No. 129829. The court finds that the two
questioned orders of the trial court are irregular, improper, and, were

issued with grave abuse of discretion amounting to excess of


jurisdiction. cdrep
Petitioner correctly states that its appeal to the Court of Appeals in
CA-G.R. No. 67288 pertaining to the questioned orders of the trial
court is not an adequate remedy, because petitioner was not able to
present evidence in the trial court. The sole issue involved in this case
is one of jurisdiction, which is appropriate for resolution by the instant
petition.
WHEREFORE, and by reason of the foregoing, the questioned orders
dated May 8, 1980 and June 26, 1980 issued in Civil Case No. 129829
are hereby REVERSED and SET ASIDE. The records of the case are
ordered returned to the trial court for trial and disposition on the
merits. No costs.
This decision is immediately executory.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

SECOND DIVISION
[G.R. No. 81835. December 20, 1990.]
ROMEO J. ORDOEZ, petitioner, vs. THE HON.
ALFREDO J. GUSTILO, in his capacity as
presiding judge of Regional Trial Court of
Cavite, Branch XVI, Cavite City, Municipality of
Rosario, Cavite, former Mayor Calixto D.
Enriquez of Rosario, Cavite, and Valeriano
Espiritu of Mabolo, Bacoor, Cavite, respondents.
Jose M. Ricafrente, Jr. for petitioner.
Ricardo C. Fernandez for respondents.
Allan E. Benusa for respondent C.D. Enriquez.
DECISION
PARAS, J p:
This is a petition for certiorari which seeks to annul, on the ground of
grave abuse of discretion, the (1) Decision dated May 24, 1985; (2)
Order dated May 27, 1987 and (3) Order dated December 24, 1987, all
issued in Civil Case No. N-4367 of the Regional Trial Court of Cavite,
Branch XVI, Cavite City entitled "Valeriano Espiritu v. Municipality of
Rosario, Province of Cavite and Hon. Calixto D. Enriquez in his capacity
as Municipal Mayor of Rosario, Cavite.
The pertinent background facts are:
Valeriano Espiritu, herein private respondent filed on April 22, 1983, a
complaint for Specific Performance and Damages, against respondents
Municipality of Rosario, Cavite and Calixto Enriquez, the latter in his
capacity as Mayor of said municipality, to enforce their agreement
contained in a Reclamation Contract. In his complaint, Espiritu prayed
that the Municipality of Rosario, together with Enriquez, be ordered to
convey to him 323,996 square meters of the reclaimed portion of the
foreshore land of the town. Espiritu filed the action in his capacity as
the assignee of the Salinas Development Corporation (SADECO), the
entity which reclaimed the area in question by virtue of a Reclamation
Contract entered into between it and the Municipality of Rosario,
represented by Enriquez as Municipal Mayor. The case was docketed
as Civil Case No. 4367 of the Regional Trial Court of Cavite, Fourth
Judicial Region, Branch XVI, Cavite City.
In its answer, defendant municipality resisted plaintiff's claim stating
that it was barred by the statute of limitation; the contract has been
substantially amended, modified and supplemented; and plaintiff has
not performed his reciprocal obligation. llcd
The barangay captain of Tejeros Convention, Rosario, Cavite, herein
petitioner Romeo J. Ordoez, together with seven (7) other municipal
and barangay officials intervened, and in their Answer-in-Intervention,
they alleged that no actual reclamation was done by the plaintiff and
the area being claimed by the plaintiff came about by natural
accretion; the reclamation contract between the contractor and the
municipality is either void, voidable or disadvantageous to the
defendant municipality.

The issues having been joined the trial court set the case for the
mandatory pre-trial conference on November 15, 1984.
At this scheduled pre-trial conference, all the litigants including the
intervenors, with their respective counsel, were present. In said
conference, plaintiff Espiritu and defendant municipality, manifested
to the court that having arrived at a satisfactory settlement, they
would submit a compromise agreement at a latter date.
On the other hand, the intervenors asked the court that they be
allowed to present their evidence to prove their defense asserted in
their answer-in-intervention. For the said purpose, hearing was held on
December 13, 1984 wherein Ernesto Andico, vice-mayor testified.
Another hearing was also held on January 24, 1985 where ViceGovernor Jose M. Ricafrente, Jr. of the Province of Cavite, and
petitioner's counsel in the instant case, also testified.
On May 20, 1985, the principal litigants filed with respondent trial
court their promised compromise agreement. The parties agreed that
208,664 square meters of the reclaimed area were to be alloted to the
plaintiff and 211,311 square meters thereof were to be given to
defendant municipality.
On May 24, 1985, the trial court approved the compromise agreement
and rendered a decision in accordance therewith. The intervenors
received their copy of the decision on September 19, 1985 thru ViceMayor Ernesto Andico. The decision being already final, it was duly
executed to the satisfaction of the principal litigants.
On October 17, 1985 and July 2, 1987 additional hearings were held
where the intervenors presented three (3) additional witnesses.
On June 24, 1987, the intervenors filed a motion to set aside the
compromise agreement dated May 15, 1985. This was denied by the
trial court, thru respondent Judge Alfredo Gustilo (the former presiding
judge, Judge Alejandro Silapan having already retired) in its Order
dated November 27, 1987, the pertinent portion of which reads as
follows:
"It appears that on May 24, 1985, the former Presiding
Judge of this Court approved the said Compromise
Agreement and rendered a judgment on the basis
thereof. It is settled that a judgment approving a
compromise agreement is final and immediately
executory. (Samonte v. Samonte, 64 SCRA 524). The
motion in question therefore cannot be granted as it
has the effect of annulling the judgment of this Court
which has already become final and, according to the
plaintiff, already executed. dctai
"The Motion to Set Aside Compromise Agreement
cannot even be considered as a motion for
reconsideration because the Court can no longer set
aside, amend or modify its judgment which has
become final. Neither can the said motion be deemed
as a petition for relief under Rule 38 of the Rules of

