G.R. No.

134171 November 18, 1998

THE EXECUTIVE SECRETARY and ARTURO C. LOMIBAO, petitioners,

vs.
RICHARD J. GORDON, ANACLETO M. DIAS, and ORLANDO E. MENDIOLA, respondents.

MENDOZA, J.:

This is a petition to declare respondents Richard J. Gordon, Anacleto M. Diaz, and Orlando E.
Mendiola in contempt of court. Respondents Diaz and Mendiola are the counsels of respondent
Gordon in G.R. No. 134071, entitled "Richard J. Gordon v. The Hon. Executive Secretary, Felicito
Payumo and Senior Superintendent Arturo C. Lomibao." The petitioners in this case are the
respondents in that case.

The aforesaid case was filed on June 29, 1998 because of respondent Gordon's apprehension that he
would be removed and replaced as chairman of the Subic Bay Metropolitan Authority (SBMA) upon
the change of administration from President Fidel V. Ramos to President Joseph Ejercito Estrada. The
petition was for prohibition to prevent Gordon's ouster as chairman of the SBMA on the ground that
he had a fixed term of office of six years which would not expire until February 10, 2004.

As respondent Gordon apprehended, upon assuming office on June 30, 1998, President Joseph
Ejercito Estrada issued Administrative Order No. 1, "recalling, withdrawing, and canceling the
appointment of Richard J. Gordon as Chairman of the Subic Bay Metropolitan Authority for a term of
six (6) years, dated February 10, 1998, by former President Fidel V. Ramos."

On July 1, 1998, instead of pressing his motion for a temporary restraining order, respondent Gordon
fried a "Notice of Withdrawal of [his] Petition." This was done at 9:21 in the morning. At 11:30 A.M. of
that same day, he filed a petition for certiorari and prohibition in the Regional Trial Court of Olongapo
City, where it was docketed as Civil Case No. 255-0-98.

The filing of the case in the Olongapo court gave rise to the present petition to declare respondents in
contempt of court filed by Executive Secretary Ronaldo Zamora and Arturo C. Lomibao. The petition is
filed against respondents Richard Gordon and his counsel Anacleto M. Diaz and Orlando E. Medina,
the latter having filed the case in the Olongapo City Regional Trial Court after filing a notice of
withdraw the case pending in this Court. Petitioners charge that "the act of respondents in filing two
(2) petitions involving the same issues before this Court and the Regional Trial Court at Olongapo City,
both pending, constitutes forum-shopping and contempt of court."

Petitioners cite the following provision of Rule 7, 5 of the Rules of Civil Procedure as basis for their
action:

1
 Certification against forum shopping. The plaintiff or principal party shall certify
under oath in the complaint or other initiatory pleading asserting a claim for relief, or in
a sworn certification annexed thereto and simultaneously filed therewith: (a) that he
has not theretofore commenced any action or filed any claim involving the same issues
in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such other pending action or
claim, a complete statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has been filed or is pending, he
shall report that fact within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt of court, without prejudice to
the corresponding administrative and criminal actions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct contempt, as
well as a cause for administrative sanctions.

This provision applies to petitions for certiorari and prohibition.

In its resolution of July 7, 1998, this Court granted respondents' prayer for leave to withdraw their
petition in G.R. No. 134071, without prejudice to the disposition of the present petition for contempt.

Respondents deny the charge against them. They contend that they in fact complied with Rule 7, 5
of the Rules of Court by disclosing in the certification of non-forum shopping attached to their
petition for certiorari and prohibition before the Regional Trial Court of Olongapo City, the existence
and subsequent withdrawal of their petition for prohibition before this Court. They argue that, as held
in PCGG v. Sandiganbayan,1 it is neither forum-shopping nor defiance of a court's authority for a
party to file a case in the lower court, even after applying for a similar relief in the Supreme Court,
where such party had first sought the withdrawal of the case before the Supreme Court in order to
seek recourse before the lower court.

We find for respondents.

Forum-shopping consists of filing multiple suits involving the same parties for the same cause of
action, either simultaneously or successively, for the purpose of obtaining a favorable judgment.
Thus, it has been held that there is forum-shopping

(1) whenever as a result of an adverse decision in one forum, a party seeks a favorable decision
(other than by appeal or certiorari) in another, 2 or

2
(2) if, after he has filed a petition before the Supreme Court, a party files another before the Court
of Appeals since in such case he deliberately splits appeals "in the hope that even as one case in
which a particular remedy is sought is dismissed, another case (offering a similar remedy) would
still be open," 3 or

(3) where a party attempts to obtain a preliminary injunction in another court after failing to obtain
the same from the original court. 4

In Chemphil Export & Import Corp. vs. Court of Appeals,5 the Court, summarizing the rulings on the
issue of what constitutes forum-shopping, stated:

Forum-shopping or the act of a party against whom an adverse judgment has been
rendered in one forum, of seeking another (and possibly favorable) opinion in another
forum (other than by appeal or the special civil action of certiorari), or the institution
of two (2) or more actions or proceedings grounded on the same cause on the
supposition that one or the other court would make a favorable disposition, has been
characterized as an act of malpractice that is prohibited and condemned as trifling
with the Courts and abusing their processes. It constitutes improper conduct which
tends to degrade the administration of justice. It has also been aptly described as
deplorable because it adds to the congestion of the already heavily burdened dockets
of the courts.

Conversely, since a party resorts to forum-shopping in order to increase his chances of obtaining a
favorable decision or action, a party cannot be said to have sought to improve his chances of
obtaining a favorable decision or action where no unfavorable decision has ever been rendered
against him in any of the cases he has brought before the courts. 6

In the case at bar, although respondent Richard J. Gordon filed a petition for prohibition before this
Court and, after two days, filed substantially the same petition before the Regional Trial Court of
Olongapo City, the fact remains that (1) before filing his petition in the Olongapo court he first flied
a notice of withdrawal of his petition which this Court later granted and (2) he withdrew his
petition in this Court for the following reason:

Due, however, to the present policy of the Court requiring parties and their counsel to
adhere strictly to the hierarchy of courts and in order to obviate any technical
objection on this ground, petitioner has deemed it fit to withdraw, as he hereby
withdraws, the instant petition so that it may be filed in the proper court where it can
be ventilated on its merits.

No adverse decision had been rendered by this Court against respondent Gordon for which
reason he thought it proper to institute the second action in the trial court. The situation he
found himself in is similar to that in which a party, after filing a suit, realizes he made a
mistake because the court in which he has brought the case has no jurisdiction. He,
therefore, withdraws his action and refiles it in the proper forum. For, indeed, the policy of
3
 this Court respecting the hierarchy of courts and consequently prohibiting the filing of a
petition in this Court in view of the concurrent jurisdiction with the lower courts has been
consistently observed in the absence of any compelling reason for departing from such
policy. It is clear from respondents' actions and explanation that they had no intention of
disregarding court processes. They in fact complied with Rule 7, 5 of the Rules of Civil
Procedure.

This case is distinguishable from E. Razon, Inc. v. The Philippine Port Authority.7 In the E. Razon
case, petitioners, after filing a petition for certiorari with prayer for the issuance of a temporary
restraining order in the Supreme Court, filed an hour later a similar petition before the Regional
Trial Court and, having been assured of a favorable action by the latter court, then sought the
withdrawal of the petition in this Court. Petitioners were found guilty of forum-shopping. "The acts
of petitioners constitute a clear case of forum-shopping an act of malpractice that is proscribed and
condemned as trifling with the courts and abusing their processes," it was held.

In contrast, in the case at bar, respondent Gordon filed a notice of withdrawal of his petition before
this Court prior to the filing of his petition in the Regional Trial Court as the appropriate forum.
While it is true he and his counsels did not wait for this Court to act on the "Notice of Withdrawal of
Petition" filed by them before filing substantially the same petition in the Regional Trial Court, the
Court understands their situation. They were faced with a predicament: Administrative Order I
ousting respondent Gordon from the chairmanship of the SMBA had been issued and was in fact
about to be enforced hence a writ of preliminary injunction had to be obtained if respondent
Gordon was to remain in office.

A similar predicament confronted the parties in PCGG v. Sandiganbayan (Minute Resolution, G.R.
Nos. 105808, 105809, and 109592, July 22, 1997), cited by respondents. There, as found by this
Court

As regards TMEE's lawyers, they obviously believed that under this Court's
dispositions just reviewed, it was their client, instead of the PCGG, that had the right
to vote the sequestered shares, prior to the determination by the Sandiganbayan of
whether or not there would be dissipation, loss or wastage of corporate assets if TMEE
were permitted to vote said shares. They wished their client to exercise that right to
vote at the stockholders' meeting of January 10, 1997; but PCIB was adamant in its
position that it should be the PCGG which should be accorded the right to vote. Time
being of the essence, said lawyers be took themselves to this Court; on December 23,
1996, they filed here an "Urgent Motion for Issuance of a Temporary Restraining
Order."

A few days' reflection, however, apparently made them doubt that the Court would
act on their motion because in its Resolution of December 3, 1996 it had said "that no
further motion for reconsideration or clarification of the issues treated or, of the
dispositions herein made, will be entertained." They thus decided that relief should
properly be sought in the Securities & Exchange Commission which in their view had
4
 "jurisdiction to act on the subject matter (which) refers to the corporate acts of PCIB
and its corporate officers (Garcia Jr. vs. Sandiganbayan 237 SCRA 552) (their cause) not
being directly aimed at the PCGG as an entity, but at a private corporation (Holiday
Inn [Phils.] vs. Sandiganbayan, et al. 186 SCRA 447]." But first they had to withdraw
their motion for TRO before this Court. This they sought to do by filing on January 9,
1997, a "Notice of Withdrawal of 'Urgent Motion for Issuance of a Restraining Order.'"
That done, they filed the corresponding petition with the Securities & Exchange
Commission to stop the PCIB stockholders' meeting scheduled the following day, as
above narrated.

This Court considered the parties' predicament with understanding and overlooked their lapse:

The Court sees no reason to reject this explanation of the TMEE lawyers, or to doubt
their good faith. Their explanation is not on its face implausible; it is in truth
consistent with the admitted facts on record. Considering that condemnation for
contempt should not be made lightly, and that the power to punish for contempt
should be exercised on the preservative and not on the vindictive principle, the Court
finds no difficulty whatever in reaching the conclusion that there was no willful
disregard or defiance of its orders, or forum-shopping, by the TMEE lawyers or,
through his permissiveness, by the SEC Hearing Officer.

By no means does the Court by the present decision wish to convey the impression that it will
tolerate any act of disrespect or discourtesy. To be sure, respondents could have apologized at the
very least for the time of the Court which they had taken and made an effort to explain why they
have to refile their case without awaiting the Court's resolution on their notice of withdrawal of the
petition. But, exercising restraint lest a contrary action be seen as mere peeve or petulance, and
considering this case instead with compassion, bearing in mind that the purpose of contempt is
preservative rather than punitive, this Court has chosen to overlook respondents' lapse.

WHEREFORE, the petition for contempt is DISMISSED.

SO ORDERED.

G.R. No. 192716 June 13, 2012

ELOISA MERCHANDISING, INC. and TREBEL INTERNATIONAL, INC., Petitioners,

vs.
BANCO DE ORO UNIVERSAL BANK and ENGRACIO M. ESCASINAS, JR., in his capacity as Ex-Officio
Sheriff of the RTC of Makati City, Respondents.

DECISION

5
VILLARAMA, JR., J.:

Assailed in this petition for review on certiorari under Rule 45 are the Decision1 dated March 30, 2010
and Resolution2 dated June 15, 2010 of the Court of Appeals (CA) in CA-G.R. CV No. 89779. The CA
affirmed the trial courts dismissal of petitioners complaint on the ground of failure to prosecute.

On November 11, 1993, petitioner Eloisa Merchandising, Inc. (EMI) executed in favor of respondent
Banco de Oro Universal Bank (BDO) a real estate mortgage (REM) over its properties located at No.
129 Neptune St., Bel-Air Village II, Makati City, Metro Manila and covered by Transfer Certificate of
Title Nos. 157092 and 157093. The REM was further amended on May 16, 1996, December 23, 1996,
September 16, 1998 and July 2, 1999 to secure the principal obligation totalling Twenty-Nine Million
Nine Hundred Thousand Pesos (29,900,000.00) drawn from the Credit Line Agreement of EMI and
Term Loan Agreement of Trebel International, Inc. (Trebel). EMI likewise executed a Continuing
Suretyship in favor of BDO to secure the credit accommodation extended by BDO to petitioners
affiliate, Trebel.3

On January 10, 2002, BDO initiated foreclosure proceedings by filing an application for extrajudicial
foreclosure before the Office of the Ex-Officio Sheriff of the Regional Trial Court (RTC) of Makati City.4
Accordingly, respondent Engracio M. Escasinas, Jr. issued a notice setting the auction sale of the
mortgaged property on March 7, 2002.

On March 1, 2002, petitioners filed a Complaint5 for "annulment of Real Estate Mortgage, Injunction
& Damages With Prayer for Issuance of a Writ of Preliminary Injunction and/or Temporary Restraining
Order," docketed as Civil Case No. 02-245 of the RTC of Makati City, Branch 59. Petitioners alleged the
following as grounds for nullity of the REM: (1) the contract is in the nature of a third-party mortgage
to secure the loans of Trebel despite the fact that EMI is not in the suretyship business; (2) after
maturity of the loans, BDO granted Trebel extensions of time to pay without notice to EMI, thus
extinguishing the corporate guaranty or suretyship and REM, pursuant to Art. 2079 of the Civil Code;
(3) under the promissory notes, BDO unilaterally fixed an adjustable, "floating" interest rate on each
interest period as may be favorable to it, a potestative condition which is null and void under Art.
1308 of the Civil Code; and (4) the penalty of 3% per month or 36% per annum is exorbitant and
excessive. Petitioners further claimed that BDO acted with malice and evident bad faith in initiating
the extrajudicial foreclosure proceedings.

BDO filed a motion to dismiss6 on the ground of lack of cause of action which can be determined from
the facts alleged in the complaint and considering all annexes, motions and evidence on record.

On May 7, 2002, petitioners filed an amended complaint7 which impleaded the Register of Deeds and
alleged that the mortgaged property was sold at a public auction on March 7, 2002.

On July 18, 2002, petitioners filed a "Motion for Leave to File and to Admit Second Amended
Complaint,"8 which averred that the Register of Deeds of Makati City has consolidated the titles over
the foreclosed properties and issued new titles in the name of BDO.