Court, since to set aside a judgment based upon a


compromise agreement under the said Rule, the
petition for relief must be filed not later than six (6)
months from the date it was rendered. (Bodiongan v.
Ceniza, 102 Phil. 750). The decision of the Court based
on the Compromise Agreement was rendered on May
24, 1985. On the other hand, the present Motion to
Set Aside Compromise Agreement was filed only on
June 24, 1987. Moreover, under Section 3 of Rule 38,
the petition for relief from judgment should be filed
within 60 days after the petitioner learns of the
judgment sought to be set aside. The intervenor in
this case received a copy of the decision based on the
Compromise Agreement on September 19, 1985. If
the instant motion be construed as an independent
action to annul a judgment, this Court would not have
jurisdiction over it inasmuch as under Section 9 of
Batas Pambansa Blg. 129, the Judiciary Reorganization
Act of 1980, an action for the annulment of a
judgment of the Regional Trial Court falls under the
exclusive original jurisdiction of the Court of Appeals.
LibLex
Additionally, the intervenors have not convincingly
shown that defendant Mayor Enriquez was not
authorized to sign the Compromise Agreement in
behalf of the Municipality of Rosario. On the contrary,
the Mayor has in his favor the presumption that
official duty has been regularly performed. (Sec. 5
[m], Rule 131, Rules of Court.) Likewise, they failed to
sufficiently explain why and how the terms and
conditions of the Compromise Agreement have
contravened the law, morals, good customs and public
policy." (pp. 41-42, Rollo).
Meanwhile, on August 10, 1987, plaintiff Espiritu filed a manifestation
and Motion praying that the proceedings be terminated and that the
case be considered closed, which motion respondent judge granted in
his Order dated December 24, 1987. The pertinent portion of the said
Order reads
"In support of his motion to terminate the
proceedings, the plaintiff argued that further trial in
this case will be an exercise in futility, considering that
the issues raised by the intervenors have become
moot and academic in view of the decision of the
Court based on the Compromise Agreement submitted
by the plaintiff and the defendants.
"This contention appears to be well taken. The
decision of the Court based on the Compromise
Agreement has in effect resolved the issues raised by

the intervenors, i.e., whether the reclamation contract


entered into between the town of Rosario and the
Salinas Development Corporation, the predecessorsin-interest of the plaintiff, is null and void; and
whether or not there was actual reclamation done by
the said entity. This is so, for the decision of the Court
based on the Compromise Agreement has impliedly
recognized the validity of the said reclamation
contract and the fact that the tract of land divided
between the plaintiff and the defendant municipality
of Rosario pursuant to the Compromise Agreement
was the product of the reclamation efforts undertaken
by the Salinas Development Corporation, which
subsequently assigned its rights to the plaintiff.
"The continuation of the trial in this case will be
useless. Should the intervenors fail to adduce
evidence showing that the reclamation contract was
null and void and that no actual reclamation was
undertaken by the Salinas Development Corporation,
the correctness and propriety of the decision of the
Court based on the Compromise Agreement would be
strengthened. Even if they would succeed in proving
that the reclamation contract was null and void and
that the area in question came into being through the
natural action of the sea and not through the
reclamation done by the Salinas Development
Corporation, still the said decision could no longer be
set aside, inasmuch as it has already become final
and, according to the plaintiff, already executed. The
continuation of the reception of the evidence for the
intervenors clearly appears to serve no purpose at all.
xxx xxx xxx
"WHEREFORE, the Manifestation and Motion dated
August 6, 1987, filed by the plaintiff, is granted, and
the trial of this case is declared terminated and this
case is considered closed.
"This order modifies the pre-trial order dated
November 15, 1984 of this Court, insofar as the said
order has allowed the intervenors to adduce evidence
in support of their contention that the land in question
was not reclaimed by the plaintiff or his predecessorin-interest but the product of accretion, and that the
reclamation contract between the defendants and the
Salinas Development Corporation was null and void.
cdrep
"SO ORDERED." (pp. 45-47, Rollo)

In assailing the aforementioned Decision and Orders of the trial court,


petitioner Romeo Ordoez (one of the intervenors, the other seven
intervenors did not join him in this petition) raises the following issues,
to wit:
1.Whether or not the lower court erred in
stopping/preventing the intervenors from further
presenting their evidence in support of their Answerin-Intervention.
2.Whether or not the lower court erred in approving
the compromise agreement of May 20, 1985 and
rendering a decision based thereon dated May 24,
1985, inspite of the clear lack of authority on the part
of respondent Calixto D. Enriquez to bind the
Municipality of Rosario because of the absence of an
enabling ordinance from the Sangguniang Bayan of
Rosario, Cavite empowering him to enter into said
compromise agreement.
We answer both issues in the negative.
Intervention is defined as a "proceeding in a suit or action by which a
third person is permitted by the court to make himself a party, either
joining plaintiff in claiming what is sought by the complaint, or uniting
with defendant in resisting the claims of plaintiff, or demanding
something adversely to both of them; the act or proceeding by which
a third person becomes a party in a suit pending between others; the
admission, by leave of court, of a person not an original party to
pending legal proceedings, by which such person becomes a party
thereto for the protection of some right or interest alleged by him to
be affected by such proceedings." (Metropolitan Bank & Trust Co. v.
the Presiding Judge, RTC Manila, Branch 39, et al., G.R. No. 89909,
September 21, 1990)
An intervention has been regarded as "merely collateral or accessory
or ancillary to the principal action and not an independent proceeding;
an interlocutory proceeding dependent on or subsidiary to, the case
between the original parties." (Francisco, Rules of Court, Vol. 1) The
main action having ceased to exist, there is no pending proceeding
whereon the intervention may be based. (Barangay Matictic v.
Elbinias, 148 SCRA 83, 89).
As we recently ruled in Camacho v. Hon. Court of Appeals, et al., G.R.
No. 79564, December 24, 1989
"There is no question that intervention is only
collateral or ancillary to the main action. Hence, it was
previously ruled that the final dismissal of the
principal action results in the dismissal of said
ancillary action." (Emphasis supplied)
A judgment approving a compromise agreement is final and
immediately executory. (Samonte v. Samonte, 64 SCRA 524) All
pending issues will become moot and academic once a compromise

submitted by the parties is approved by the trial court. (Berenguer v.