6
On November 28, 2002, the trial court issued an order9 granting the motion to admit second
amended complaint and denying the motion to dismiss. BDO was directed to file a responsive
pleading.

On January 17, 2003, BDO filed its Answer10 traversing the allegations of the complaint and asserting
that: (1) there was only forbearance on BDOs part before filing the extrajudicial foreclosure due to
insistent request of petitioners who repeatedly promised to settle their obligations, and for
humanitarian reasons; (2) the loan documents clearly stated that no prior demand is necessary before
the entire obligation becomes due and demandable; (3) on June 22, 1999, Trebel obtained a "Term
Loan Agreement" in addition to the previously granted 5,000,000.00 Credit/Trust Receipts Line
granted by BDO, from which Trebel availed of 19,900,000.00, part of which was used to pay off
EMIs loans; in consideration thereof, EMI executed a Continuing Suretyship and the Fourth Amended
REM to the extent of 29,900,000.00 in favor of BDO; (4) Trebel subsequently made several drawings
from its own credit lines in the total amount of 29,880,000.00 under Promissory Notes (PNs)
executed on various dates; (5) because Trebel failed to satisfy its loan obligations under the aforesaid
PNs, BDO was compelled to file an application for extrajudicial foreclosure of the REM on January 10,
2002, and BDO won as the highest bidder during the public auction sale; (6) EMI was not a third-party
mortgagor considering that it secured its own obligations and Trebel has assumed its obligations in
full; the veil of corporate fiction maybe pierced in this case, and EMI is already estopped from raising
the issue of ultra vires act after Trebel had defaulted on its obligations; (7) with the execution of the
Continuing Suretyship, EMI bound itself solidarily with the principal debtor, Trebel, and the right of
BDO to proceed against EMI as surety exists independently of its right to proceed against Trebel; EMI
as surety is not even entitled to a notice of the principals default; (8) the Conforme Letter dated June
14, 1999 sent by BDO to EMI showed the consent of Mr. Roberto L. Del Rosario (President) and Ms.
Emma M. Del Rosario (Finance Manager) who both signed the said letter which provides for a floating
interest rate based on the 364-day Treasury Bill Rates plus 4% or the BDO Reference Rate plus 7.5%;
T-Bill Rates are one of the most objective and generally used standard for interest rates; and (9) the
liquidated penalty was part of the parties agreement, which will not accrue until Trebel defaults on
its obligations with BDO.

In the Notice of Pre-Trial11 dated January 22, 2003, the trial court set the pre-trial conference on
February 27, 2003. In compliance with the trial courts directive, the parties submitted their
respective pre-trial briefs.

On March 13, 2003, petitioners filed a "Motion to Admit Supplemental Complaint" which further
alleged that BDOs petition for issuance of a writ of possession was granted by the RTC of Makati City,
Branch 143 in a Decision dated February 18, 2003. EMI reiterated that its rights as surety-mortgagor
were violated in the railroaded ex parte proceedings implementing the writ of possession even as
EMIs pending motion for reconsideration was still unresolved by Branch 143.12

In its Order13 dated June 19, 2003, the trial court denied the motion to admit supplemental
complaint on the ground that the matters raised in the supplemental complaint were improper as
they pertain to issuances by another branch in a separate petition for writ of possession.

7
At the scheduled pre-trial conference on June 26, 2003, on motion of petitioners, they were allowed
to present evidence exparte in view of the absence of BDO which was non-suited. In its motion for
reconsideration, BDOs counsel cited extraordinary and non-moving traffic as reason for his failure to
arrive on time for the pre-trial conference. The trial court, in an Order dated August 27, 2003, granted
the said motion, reinstated the case and set the case again for pre-trial conference on September 26,
2003, later moved to November 10, 2003, and finally rescheduled to January 12, 2004 by agreement
of the parties.14

On July 16, 2003, petitioners filed a motion for reconsideration of the June 19, 2003 Order denying
their motion to admit supplemental complaint; BDO filed its opposition to the said motion.

For failure of the petitioners to appear despite due notice at the scheduled pre-trial conference on
January 12, 2004, the case was ordered dismissed.15 In their motion for reconsideration, petitioners
counsel claimed that his failure to attend was due to his accidental falling on the stairs of his house in
the morning of January 12, 2004, due to which he had to be attended by a "hilot". In an Order dated
May 7, 2004, the trial court reconsidered the dismissal and scheduled anew the pre-trial conference
on June 29, 2004, which date was subsequently reset to August 3, 2004 for lack of proof of service
upon petitioners counsel.16

Since petitioners again failed to appear on the re-scheduled pre-trial conference on August 3, 2004,
the trial court issued the following Order:

When this case was called for pre-trial conference, only counsel for the defendants appeared. There
was no appearance on the part of the plaintiffs, despite the fact that as early as June 29, 2004, they
were notified for todays hearing. The Court, however, is in receipt of a Motion to Reset filed by
counsel for the plaintiff, alleging among others, that he is to appear at the MTC of San Jose, Batangas,
which was set earlier than the hearing of this case. The Court finds the ground not meritorious
because counsel of plaintiffs in open Court on June 29, 2004 signed the notification for the hearing of
this case. Counsel could have objected to the chosen date if indeed he was not available. Likewise, the
records will show that on January 12, 2004, this case was also dismissed for failure of the plaintiffs to
appear for pre-trial conference. This should have served as a warning to herein plaintiffs.

In view hereof, upon motion of the herein defendants, the above-entitled case is hereby ordered
dismissed pursuant to Section 5, Rule 18 of the Rules of Court.

SO ORDERED.17 (Italics supplied.)

Petitioners moved to reconsider the above order, their counsel alleging that he had misplaced or lost
his calendar book and could not have ascertained the availability of his schedule. Stressing that he
had no intention to ignore the hearing as in fact he filed a motion to reset the same six days prior to
the scheduled hearing, petitioners counsel pleaded for the kind indulgence of the court.

8
On December 29, 2004, the trial court issued an Order18 granting petitioners motion for
reconsideration "in the interest of justice" and reinstating the case. The trial court, however directed
petitioners to be "more circumspect in attending to this case."

In its Order19 dated September 20, 2005, the trial court dismissed the case for failure of petitioners
to prosecute their case. Citing the two previous dismissals on account of petitioners non-appearance
at the pre-trial conference, the trial court said that "[f]rom the date of its second reconsideration of
the order of dismissal on December 29, 2004 until today, plaintiffs did not do anything to prosecute
the instant case."

Petitioners filed a motion for reconsideration in which they averred that:

1. After the reconsideration of the Order of dismissal on December 29, 2004, the plaintiffs
counsel, Atty. Anselmo A. Marqueda, on several occasion, passed by the court and diligently
followed-up the hearing of this case. He was assured by an officer of the court to just wait for
the notice of hearing that they will issue in the instant case.

2. While waiting for the notice of hearing from this court, the respective counsels of the parties
negotiated in earnest for an amicable settlement of the case. During the last telephone
conversation with Atty. Roy P.R. Talao, the defendants bank counsel, and the undersigned
agree on some proposals for settlement which are however subject to final confirmation of
their respective clients. The plaintiff believe that the parties are very close to agree and enter
into an amicable settlement of this case.

3. Apart from the reliance of the undersigned counsel on the statement of the court officer to
just wait for the notice of hearing, the undersigned counsel suffered a handicap in making a
personal follow-up of this case because of his numerous travels and lengthy sojourn in the
province due to family conflict and death of a member of the family.

x x x x20

In its Order21 dated April 10, 2006, the trial court denied petitioners motion for reconsideration, as
follows:

x x x Records show that this case has been dismissed thrice (January 12, 2004; August 3, 2004 and
September 20, 2005). The first two dismissals were due to the failure of the plaintiffs to appear during
the pre-trial conference despite notice. In both cases plaintiffs were admonished to be more
circumspect in attending to this case. This time the instant case was dismissed due to inaction of
herein plaintiffs for unreasonable length of time.

The Court has been lenient for quite sometime however, plaintiffs seemed inclined to abuse the
Courts leniency. Finding no compelling reason to reconsider the assailed order, motion is hereby
DENIED.

9
SO ORDERED.

Aggrieved, petitioners appealed to the CA arguing that the trial court erred in dismissing the case for
failure to prosecute considering that (1) the trial court has not yet resolved petitioners motion for
reconsideration of the order denying their motion to admit supplemental complaint; (2) petitioners
are very much interested to prosecute this case to protect their rights in the premises; (3) petitioners
have valid and meritorious causes of action; (4) petitioners may not be deprived of their day in court
by the negligence of their counsel; and (5) non-suit or default judgment is not encouraged as it
violates due process.22

By Decision dated March 30, 2010, the CA affirmed the trial courts dismissal of the case. The CA said
that petitioners cannot justify their prolonged inaction by belatedly raising as issue the pending
motion for reconsideration from the trial courts denial of their motion to admit the supplemental
complaint, when all along they were aware that the case was at the pre-trial stage as in fact the case
was twice dismissed for their failure to attend the pre-trial conference. Under the circumstances
stated in its September 20, 2005 Order, the CA held that the trial court cannot be faulted for
dismissing the case on the ground of petitioners failure to prosecute their action, citing this Courts
ruling in Olave v. Mistas.23

The CA also denied the motion for reconsideration filed by the petitioners.

Petitioners contend that the only reason for the trial courts dismissal of the case was the failure of
their counsel to move to set the case for pre-trial. However, Section 1, Rule 18 of the 1997 Rules of
Civil Procedure, as amended, imposing upon the plaintiff the duty to promptly move to set the case
for pre-trial, had been repealed and amended by A.M. No. 03-1-09-SC which took effect on August 16,
2004. This amendment to the rule on pre-trial now imposes on the clerk of court the duty to issue a
notice of pre-trial if the plaintiff fails to file a motion to set the case for pre-trial conference.

Petitioners point out that the case was not yet ripe for pre-trial because of the unresolved pending
motion for reconsideration of the trial courts denial of the motion to admit supplemental complaint.
In any event, petitioners assert that they are very much interested to prosecute the case as they have
presented evidence in their application for the issuance of TRO and writ of preliminary injunction,
amended the complaint several times, their representatives have always been attending as notified
by their lawyers, and their counsel was following up the case but the Clerk of Court could not set the
case for pre-trial because of the pending motion. As to the prior dismissals of the case, these should
not be taken as badges of failure to prosecute because these had been set aside on meritorious
grounds. The circumstances that respondent BDO itself had been declared in default for failure to
appear at the pre-trial on June 26, 2003 and has asked repeatedly for extensions of time from the
court, the ongoing negotiations with BDO for amicable settlement even at the appeal stage, and
petitioners meritorious causes of action, justify a liberal application of the rules so that petitioners
will be given their day in court.

Respondent BDO, on the other hand, asserts that the failure of petitioners to move for the setting of
the case for pre-trial conference, coupled with their repeated violations of the Rules which prompted
10
the trial court to dismiss their complaint twice, are sufficient grounds for the trial court to finally
dismiss the complaint. A.M. No. 03-1-09-SC did not remove plaintiffs obligation to set the case for
pre-trial. Petitioners claim that they relied on a supposed assurance by a court personnel to set the
case for pre-trial is doubtful, aside from being contradictory to the admission of petitioners counsel
that he "suffered a handicap in making a personal follow-up of this case because of [his] numerous
travels and lengthy sojourn in the province due to family conflict and death of a member of the
family."

As to the alleged negotiations for an amicable settlement, respondent admitted there were talks
during court hearings and telephone calls but these were casual and at best, exploratory. No serious
offer was made by petitioners, much less concretized. At any rate, even if true, such talks is not a
ground to tarry and delay the prosecution of the case which had been pending with the trial court for
more than three years and had not even left the pre-trial stage. If indeed petitioners were sincere in
their desire to settle, they should have promptly moved for the setting of pre-trial so that the case
can be referred for mandatory mediation proceedings.

The petition has no merit.

Under Section 3,24 Rule 17 of the 1997 Rules of Civil Procedure, as amended, the failure on the part
of the plaintiff, without any justifiable cause, to comply with any order of the court or the Rules, or to
prosecute his action for an unreasonable length of time, may result in the dismissal of the complaint
either motu proprio or on motion by the defendant. The failure of a plaintiff to prosecute the action
without any justifiable cause within a reasonable period of time will give rise to the presumption that
he is no longer interested to obtain from the court the relief prayed for in his complaint; hence, the
court is authorized to order the dismissal of the complaint on its own motion or on motion of the
defendants. The presumption is not, by any means, conclusive because the plaintiff, on a motion for
reconsideration of the order of dismissal, may allege and establish a justifiable cause for such
failure.25 The burden to show that there are compelling reasons that would make a dismissal of the
case unjustified is on the petitioners.26

Under Section 1, Rule 18 of the 1997 Rules of Civil Procedure, as amended, it is the duty of the
plaintiff, after the last pleading has been served and filed, to promptly move ex parte that the case be
set for pre-trial. On August 16, 2004, A.M. No. 03-1-09-SC (Re: Proposed Rule on Guidelines to be
Observed by Trial Court Judges and Clerks of Court in the Conduct of Pre-Trial and Use of Deposition-
Discovery Measures) took effect, which provides that:

Within five (5) days from date of filing of the reply, the plaintiff must promptly move ex parte that the
case be set for pre-trial conference. If the plaintiff fails to file said motion within the given period, the
Branch COC shall issue a notice of pre-trial.

We note that when the above guidelines took effect, the case was already at the pre-trial stage and it
was the failure of petitioners to set the case anew for pre-trial conference which prompted the trial
court to dismiss their complaint.

11
In Olave v. Mistas,27 this Court said that even if the plaintiff fails to promptly move for pre-trial
without any justifiable cause for such delay, the extreme sanction of dismissal of the complaint might
not be warranted if no substantial prejudice would be caused to the defendant, and there are special
and compelling reasons which would make the strict application of the rule clearly unjustified. In the
more recent case of Espiritu v. Lazaro,28 this Court affirmed the dismissal of a case for failure to
prosecute, the plaintiff having failed to take the initiative to set the case for pre-trial for almost one
year from their receipt of the Answer. Although said case was decided prior to the effectivity of A.M.
No. 03-1-09-SC, the Court considered the circumstances showing petitioners and their counsels lack
of interest and laxity in prosecuting their case.