Arcangel, 149 SCRA 164)
In the case at bar, the compromise agreement submitted by the
plaintiff and the defendants and the decision approving the same
recognized the validity of the Reclamation Contract and the fact that
the tract of land involved was the result of the reclamation done by
SADECO. In their answer-in-intervention, petitioner alleges that there
was no reclamation undertaken by SADECO, that the land in question
was the result of accretion from the sea and that the Reclamation
Contract is null and void. Clearly then, the compromise agreement
and the decision had in effect resolved the aforementioned issues
raised by the intervenors. As aptly observed by the trial court, the
continuation of the reception of the intervenors' evidence would serve
no purpose at all. Should intervenors fail to prove that the
Reclamation Contract is null and void and that no actual reclamation
was made, the correctness and propriety of the decision based on the
compromise agreement would be strengthened. Upon the other hand,
should they succeed in proving that the contract is null and void, and
that the area in question came into being through the natural action of
the sea, still the decision of the lower court could no longer be set
aside, inasmuch as it has already become final and executed. prLL
There is, therefore, no merit to the claim of petitioner that the lower
court "unceremoniously terminated the proceedings" even "without
the intervenors completing their evidence." (Memorandum for
Petitioner, p. 140, 143, Rollo) Precisely, the court a quo gave credence
and weight to the compromise agreement and denied the claims of
the intervenors which were controverting the theories of the plaintiff
and the defendants. In other words, due process had been accorded
the intervenors. It would have been different had the court not taken
into consideration the claims of the intervenors.
The petitioner cannot claim ignorance of the filing of the compromise
agreement. As can be gleaned from the pre-trial order, the intervenors
were represented during the pre-trial conferences, where the plaintiff
and the defendants intimated that they would submit a compromise
agreement. The intervenors did not interpose any opposition to the
manifestation of the plaintiff and defendants that they would be
amicably settling their dispute. The compromise agreement was filed
in court on May 20, 1985. It was approved by the lower court on May
24, 1986. Before its approval no opposition had been filed questioning
its legality. The intervenors received their copy of the decision on
September 19, 1985. They did not file any motion for reconsideration
to suspend its finality. It was only on June 24, 1987, or after the lapse
of almost two (2) years when they filed a motion to set aside the
compromise agreement. It should be emphasized at this juncture that
the decision based on the compromise agreement had long been
executed.
Anent the other issue raised whether or not respondent mayor
needed another authority from the Sangguniang Bayan to sign the

compromise agreement, suffice it to state that the mayor need not


secure another authority from the Sandiganbayan under Section 141
(c) and (i) of the Local Government Code, which state that
"Section 141. (1) The Mayor shall be the Chief
Executive of the municipal government and shall
exercise such powers, duties and functions as
provided in this code and other laws. (2) He shall:
xxx xxx xxx
'(c)Represent the municipality in its
business transactions and sign on its behalf all
contracts, obligations and official documents
made in accordance with law or ordinance.
cdrep
'(i)Direct the formulation of municipal
development plans and programs, and once
approved by the Sangunian Bayan, supervise
and direct the execution and implementation
thereof.'" (p. 115, Rollo)
because the execution of the Compromise Agreement is but an act
implementing the reclamation contract duly approved by the
Sangguniang Bayan.
Further, the terms and conditions of the compromise agreement are
beneficial to the municipality because the share of Espiritu has been
reduced considerably from the 80% agreed upon in the reclamation
contract.
WHEREFORE, for lack of merit, the petition is DISMISSED. Costs
against petitioner.
SO ORDERED.
Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.

SECOND DIVISION
[G.R. No. 89909. September 21, 1990.]
METROPOLITAN
BANK
AND
TRUST
COMPANY,
petitioner, vs. THE PRESIDING JUDGE, REGIONAL TRIAL
COURT, Manila Branch 39, RAYCOR AIRCONTROL
SYSTEM, INC. and COURT OF APPEALS * , respondent.
Balane, Barican, Cruz, Alampay Law Office for petitioner.
Bito, Lozada, Ortega & Castillo for private respondent.
DECISION
REGALADO, J p:
Before the Court for review on certiorari is the decision of respondent
Court of Appeals in CA-G.R. SP No. 17341, dated July 19, 1989, 1
dismissing petitioner's original action for certiorari and mandamus
which seeks to set aside the order of the trial court dated June 2,
1988, allowing the intervention suit thereinto proceed, and its order of
January 11, 1989, admitting the amended complaint in intervention.
The proceedings in the court below from which this appeal arose, as
found by respondent Court of Appeals, are as follows:
"Petitioner
Metropolitan
Bank
and
Trust
Co.
(Metropolitan) in whose favor a deed of chattel
mortgage was executed by Good Earth Emporium, Inc.
(GEE) over certain air conditioning units installed in
the GEE building, filed a complaint for replevin against
Uniwide Sales, Inc. (Uniwide, for brevity) and the BPI
Investment Corporation and several other banks
collectively called BPI-Consortium, for the recovery of
the possession of the air-conditioning units or in the
event they may not be recovered, for the defendants
which acquired the GEE building in an auction sale,
(to) be required, jointly and severally, to pay the
plaintiff the unpaid obligations on the units.
"Per paragraph 3.11.3 of its complaint, plaintiff
Metrobank alleged that the air-conditioning units were
installed on a loan of P4,900,000.00 it extended to
Good Earth Emporium & Supermarket, Inc. in its
building located at Rizal Avenue, Sta. Cruz, Manila,
after the land and building had been foreclosed and
purchased on June 3, 1983 at public auction by the
defendants, except Uniwide, and in order to secure
repayment of the loan, a deed of chattel mortgage
was constituted over the personal properties listed in
the deed which included the airconditioning units.
"It also alleged in par. 3.11.2 of the complaint, that
'(T)he loan proceeds were used by GEE to finance the
acquisition of airconditioning equipment from Reycor
(sic) Air Control System, Inc. (amounting to
P4,250,000.00 and installation costs of P650,000.00)

under an Agreement of Sale dated 29 June 1984'