In this case, while there was no substantial prejudice caused to herein respondent, who has already
consolidated the ownership of petitioners properties, secured new titles in its name and successfully
implemented a writ of possession issued by another branch, there was neither patent abuse in the
trial courts dismissal of the complaint for the third time, the earlier two dismissals having been
precipitated by petitioners non-appearance at the pre-trial conference. Contrary to petitioners
assertion, the trial court did not find their offered excuses as meritorious or justifiable; the trial court
in the exercise of discretion simply reinstated the case "in the interest of justice" but explicitly warned
petitioners to be more circumspect in attending to the case.

However, despite the trial courts leniency and admonition, petitioners continued to exhibit laxity and
inattention in attending to their case. Assuming domestic problems had beset petitioners counsel in
the interregnum, with greater reason should he make proper coordination with the trial court to
ensure his availability on the date to be chosen by the trial court for the long-delayed conduct of a
pre-trial conference. Petitioners themselves did nothing to get the case moving for nine months and
set the case anew for pre-trial even as BDO was already seeking their judicial ejectment with the
implementation of the writ of possession issued by Branch 143. Such circumstance also belies their
pretense that the parties were then still negotiating for a settlement. We have held that a party
cannot blame his counsel when he himself was guilty of neglect; and that the laws aid the vigilant, not
those who slumber on their rights. Vigilantibus sed non dormientibus jura subveniunt.29

We also agree with the CA that petitioners are belatedly raising as issue the unresolved motion for
reconsideration of the denial of petitioners motion to admit supplemental complaint. Petitioners did
not even file a motion to resolve the said pending incident which, in any event, could have been
brought to the trial courts attention had petitioners acted promptly to have the case set anew for
pre-trial conference soon after or within a reasonable time from the reinstatement of the case on
December 29, 2004.

While under the present Rules, it is now the duty of the clerk of court to set the case for pre-trial if
the plaintiff fails to do so within the prescribed period, this does not relieve the plaintiff of his own
duty to prosecute the case diligently. This case had been at the pre-trial stage for more than two
years and petitioners have not shown special circumstances or compelling reasons to convince us that
the dismissal of their complaint for failure to prosecute was unjustified.

12
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated March 30, 2010 and
Resolution dated June 15, 2010 of the Court of Appeals in CA-G.R. CV No. 89779 are hereby
AFFIRMED and UPHELD.

Costs against the petitioners.

SO ORDERED.

G.R. No. 153432 February 18, 2004

BAHIA SHIPPING SERVICES, INC., MA. CYNTHIA G. MENDOZA and RED BAND A/S, petitioners
vs.
OSCAR P. MOSQUERA, respondent.

DECISION

VITUG, J.:

The rules of procedure are designed to ensure a fair, orderly and expeditious disposition of cases;
however, the rules are not meant to allow hasty judgments at the price of great injustice. Where a
strict and unflinching reliance on technical rules will defeat their real objective, and where the non-
observance thereof is neither deliberate nor with intent to cause any undue delay by a party, a liberal
construction of those rules would be becoming, if not compelling, at times.

Before the Court is a petition for review on certiorari, assailing the judgment of the Court of Appeals
which has upheld the order of default issued by the court a quo. The case has originated from Civil
Case No. 23482, entitled "Oscar P. Mosquera vs. Bahia Shipping Services, Cynthia Mendoza and Red
Band A/S" before the Regional Trial Court, Branch 29, of Iloilo City. The appellate court gives its
narration of the controversy.

"Respondent Oscar Mosquera filed his Complaint against petitioners with the Regional Trial Court in
Iloilo City on February 28, 1997 which was docketed as Civil Case No. 23482 and assigned to Branch
29, the sala of the respondent judge.

"Herein petitioner Bahia Shipping filed a Motion to Dismiss, questioning, among others, the
jurisdiction of the Regional Trial Court which motion was eventually denied by the respondent judge
in an Order dated May 8, 1997. A Motion for Reconsideration was filed, but the same was also denied
in an Order dated June 18, 1997.

"Petitioners initiated certiorari proceedings with the appellate courts questioning the refusal of the
respondent judge to dismiss the case entitled `Bahia Shipping Services Inc., Ma. Cynthia Mendoza and
Red Band A/S vs. Hon. Rene Honrado, Presiding Judge Regional Trial Court of Iloilo, and Oscar P.
Mosquera docketed as CA-G.R. SP No. 45282. The same was dismissed by the Court of Appeals and
taken on appeal by certiorari with the Supreme Court.

13
"In the meantime, petitioners filed their Answer in the case a quo.

"Eventually, the case was scheduled for pre-trial on September 17, 1997.

"On September 11, 1997, petitioners filed a manifestation with motion to defer pre-trial proceedings
in view of the certiorari petition that had been filed with the Court of Appeals and to ensure that the
pre-trial would indeed be deferred, [the law office (for herein petitioners) (supplied)] called up the
sala of respondent judge for confirmation. It was confirmed by the court personnel, particularly, the
Branch Clerk of Court, Atty. Elizabeth Sumague-Payba - that there was no need to file the pre-trial
brief yet nor to attend the scheduled pre-trial because the respondent judge would first rule on the
Motion of September 11, 1997.

"Specifically, when the [law office (for petitioners) (supplied)] through then handling lawyer, Atty.
Ruben R. Capahi called up the sala of respondent judge, it was Atty. Sumague-Payba who answered
the phone. She put Atty. Capahi on hold while she went to confer with respondent judge. Afterwards,
she got back on the phone and told Atty. Capahi that, in view of the motion filed, there was, as yet, no
need to file the pre-trial brief and attend the scheduled pre-trial conference on September 17, 1997.
In fact, in a subsequent occasion, when Atty. Capahi called the sala of respondent judge to find out
the status of the case, he was able to talk to respondent judge himself, and the latter confirmed that
he had indeed advised that such pre-trial brief was not needed to be filed at that time and neither
was it necessary for the parties and counsels to attend the September 17, 1997 schedule.

"On September 17, 1997, however, despite his advice to petitioners' counsel, respondent judge
apparently proceeded with the pre-trial hearing and subsequently, respondent Mosquera filed a
motion to declare petitioners as in default to which the latter vigorously opposed the same.

"On January 6, 1998, petitioners, through counsel, received the Order dated December 11, 1997
declaring them as in default for their failure to file their pre-trial brief and to attend the pre-trial on
September 11, 1997.

"Petitioners filed a verified Motion for Reconsideration dated January 15, 1998 together with an
Affidavit of Merit, a separate Affidavit by Atty. Capahi, as well as their pre-trial brief to which private
respondent filed an Opposition thereto. Thereafter, petitioners filed a reply to the opposition." 1

The motion for reconsideration having been denied in the order, dated 27 July 2001, of the trial court,
petitioners raised the issue before the Court of Appeals. The appellate court, on 05 December 2001,
sustained the ruling of the court a quo, by dismissing the appeal, now the subject of the instant
petition for review.

The petition is meritorious.

Pre-trial is that stage of the proceedings when the last pleading has been filed and the parties explore
possible ways to avoid a protracted trial, including the possibility of an amicable settlement or a
summary judgment, the submission of the case to alternative modes of dispute resolution, a
14
stipulation of facts, or the limitation of the number of witnesses. Whereas pre-trial has before been
optional, the new rules of civil procedure now make it mandatory such that the failure of a party to
appear at pre-trial is deemed to be a waiver of his right to present evidence in his behalf -

"Section 5. Effect of failure to appear. - The failure of the plaintiff to appear when so required
pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal shall be
with prejudice, unless otherwise ordered by the court. A similar failure on the part of the defendant
shall be cause to allow the plaintiff to present his evidence ex parte and the court to render judgment
on the basis thereof."2

The seeming severity of the rule notwithstanding, it, nevertheless, is not unyielding. Like all rules of
procedure, it admits of exceptions for valid and justifiable reasons.3

Petitioner is a corporation, with business address in Cebu City, represented by the law firm of Sycip
Salazar Hernandez and Gatmaitan in the case pending before the Regional Trial Court of Iloilo City.
The lawyer assigned by the law firm to see to the case in Iloilo City has, during scheduled hearings, yet
to embark on an inter-island travel, either by boat or by plane, at the expense of the client. An out-of-
town hearing, expending, as it so does, more than the usual time, energy, resources and personnel
than would ordinarily be required, might indeed make it prudent for the law firm to first ascertain and
confirm, as much as it can be helped, the court schedule and trial.

The firms counsel, Atty. Ruben R. Capahi, through long-distance telephone communication, was able
to converse with Atty. Sumague-Payba, the branch clerk of court, who, after conferring with
respondent judge, confirmed the postponement of the pre-trial and the filing of the pre-trial brief in
view of the motion to defer the proceedings and the pending appeal of petitioner. Still, in order to be
absolutely sure, Atty. Capahi sought at a later date a re-confirmation of the postponement from
respondent judge himself. It should be noteworthy that neither the honorable judge, in his order
declaring petitioner in default and in his subsequent order denying the motion for reconsideration
thereto, nor his clerk of court refuted the incidents attributed to them. It would not thus be right for
the appellate court to conjecture otherwise.

It is not to say, however, that adherence to the rules could be dispensed with lightly but that, rather,
exigencies and situations might occasionally demand flexibility in their application. Substantial justice
in this instance can be best served if a full opportunity is given to both parties to litigate their dispute
and submit the merits of their respective positions.

WHEREFORE, the petition is GRANTED and the decision of the appellate court in C.A.-G.R. No. 66693
is set aside. Let the case be remanded to the court a quo for further proceedings and a trial on the
merits. No costs.

SO ORDERED.

15
G.R. No. 164375 October 12, 2006

RODOLFO PAREDES, TITO ALAGO AND AGRIPINO BAYBAY, SR., petitioners,

vs.
ERNESTO VERANO and COSME HINUNANGAN, respondent.

DECISION

TINGA, J.:

The central issue in this case is whether the absence of the counsel for defendants at the pre-trial,
with all defendants themselves present, is a ground to declare defendants in default and to authorize
plaintiffs to present evidence ex parte.

The relevant facts are uncomplicated.

The protracted legal battle between the parties began with a complaint for the establishment of a
right of way filed by petitioners herein as plaintiffs against respondents as defendants. 1 The
complaint, docketed as Civil Case No. 2767 of the Regional Trial Court (RTC) of Maasin City, Southern
Leyte, Branch 24, culminated in a judgment by compromise dated 26 April 1994.2 In the Compromise
Agreement, respondent Cosme Hinunangan granted a two (2) meter-wide right of way in favor of
petitioners in consideration of the amount of P6,000.00 which petitioners agreed to pay.3

Alleging that petitioners had blocked the passage way in violation of the Compromise Agreement, on
28 September 1999, respondents filed a complaint for specific performance with damages against
petitioners. It was docketed as Civil Case No. R-3111 also of the RTC of Maasin City, Southern Leyte,
Branch 24.4

In their answer, petitioners denied having violated the Compromise Agreement. They alleged that like
them, respondents were not actual residents of Barangay Tagnipa where the "road right of way" was
established and that respondent Cosme Hinunangan had already sold his only remaining lot in the
vicinity to petitioner Rodolfo Paderes.5

Subsequent to the answer, petitioners filed a motion to dismiss on the ground of lack of cause of
action.6 The trial court, presided by Judge Bethany G. Kapili, denied the motion to dismiss. 7 Petitioners
elevated the order of denial to the Court of Appeals and thereafter to this Court, both to no avail. 8

Petitioners asked Judge Kapili to inhibit himself from the case. The judge denied the motion. 9

16
Pre-trial was initially set for 24 April 2003, but this was reset to 3 June 2003 on motion of
respondents' counsel. But the pre-trial set on 3 June 2003 did not push through either because none
of the parties appeared.

So, pre-trial was reset to 11 November 2003. Petitioner Baybay's counsel moved to reset it to another
date on account of a conflicting hearing. However, petitioner Baybay, who is the father of the counsel
for petitioners, was present in court along with the other defendants, when the case was called on 11
November 2003. The RTC was informed then of a proposed settlement between the parties, although
respondent Baybay qualified his reaction by telling the court

that he would first have to inform his lawyer and the co-defendants of the said proposal. The RTC
then commented unfavorably on the absence of petitioners' counsel, expressing disappointment
towards his attitude, even making note of the fact that not once had the counsel appeared before the
RTC, even though the case had already reached the Supreme Court over the denial of the motion to
dismiss.10 At the same time, the RTC acceded and reset the pre-trial for 23 January 2004.11

Shortly before the new pre-trial date, counsel for petitioners filed a Manifestation of Willingness to
Settle With Request for Cancellation dated 5 January 2004.12 Apart from manifesting his willingness to
settle the complaint, petitioners' counsel through the Manifestation suggested to the opposing
counsel that he be informed of the terms of the proposed settlement. Correspondingly, petitioners'
counsel requested the cancellation of the 23 January 2004 hearing.

However, the hearing did push through on 23 January 2004. The private respondents and their
counsel were present. So were petitioners Baybay and Paderes, and co-defendant Alago, but not their
counsel.

An order of even date formalized what had transpired during the hearing. The RTC allowed
respondents to present their evidence ex parte, "for failure of the defendants['] counsel to appear
before [the RTC]".13 Petitioners filed a motion for reconsideration, but this was denied by the RTC. 14

Thus, petitioners filed a petition for certiorari with the Court of Appeals, assailing the orders of the
RTC. However, on 28 April 2004, the Court of Appeals dismissed the petition outright, 15 for failure to
attach duplicate original copies of the annexes to the petition other than the RTC Orders dated 23
January 2004 and 17 February 2004 (attaching photocopies instead), as well as for failure to submit
such other pleadings relevant and pertinent to the petition. Petitioners filed a Motion for
Reconsideration with Motion to Admit Additional Exhibits, adverting to the documents previously
missing from the petition but attached to the motion.