(Annex A, Petition, id., pp. 23-24).
"The defendants filed their Answer, Uniwide on July
25, 1986 (Annex B, Petition, id., pp. 32-48) and the
defendants (presumably the rest of the defendants),
on July 14, 1986 (Annex C, Petition, id., pp. 39-49).
cdphil
"On July 17, 1986, Raycor Air Control Systems, Inc.
filed a motion for leave to intervene alleging 'it has a
direct and immediate interest on the subject matter of
the litigation such that it will either gain or lose by the
direct legal operation and effect of the judgment' and
attached the 'Intervention Complaint' (Annex D,
Petition, id., pp. 49-52). There was no opposition to
the motion and the intervention complaint was
admitted by the lower court per its order dated August
8, 1986. Metrobank on November 19, 1986, filed its
Answer To The Intervention Complaint (Annex E,
Petition, id., pp. 53-59).
"On August 3, 1987, the lower court set the case for
trial on the merits on September 15, 1987 but before
the date of the trial, on September 7, 1987, plaintiff
Metrobank and the defendants Uniwide and BPI
Consortium, filed a motion for postponement of the
scheduled hearing on September 15, 1987 and asked
for thirty (30) days from September 15 within which to
submit a compromise agreement. On March 15, 1988,
plaintiff Metrobank and defendants BPI Consortium
filed a joint motion to dismiss the complaint and on
March 18, 1988, the lower court issued the order
dismissing the complaint with prejudice (Annex D to
Comment of Raycor Air Control System, Inc., Rollo, p.
108).
"On April 19, 1988, private respondent filed a motion
for reconsideration of the order dismissing the
complaint with prejudice, claiming it was not furnished
with copy of the joint motion for dismissal and that it
received the order of dismissal only on April 14, 1988.
On June 2, 1988, the respondent court issued the
order granting the motion for reconsideration filed by
the intervenor (Annex I, Petition, id., p. 67) which
order is now subject of present petition for certiorari.
"On August 2, 1988, private respondent filed a motion
to admit amended complaint (Annex F, Intervenor's
Comment, id., p. 110) and attached the Amended
Intervention Complaint (Annex J, Petition, id., pp. 6873) to the motion. To this motion, plaintiff Metrobank
filed an opposition (Annex K, Petition, id., pp. 71-76)

and after the intervenor had filed their Reply (Annex L,


Petition, id., pp. 77-81) and the plaintiff a Rejoinder
(Annex M, Petition, id., pp. 82-87), on January 11,
1989, the respondent court issued the order admitting
the amended complaint in intervention (Annex N,
Petition, id., p. 88). This is the other order which is
subject of the petition for certiorari.
"On February 9, 1989, plaintiff Metrobank filed a
motion for extension for 15 days or until February 24,
1988 within which to file its answer to the amended
complaint in intervention and the intervenor on
February 17, 1989 filed an opposition to Metrobank's
motion and at the same time moved that Metrobank
be declared in default on the amended complaint in
intervention.
The
respondent
court
granted
Metrobank's motion and on February 18, 1989,
Metrobank filed its Answer to the Amended Complaint
in Intervention with Counterclaim." 2
On April 14, 1989, petitioner filed a petition for certiorari and
mandamus with respondent Court of Appeals contending that the
lower court committed a grave abuse of discretion amounting to lack
of jurisdiction in allowing, per its order of June 2, 1988, the
intervention suit to survive despite the dismissal of the main action
and also in admitting, per its order of January 11, 1989, the amended
complaint in intervention. 3
As earlier stated, the Court of Appeals found no merit in the petition
and dismissed the same on July 19, 1989. Petitioner is now before us
raising the same issues and arguments. We agree with the Court of
Appeals that the lower court was innocent of any grave abuse of
discretion in issuing the orders complained of. llcd
The contention of petitioner that the order of the lower court, dated
June 2, 1988, has the effect of allowing the intervention suit to prosper
despite the dismissal of the main action obviously cannot be upheld.
There is here no final dismissal of the main case. The aforementioned
order of the lower court has the effect not only of allowing the
intervention suit to proceed but also of vacating its previous order of
dismissal. The reinstatement of the case in order to try and determine
the claims and rights of the intervenor is proper. The joint motion of
therein plaintiff and the original defendants to dismiss the case,
without notice to and consent of the intervenor, has the effect of
putting to rest only the respective claims of the said original parties
inter se, but the same cannot in any way affect the claim of private
respondent which was allowed by the court to intervene without
opposition from the original parties. A resum of pertinent rulings on
the matter would be in order.
Intervention is defined as "a proceeding in a suit or action by which a
third person is permitted by the court to make himself a party, either
joining plaintiff in claiming what is sought by the complaint, or uniting

with defendant in resisting the claims of plaintiff, or demanding


something adversely to both of them; the act or proceeding by which
a third person becomes a party in a suit pending between others; the
admission, by leave of court, of a person not an original party to
pending legal proceedings, by which such person becomes a party
thereto for the protection of some right of interest alleged by him to
be affected by such proceedings." 4
Any person who has or claims an interest in the matter in litigation, in
the success of either of the parties to an action, or against both, may
intervene in such action, and when he has become a party thereto it is
error for the court to dismiss the action, including the intervention suit
on the basis of an agreement between the original parties to the
action. Any settlement made by the plaintiff and the defendant is
necessarily ineffective unless the intervenor is a party to it. 5
By the very definition of "intervention," the intervenor is a party to the
action as the original parties and to make his right effectual he must
necessarily have the same power as the original parties, subject to the
authority of the court reasonably to control the proceedings in the
case. 6
Having been permitted to become a party in order to better protect
his interests, an intervenor is entitled to have the issues raised
between him and the original parties tried and determined. 7 He had
submitted himself and his cause of action to the jurisdiction of the
court and was entitled to relief as though he were himself a party in
the action. 8
After the intervenor has appeared in the action, the plaintiff has no
absolute right to put the intervenor out of court by the dismissal of the
action. The parties to the original suit have no power to waive or
otherwise annul the substantial rights of the intervenor. When an
intervening petition has been filed, a plaintiff may not dismiss the
action in any respect to the prejudice of the intervenor. 9 LLjur
It has even been held that the simple fact that the trial court properly
dismissed plaintiffs action does not require dismissal of the action of
the intervenor. 10 An intervenor has the right to claim the benefit of
the original suit and to prosecute it to judgment. The right cannot be
defeated by dismissal of the suit by the plaintiff after the filing of the
petition and notice thereof to the other parties. A person who has an
interest in the subject matter of the action has the right, on his own
motion, to intervene and become a party to the suit, and even after
the complaint has been dismissed, may proceed to have any actual
controversy established by the pleadings determined in such action.
The trial court's dismissal of plaintiff's action does not require
dismissal of the action of the intervenor. 11
The intervenor in a pending case is entitled to be heard like any other
party. 12 A claim in intervention that seeks affirmative relief prevents
a plaintiff from taking a voluntary dismissal of the main action. 13
Where a complaint in intervention was filed before plaintiff's action

had been expressly dismissed, the intervenor's complaint was not


subject to dismissal on the ground that no action was pending, since
dismissal of plaintiff's action did not affect the rights of the intervenor
or affect the dismissal of intervenor's complaint. 14 An intervenor's
petition showing it to be entitled to affirmative relief will be preserved
and heard regardless of the disposition of the principal action. 15
As we ruled in Camacho vs. Hon. Court of Appeals, et al., 16 the
rationale whereof is clearly applicable to the present controversy
"There is no question that intervention is only
collateral or ancillary to the main action. Hence, it was
previously ruled that the final dismissal of the
principal action results in the dismissal of said
ancillary action. The main action having ceased to
exist, there is no pending proceeding whereon the
intervention may be based. In the case at bar,
however, there was no such final or complete
dismissal but rather an approval of a compromise
agreement which was embodied in what was
specifically designated as a 'Partial Decision' affecting
only the interests of herein petitioner and the
defendant in said case but not those of her co-plaintiff
municipality and the intervenor. The clear intent of the
court below in making the partial decision is to make a
reservation to determine the rights of the intervenor
and, presumably, the plaintiff municipality. There may
be nothing much left to be done with respect to the
main case but as far as the proceedings in the trial
court are concerned, the controversy therein has not
been fully settled and the disposition of the case is
definitely incomplete."
Moreover, to require private respondent to refile another case for the
settlement of its claim will result in unnecessary delay and expenses
and will entail multiplicity of suits and, therefore, defeat the very
purpose of intervention which is to hear and determine at the same
time all conflicting claims which may be made on the subject matter
in litigation, and to expedite litigation and settle in one action and by
a single judgment the whole controversy among the persons involved.
17
On the propriety of the order dated January 11, 1988, admitting
private respondent's amended complaint in intervention, we sustain
respondent Court of Appeals in upholding the same. Incidentally, it will
be recalled that petitioner was granted the opportunity to file, as it did
file, its answer to the amended complaint in intervention and it even
interposed a counterclaim in the process. LLphil
Now, the granting of leave to file an amended pleading is a matter
particularly addressed to the sound discretion of the trial court and
that discretion is broad, subject only to the limitations that the
amendments should not substantially change the cause of action or

alter the theory of the case or that it was made to delay the action. 18
Once exercised, that discretion will not be disturbed on appeal, except
in case of abuse thereof. 19
In the case at bar, a reading of the amended complaint in intervention
shows that it merely supplements an incomplete allegation of the
cause of action stated in the original complaint so as to submit the
real matter in dispute. Contrary to petitioner's contention, it does not
substantially change intervenor's cause of action or alter the theory of
the case, hence its allowance is in order.
As aptly stated by the Court of Appeals:
"In both the Intervention Complaint and the Amended
Complaint in Intervention, the private respondent
seeks the payment to it of the amount of P150,000.00
which should have been paid to it from out of the
P650,000.00 which the petitioner as plaintiff in CC 863618 had referred to in pars. 3.11.2 and 3.11.3 of its
complaint as cost of installation of the airconditioning
units under the agreement of sale (between plaintiff
Metrobank and GEE Inc). dated June 29, 1984 and so
basically, the Amended Complaint In Intervention did
not really detract or depart from that basic claim." 20
In determining whether a different cause of action is introduced by
amendments to the complaint, what is to be ascertained is whether
the defendant shall be required to answer for a liability or legal
obligation wholly different from that which was stated in the original
complaint. An amendment will not be considered as stating a new
cause of action if the facts alleged in the amended complaint show
substantially the same wrong with respect to the same transaction, or
if what are alleged refer to the same matter but are more fully and
differently stated, or where averments which were implied are made in
expressed terms, and the subject of the controversy or the liability
sought to be enforced remains the same. 21
The courts should be liberal in allowing amendments to pleadings to
avoid multiplicity of suits and in order that the real controversies
between the parties are presented, their rights determined and the
case decided on the merits without unnecessary delay. 22 This
liberality is greatest in the early stages of a lawsuit, 23 especially in
this case where the amendment to the complaint in intervention was
made before trial of the case thereby giving petitioner all the time
allowed by law to answer and to prepare for trial. cdphil
On the issue regarding the propriety of the intervention, suffice it to
state that petitioner's failure to interpose a timely objection when the
motion for leave to intervene was filed by private respondent bars the
former from belatedly questioning the validity of the same on appeal.
In any event, the trial court duly considered the circumstances and
granted the motion, which order was not seasonably questioned by
petitioner thus evincing its approval of the court's action.