On 13 July 2004, the Court of Appeals issued a Resolution denying the motion for reconsideration. In
doing so, the Court of Appeals resolved the petition on its merits, as it ruled that "even with the
submission by petitioners of the required pleadings and documents, the instant petition must
nevertheless fail."16 The appellate court quoted extensively from the transcripts of the hearings of 11
November 2003 and 23 January 2004. It conceded that under Section 5, Rule 18 of the 1997 Rules of
Civil Procedure, it is the failure of the defendant, and not defendant's counsel, to appear at the pre-
17
trial that would serve cause to allow plaintiff to present evidence ex parte. Nevertheless, the Court of
Appeals noted that petitioner Baybay had made it clear that he would never enter into any amicable
settlement without the advice of his counsel. Thus, the Court of Appeals concluded that Judge Kapili's
"hands were tied," explaining, thus: "He was held hostage by the blatant display of arrogance
exhibited by petitioner's counsel in assiduously failing to appear before the trial court. Were he to
close his eyes to the reprehensible scheme of Atty. Baybay in delaying the disposition of the main
case, the resulting impass would only strain further the meager resources of the court and prejudice
the rights of private respondents."17

The Court of Appeals then cited Sps. Ampeloquio, Sr. v. Court of Appeals,18 wherein the Court held
that if every error committed by the trial court were to be a proper object of review by certiorari,
then trial would never come to an end and the appellate court dockets would be clogged with
petitions challenging every interlocutory order of the trial court. It concluded that the acts of Judge
Kapili did not constitute grave abuse of discretion equivalent to lack of jurisdiction.

Finally, the trial court admonished petitioners' counsel to "bear in mind that as an officer of the court,
he is tasked to observe the rules of procedure, not to unduly delay a case and defeat the ends of
justice but to promote respect for the law and legal processes."19

We reverse the trial court and the Court of Appeals.

A preliminary observation. The Court of Appeals had initially dismissed the petition lodged by
petitioners on account of their failure to attach several relevant pleadings, citing Section 3, Rule 46 of
the 1997 Rules of Civil Procedure. Before this Court, petitioners devote some effort in arguing that the
Court of Appeals erred in dismissing the petition on that procedural ground, while respondents in
their comment similarly undertook to defend the appellate court's action on that point. We do not
doubt that under Section 3, Rule 46 of the 1997 Rules of Civil Procedure, the Court of Appeals has
sufficient discretion to dismiss the petition for failure of petitioner to comply with the requirements
enumerated in the section, including "such material portions of the record as are referred to [in the
petition], and other documents relevant or pertinent thereto."20 At the same time, "[d]ismissal of
appeals purely on technical grounds is frowned upon and the rules of procedure ought not to be
applied in a very rigid, technical sense, for they are adopted to help secure, not override, substantial
justice, and thereby defeat their very aims."21 Thus, the Court has not hesitated to view Section 3 of
Rule 46 with a liberal outlook, ruling for example that it was not necessary to attach certified true
copies of such material portions of the record as referred to therein.22

The situation in this case bears similarity to that which transpired in Cortez-Estrada v. Heirs of
Samut.23 Therein, the petitioner had failed to attach material documents to her petition before the
Court of Appeals. The Court of Appeals held the petition was dismissible for such procedural
infirmities, yet it nonetheless proceeded to rule against the petitioner on the merits. The Supreme
Court agreed with the appellate court that the petition was procedurally infirm, yet found partial
merit in its arguments and consequently granted partial relief in favor of the petitioner. In this case,
the Court of Appeals, in resolving the motion for reconsideration, proceeded to make a judgment on
the merits. Similarly, this Court finds ample basis to review the decision of the trial court as affirmed
18
by the appellate court, notwithstanding the procedural flaw that originally accompanied the
petitiona flaw which petitioners did seek to remedy when they belatedly attached the relevant
documents to their motion for reconsideration.

Ultimately, there are important reasons to consider the case on the merits. This case affords the
Court the opportunity to clarify the authority granted to a trial judge in relation to pre-trial
proceedings.

The order of the RTC allowing respondents to present evidence ex parte was undoubtedly to the
detriment of petitioners. Since the RTC would only consider the evidence presented by respondents,
and not that of petitioners, the order strikes at the heart of the case, disallowing as it does any
meaningful defense petitioners could have posed. A judgment of default against a defendant who
failed to attend pre-trial, or even any defendant who failed to file an answer, implies a waiver only of
their right to be heard and to present evidence to support their allegations but not all their other
rights.24

The Constitution guarantees that no person shall be deprived of property without due process of law.
One manner by which due process is assured is through the faithful adherence to the procedural rules
that govern the behavior of the party-litigants. The Rules of Court do sanction, on several instances,
penalties for violation of the Rules that causes the termination of an action without a ruling on the
merits, or bars one party from litigating the same while permitting the other to do so. We noted
earlier that Section 3, Rule 46 authorizes the dismissal of an original petition before the Court of
Appeals for failure to append material portions of the record. Pursuant to Section 5, Rule 17, the
failure of the plaintiff to appear on the date of the presentation of his/her evidence in chief on the
complaint is ground for the court to dismiss the complaint, without prejudice to the right of the
defendant to prosecute the counterclaim in the same or in a separate action. And under Section 5,
Rule 18, the failure of the plaintiff or defendant to appear during pre-trial authorizes the court to
either dismiss the complaint, if the plaintiff were absent; or to allow the plaintiff to present evidence
ex parte, if the defendant were absent.

The operation of the above-cited provisions may defeat the cause of action or the defense of the
party who violated the procedural rule. Yet it could not be said that any resultant adverse judgment
would contravene the due process clause, as the parties are presumed to have known the governing
rules and the consequences for the violation of such rules. In contrast, the same presumption could
not attach if a party were condemned to the same outcome even if the party did not violate a
prescribed rule of procedure. Any ruling that disposes of an action or precludes a party from
presenting evidence in support or against thereof must have basis in law,25 and any ruling so
intentioned without legal basis is deemed as issued with grave abuse of discretion.26 In the end, a
person who is condemned to suffer loss of property without justifying legal basis is denied due
process of law.

Simply put, nothing in the Rules of Court authorizes a trial judge to allow the plaintiff to present
evidence ex parte on account of the absence during pre-trial of the counsel for defendant.

19
Sections 4 and 5 of Rule 18 warrant examination:

SEC. 4. Appearance of Parties. It shall be the duty of the parties and their counsel to appear
at the pre-trial. The non-appearance of a party may be excused only if a valid cause is shown
therefor or if a representative shall appear in his behalf fully authorized in writing to enter into
an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into
stipulations or admissions of facts and of documents.

SEC. 5. Effect of failure to appear. The failure of the plaintiff to appear when so required
pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal
shall be with prejudice, unless otherwise ordered by the court. A similar failure on the part of
the defendant shall be cause to allow the plaintiff to present his evidence ex parte and the
court to render judgment on the basis thereof.

Section 4 imposes the duty on litigating parties and their respective counsel during pre-trial. The
provision also provides for the instances where the non-appearance of a party may be excused.
Nothing, however, in Section 4 provides for a sanction should the parties or their respective counsel
be absent during pre-trial. Instead, the penalty is provided for in Section 5. Notably, what Section 5
penalizes is the failure to appear of either the plaintiff or the defendant, and not their respective
counsel.