WHEREFORE, finding no reversible error, the petition is DENIED and


the judgment of respondent Court of Appeals is hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera and Sarmiento, JJ., concur.
Paras, J., is on leave.
Padilla, J., took no part.

SECOND DIVISION
[G.R. Nos. 99338-40. February 1, 1993.]
HEIRS OF NICOLAS Y. OROSA, (Represented
herein by their Attorney-in-Fact, RICARDO Q.
OROSA), petitioners, vs. THE HON. EUTROPIO
MIGRINO, Presiding Judge, Regional Trial Court
of Pasig, M.M. Branch 151 and GOLDENROD,
INC., respondents.
Romero, Lagman, Valdecantos & Arreza Law Offices for petitioner.
Eliseo M. Cruz for Heirs of F. Alma Sr.
Adoracion J. Mirandilla for Goldenrod, Inc.
SYLLABUS
1.CIVIL LAW; ACTIONS; INTERVENTION; MOVANT MUST HAVE DIRECT
AND ACTUAL LEGAL INTEREST ON THE DISPUTED PROPERTY; ABSENCE
THEREOF IN CASE AT BAR. Taking Goldenrod's own admissions at
their face value, it is quite apparent that whatever direct and actual
legal interest it may have had over the land had been disposed of by it
for value in favor of the consortium in 1989 and that whatever
residual legal interest in the property can be premised on Goldenrod's
contractual undertaking, actually an express warranty against
eviction, is expectant or contingent in nature. Presently, Goldenrod
has no legal interest in the property and its warranty can only be
enforced by the consortium if the latter is dispossessed of the land by
virtue of a proper action instituted by the Orosa heirs as registered
owners thereof. But, the legal interest which entitles a person to
intervene in a suit must be actual and material, direct and immediate.
A party seeking to intervene in a pending case must show that he will
either gain or lose by the direct legal operation and effect of a
judgment. In the present case, Goldenrod has failed to meet this
criteria and the lower court gravely abused its discretion in permitting
intervention after having overlooked this matter.
2.ID.; ID.; REOPENING OF DECREE OF REGISTRATION WITHIN ONE
YEAR FROM ENTRY UNDER PRESIDENTIAL DECREE NO. 1529; ACTUAL
INTEREST IN THE LAND, INDISPENSABLE; CASE AT BAR. It appears
that the lower court cited Section 32 of P.D. 1529, permitting the
reopening of a decree of registration within one year after its entry, if
the same was procured through actual fraud and a person is thereby
deprived of any interest over the affected land. The difficulty with this
view is that, as earlier noted, Goldenrod had not shown any actual
interest in the land of which it could have been deprived, on the basis
of an actual or extrinsic fraud perpetrated by petitioners in the course
of procuring their decree of confirmation. Goldenrod had merely
alleged, rather ambiguously, a cause of action against petitioners in
that they "suddenly breached and disregarded the 1977 Agreement"
(the sale between Nicolas Orosa and Delta). Even the public
respondent made no finding that Goldenrod was the apparent victim
of an actual fraud. Hence its invocation of the remedy provided in
Section 32 of P.D. 1529 was bereft of basis.

3.ID.; TORRENS SYSTEM OF LAND REGISTRATION; REGISTRATION


COURT; ENTRY OF JUDGMENT; DIVESTS THE LOWER COURT IPSO
FACTO OF ITS JURISDICTION. Upon entry of the Court's judgment in
G.R. No. L-30859, the confirmation of a registerable title, and the
consequent adjudication of ownership over Lot 9 Psu-11411 Amd-2, in
favor of petitioners' predecessors-in-interest became a final and
settled matter. Such entry of judgment operated ipso facto to divest
the lower court of its general jurisdiction to act in LRC No. 2839, save
for the limited matter of supervising the process of executing the
Court's decision. The public respondent simply cannot, as it appears to
be trying to do in this case, interpret or reverse the implication of this
Court's ruling that petitioners are entitled to a Torrens title over Lot 9
Psu-11411 Amd-2, just because Goldenrod seeks to recall execution by
making a supervening allegation that petitioners are no longer the
owners thereof.
4.ID.; QUIETING OF TITLE; PLAINTIFF MUST HAVE AT LEAST EQUITABLE
TITLE TO OR INTEREST IN THE PROPERTY IN LITIGATION; CASE AT BAR.
Under Article 447 of the Civil Code, the plaintiff in an action for
quieting of title must at least have equitable title to or an interest in
the real property which is the subject matter of the action. Evidence of
Goldenrod's capacity on this point is inexistent because Goldenrod is
not asserting a claim to the property. On the contrary, it had admitted
having alienated its interest in the land referred to as Lot 9 Psu-11411
Amd-2 to the consortium. Thus, Goldenrod is not an interested party
capable of instituting an action to quiet title, either by intervening in
LRC No. 2839 or by instituting a separate action. The right to
commence such a separate action pertains to its Vendee, if the latter
wishes to defend the validity of its 1987 purchase from Goldenrod and
to hold the Vendor Goldenrod liable on its warranty of title.
DECISION
FELICIANO, J p:
In Maria Mayug Vda. de Cailles v. Dominador Mayuga, et. al., 1 the
Court affirmed the decision of the Court of Appeals in C.A.-G.R. No.
31887-R, confirming ownership over a fifty- three (53) hectare parcel
of land located in Las Pinas, Rizal, more particularly referred to as Lot
9 Psu-11411 Amd-2, in favor of one Dominador Mayuga. The Court
also extended the benefit of such confirmation to the latter's
successor-in-interest, the late Nicolas Orosa.
After the case was remanded to Branch 151 of the Regional Trial
Court, Pasig, where it was originally docketed in 1958 as Land
Registration Case ("LRC") No. 2839, the heirs of Nicolas Orosa
(petitioners herein) moved for execution of judgment. This motion was
granted by the lower court in its Order dated 25 October 1989,
directing the Land Registration Authority ("LRA") to submit the
property's amended technical description for approval. 2
However, the LRA did not comply with said order because, among
others, its records indicated that the property had previously been

decreed in favor of one Jose T. Velasquez, to whom was issued Original


Certificate of Title No. 6122. 3
On 10 September 1990, Goldenrod, Inc. ("Goldenrod") filed a motion
for leave to intervene in the execution proceeding, alleging an interest
in the property which is the subject matter of LRC No. 2839. 4
Petitioners opposed Goldenrod's motion, without success. The lower
court permitted Goldenrod to file its pleading in intervention through
its Order dated 7 December 1990. Petitioners' motion for
reconsideration therefrom was likewise denied in an Order dated 11
April 1991. 5
Hence this Petition for Certiorari and Prohibition.
After reviewing the comment required of private respondent
Goldenrod, the Court resolved to give due course to the petition and
to issue a temporary restraining order to enjoin the public respondent
lower court from taking further action in LRC No. 2839. Upon filing of
petitioner's reply to said comment, the case was submitted for
decision.
Two (2) ultimate issues are posed for the Court's consideration in this
case: 1) whether Goldenrod has shown in its pleadings in intervention
a sufficient legal interest in the land which is the subject matter of LRC
No. 2839; and 2) whether the legal interest actually shown by
Goldenrod over the land can be protected in a proceeding separate
from LRC No. 2839. Cdpr
In respect of the first issue, the Court must observe that the lower
court had evaded resolving this matter before permitting Goldenrod's
intervention:
"The Orosa heirs also contend that the purported
intervenor failed to establish its alleged legal interest
in these proceedings to the subject parcel of land.
Precisely, this case has to be set for hearing to enable
Goldenrod to prove its claim to the land in question."
6 (Emphasis supplied)
As the Court understands it, Goldenrod attempts to augment the
ruling of the lower court by showing in its pleadings in intervention, as
well as in its comment before the Court, the existence of a legal
interest in the land sufficient to justify its intervention.
Goldenrod claims that in 1977, during the pendency of this case
before the Court in G.R. No. L-30859, Delta Motors Corporation (Delta)
acquired for value the contingent rights of Nicolas Orosa over the
property, as well as the conflicting claims thereto of one Jose
Velasquez. 7 In 1980, the land registration court trying Jose Velasquez'
claims in LRC No. N-5416 excluded therefrom the land referred to as
Lot 9 Psu-11411 Amd-2 in G.R. No. L-30859. 8 Meanwhile, Delta
somehow managed to obtain transfer certificates of titles over the
land and sold this acquisition to Goldenrod in 1987. 9 The latter then
succeeded in obtaining issuance in its favor of Transfer Certificates of
Title Nos. 4893 and 4901, whose technical descriptions overlapped
"big portions" of the land referred to as Lot 9 Psu-11411 Amd-2 in G.R.

No. L-30859. 10 In February 1989, Goldenrod sold the land covered by


said transfer certificates of title to a consortium composed of Fil Estate
Management Inc., Arturo Y. Dy, Megatop Realty Development Inc.,
Peaksun Enterprises and Export Corporation, and Elena D. Jao
("Consortium"). 11 The contract of sale contained an undertaking on
Goldenrod's part to "defend the title of the VENDEES to the property
against claims of any third person whatsoever." 12 It is on the basis of
this stipulation that Goldenrod seeks to intervene in the execution
proceedings of LRC No. 2839.
Taking Goldenrod's own admissions at their face value, it is quite
apparent that whatever direct and actual legal interest it may have
had over the land had been disposed of by it for value in favor of the
consortium in 1989 and that whatever residual legal interest in the
property can be premised on Goldenrod's contractual undertaking,
actually an express warranty against eviction, is expectant or
contingent in nature. Presently, Goldenrod has no legal interest in the
property and its warranty can only be enforced by the consortium if
the latter is dispossessed of the land by virtue of a proper action
instituted by the Orosa heirs as registered owners thereof. 13
But, the legal interest which entitles a person to intervene in a suit
must be actual and material, direct and immediate. A party seeking to
intervene in a pending case must show that he will either gain or lose
by the direct legal operation and effect of a judgment. 14
In the present case, Goldenrod has failed to meet this criteria and the
lower court gravely abused its discretion in permitting intervention
after having overlooked this matter.
One of the other reasons invoked by the public respondent in
permitting intervention at the execution stage of LRC No. 2839
follows:
"The Orosa heirs contend that intervention can not be
allowed at this stage of the proceedings in this case.
They forget that in a land registration case even when
the decree has been issued, the case can be reopened within (1) year from issuance of said decree
to enable any prejudiced party to present evidence in
support of his claim." 15
It appears that the lower court cited Section 32 of P.D. 1529, 16
permitting the reopening of a decree of registration within one year
after its entry, if the same was procured through actual fraud and a
person is thereby deprived of any interest over the affected land. prcd
The difficulty with this view is that, as earlier noted, Goldenrod had
not shown any actual interest in the land of which it could have been
deprived, on the basis of an actual or extrinsic fraud perpetrated by
petitioners in the course of procuring their decree of confirmation.
Goldenrod had merely alleged, rather ambiguously, a cause of action
against petitioners in that they "suddenly breached and disregarded
the 1977 Agreement" (the sale between Nicolas Orosa and Delta). 1 7

Even the public respondent made no finding that Goldenrod was the
apparent victim of an actual fraud. Hence its invocation of the remedy
provided in Section 32 of P.D. 1529 was bereft of basis.
The action of the lower court in permitting Goldenrod's intervention at
this late stage of the proceedings in LRC No. 2839 is also flawed by
another, more serious defect. It must be remembered that upon entry
of the Court's judgment in G.R. No. L-30859, the confirmation of a
registerable title, and the consequent adjudication of ownership over
Lot 9 Psu-11411 Amd-2, in favor of petitioners' predecessors-ininterest became a final and settled matter. 18 Such entry of judgment
operated ipso facto to divest the lower court of its general jurisdiction
to act in LRC No. 2839, save for the limited matter of supervising the
process of executing the Court's decision. The public respondent
simply cannot, as it appears to be trying to do in this case, interpret or
reverse the implication of this Court's ruling that petitioners are
entitled to a Torrens title over Lot 9 Psu-11411 Amd-2, just because
Goldenrod seeks to recall execution by making a supervening
allegation that petitioners are no longer the owners thereof. 19
Goldenrod attempted to broaden the jurisdiction of the lower court, so
as to enable the latter to take cognizance of its motion for
intervention, by invoking the Court's ruling in Suson v. Court of
Appeals: 20
"It cannot be overlooked that the hearing before the
respondent court on the motion for demolition
(underscoring supplied by the Court) was in
connection with the implementation or execution of a
final judgment in Civil Case No. R-14351. Petitioner
was precisely given an opportunity to intervene in
order to guide the court in disposing of private
respondent's motion for demolition in the light of
petitioner's claim that his house was erected on the
disputed lot (Italic supplied by the Court), and yet, he
was not an original party to the action. Petitioner was
thus given a chance to raise and prove his claim of
ownership over a part of the lot in question (Italic
supplied by the Court), but he ignored such
opportunity. He cannot now complain that he was
denied due process. `A case in which an execution
has been issued is regarded as still pending so that all
proceedings on the execution are proceedings in the
suit. There is no question that the court which
rendered the judgment has a general supervisory
control over its process of execution, and this power
carries with it the right to determine every question of
fact and law which may be involved in the execution.'"
(Italic supplied by Goldenrod).
But it is evident that Goldenrod's reliance upon the Suson case is
misplaced because the intervenor therein had a direct and actual legal

interest in the property sought to be recovered by the prevailing party


at execution. Consequently, the executing court thereat had to accord
the intervenor a full hearing on whatever claim he might seek to
make, disregarding the rules of procedure limiting intervention to the
period before or during a trial of a case, 21 in the interest of observing
due process as an aspect of substantial justice.
Here, these considerations do not obtain and the lower court, in
permitting intervention, caused needless complication, expense and
delay in the execution proceedings of LRC No. 2839, to the prejudice
of petitioners' right to a speedy disposition thereof.
Turning to the second issue posed in this case, given the remote and
contingent nature of Goldenrod's legal interest over the real property
which is the subject matter of LRC No. 2839, the Court believes that
Goldenrod can and should protect such interest in a separate
proceeding.
The public respondent invoked the following to support its view that
the execution stage of the land registration proceeding was the proper
venue within which Goldenrod can protect its interest in the property:
22
"Movants also contend that the granting of leave to
intervene will unduly delay the disposition of this
case. The adjudication of Goldenrod, Inc.'s interest in
the subject parcel of land in the instant case would be
for the benefit not only of Goldenrod, Inc. itself, (but)
also of the Orosa heirs, because thereafter there will
be no cloud in the title of the party to whom the
ownership of said parcel of land may be adjudicated.
Cdpr
Finally, the movants contend that the intervenor's
interest can be protected in a separate proceedings
(sic). The Court doubts if this is true. In any event, as
above adverted to, everybody will be benefited by this
Court adjudicating in this case the claim of the
intervenor." (Italic supplied)
It would appear that the public respondent premised its ruling solely
on the belief that a cloud had descended on the title over the real
property which is the subject matter of LRC No. 2839 and that this
cloud had to be removed.
This justification does not persuade. Under Article 447 of the Civil
Code, 23 the plaintiff in an action for quieting of title must at least
have equitable title to or an interest in the real property which is the
subject matter of the action. Evidence of Goldenrod's capacity on this
point is inexistent because Goldenrod is not asserting a claim to the
property. 24 On the contrary, it had admitted having alienated its
interest in the land referred to as Lot 9 Psu-11411 Amd-2 to the
consortium. Thus, Goldenrod is not an interested party capable of
instituting an action to quiet title, either by intervening in LRC No.
2839 or by instituting a separate action. The right to commence such

a separate action pertains to its Vendee, if the latter wishes to defend


the validity of its 1987 purchase from Goldenrod and to hold the
Vendor Goldenrod liable on its warranty of title.
WHEREFORE, the Petition for Certiorari and Prohibition is hereby
GRANTED. The Orders of the public respondent dated 7 December
1990 and 11 April 1991, being issued with grave abuse of discretion
amounting to excess of jurisdiction, are hereby ANNULLED and SET
ASIDE. The public respondent's Order dated 25 October 1989 is
hereby REINSTATED and the Temporary Restraining Order issued by
the Court in this case is correspondingly LIFTED. In view of the long
pendency of LRC No. 2839, the public respondent is hereby enjoined
to terminate the proceeding as soon as possible by completing the
execution of the Court's Decision in G.R. No. L-30859 with all
deliberate speed. This Decision is immediately executory. No costs.
SO ORDERED.
Narvasa, C . J ., Regalado, Nocon and Campos, Jr., JJ., concur.