Indeed, the Court has not hesitated to affirm the dismissals of complaints or the allowance of
plaintiffs to present evidence ex parte on account of the absence of a party during pre-trial. In United
Coconut Planters Bank v. Magpayo,27 the complaint was dismissed because although the counsel for
complainant was present during the pre-trial hearing, the Court affirmed such dismissal on account of
said counsel's failure to present any special power of attorney authorizing him to represent the
complainant during pre-trial.28 In Jonathan Landoil International Co. v. Mangudadatu,29 the defendant
and its counsel failed to appear during pre-trial, and the complainants were allowed to present
evidence ex parte. After an adverse decision was rendered against the defendant, it filed a motion for
new trial in which it cited the illness of defendant's counsel as the reason for his non-appearance
during pre-trial. While the Court acknowledged that such argument was not a proper ground for a
motion for new trial, it also noted that the appearance of the defendant during pre-trial was also
mandatory, and that the defendant failed to justify its own absence during pre-trial.30

There are two cases which, at first blush, may seem to affirm the action of the RTC. In the disbarment
case of Miwa v. Medina,31 a lawyer was suspended from the practice for one (1) month for, among
others, failing to appear during pre-trial, thus leading to the declaration of his client, the defendant, in
default. At the same time, the Court in Miwa did take the defendant herself to task for also failing to
appear during pre-trial, observing that "the failure of a party to appear at pre-trial, given its
mandatory character, may cause her to be non-suited or considered as in default."32

In Social Security System v. Chaves,33 the Social Security System (SSS) itself was named as the
defendant in a complaint filed with the RTC of Cagayan de Oro City. The pre-trial brief was filed by the
acting assistant branch manager of the SSS in Cagayan de Oro City, who happened to be a lawyer and
20
who also entered his appearance as counsel for the SSS. However, said lawyer was not present during
pre-trial, and the SSS was declared in default and the complainants allowed to present their evidence
ex parte. The Court affirmed such order of default, noting other procedural violations on the part of
SSS, such as the fact that the motion for reconsideration to lift the order of default lacked verification,
notice of hearing and affidavit of merit.

Notwithstanding, the Court is not convinced that SSS is ample precedent to affirm an order of default
where even though the defendant was present during pre-trial, defendant's counsel failed to appear
for the same hearing. The Court in SSS did not make any categorical declaration to this effect.
Moreover, it can be observed that in SSS, the counsel himself, the acting assistant branch manager of
the SSS, would have been in addition, the representative of the SSS itself, a juridical person which can
only make an appearance during pre-trial through a natural person as its duly authorized
representative. The Court of Appeals decision upheld in SSS, cited extensively in our decision therein,
expressly affirmed the order of default on the ground that "it is the discretion of the trial judge to
declare a party-defendant as in default for failure to appear at a pre-trial conference." However, in
SSS, neither the Court of Appeals nor this Court expressly laid relevance to the fact that the counsel
himself, as opposed to the defendant, had not attended the pre-trial.

Upon the other hand, Africa v. Intermediate Appellate Court34 illuminates the proper standard within
which to view the instant petition. It appeared therein that on the day of the pre-trial, counsel for the
defendant (therein petitioner) had arrived ten minutes after the case was called. Within that ten-
minute span, the trial court had issued an order in open court declaring the defendant in default and
authorizing the plaintiff to present its evidence ex parte. A mere two days later, the trial court
rendered judgment in favor of plaintiff. The Court reversed the trial court, holding that the order of
default was issued with grave abuse of discretion. The reasoning of the Court was grounded primarily
on the doctrinal rule that frowned against "the injudicious and often impetuous issuance of default
orders,"35 which led in that case to "a deni[al of the defendant's] basic right to be heard, even after
his counsel had promptly explained the reason for his tardiness at the pre-trial."36

Still, it would not be proper to consider Africa as the governing precedent herein, influential as it may
be to our disposition. It was not clear from the narration in Africa whether the defendant himself was
absent during the pre-trial, a circumstance which is determinative to this petition. Moreover, the
Court's tone in Africa indicated that it was animated by a liberal philosophy towards the procedural
rule, implying that the trial court's reversed action was nonetheless adherent to the strict letter of the
rule. Whether or not the trial court in Africa acted conformably with the rules depends upon the
presence or absence of the defendant therein during pre-trial. It can no longer be discerned whether
the Court so ruled in Africa notwithstanding the presence or absence of the defendant therein. It
would be disingenuous though to assume, as a means of applying that case as precedent herein, that
the defendant was actually present during the pre-trial in Africa.

Hence, we pronounce that the absence of counsel for defendants at pre-trial does not ipso facto
authorize the judge to declare the defendant as in default and order the presentation of evidence ex
parte. It bears stressing that nothing in the Rules of Court sanctions the presentation of evidence ex
parte upon instances when counsel for defendant is absent during pre-trial. The Rules do not
21
countenance stringent construction at the expense of justice and equity.37 As the Court has previously
enunciated:

We cannot look with favor on a course of action which would place the administration of
justice in a straightjacket for then the result would be a poor kind of justice if there would be
justice at all. Verily, judicial orders, such as the one subject of this petition, are issued to be
obeyed, nonetheless a non-compliance is to be dealt with as the circumstances attending the
case may warrant. What should guide judicial action is the principle that a party-litigant is to
be given the fullest opportunity to establish the merits of his complaint or defense rather
than for him to lose life, liberty or properties on technicalities.38

Due process dictates that petitioners be deprived of their right to be heard and to present evidence to
support their allegations if, and only if, there exists sufficient basis in fact and in law to do so.39 There
being a manifest lack of such basis in this case, petitioners would be unjustly denied of the
opportunity to fully defend themselves should the Court affirm the questioned orders which were
evidently issued by the RTC with grave abuse of discretion. The better and certainly more prudent
course of action in every judicial proceeding is to hear both sides and decide on the merits rather than
dispose of a case on technicalities.40

While counsel is somewhat to blame for his non-attendance at pre-trial, incidentally the operative act
which gave birth to the controversy at bar, it would be most unfair to penalize petitioners for what
may be the deficiency of their lawyer when the consequent penalty has no basis in law. Particularly
mitigating in the instant case is the fact that the counsel for private respondents intimated, at an
earlier hearing, a possibility of an amicable settlement to the case. Then, counsel for petitioners
submitted a manifestation41 requesting therein that the parties be given ample time to respectively
discuss their proposals and counter-proposals and that the hearing for 23 January 2004 be moved to a
later date as may be agreed upon by the parties for submission of their possible compromise
agreement. It may well have been that counsel for petitioners labored under the false understanding
that a compromise agreement was an imminent possibility. The Court nonetheless notes that counsel
was remiss in assuming that his motion to reset the scheduled hearing would necessarily be granted
by the court a quo.

Be that as it may, there is no clear demonstration that the acts of the counsel of petitioners were
intended to perpetuate delay in the litigation of the case. Assuming arguendo that the trial court
correctly construed the actions of the counsel of petitioners to be dilatory, it cannot be said that the
court was powerless and virtually without recourse but to order the ex parte presentation of evidence
by therein plaintiffs. We are in some sympathy with the judge who was obviously aggrieved that the
case was dragging on for an undue length of time. But even so, there were other remedies available
to the court.

Among the inherent powers of the courts expressly recognized by the Rules include the authority to
enforce order in proceedings before it,42 to compel obedience to its judgments, orders and
processes,43 and to amend and control its process and orders so as to make them conformable to law
and justice.44 Moreover, the Code of Judicial Conduct empowers the courts to judiciously take or
22
initiate disciplinary measures against lawyers for unprofessional conduct.45 A show cause order to
counsel would have been the more cautious and reasonable course of action to take under the
circumstances then prevailing. In failing to do so, the trial court impetuously deprived petitioners of
the opportunity to meaningfully present an effective defense and to adequately adduce evidence in
support of their contentions.

WHEREFORE, the instant petition is hereby GRANTED and the resolutions of the Court of Appeals
affirming the Orders of the Regional Trial Court in Civil Case No. R-3111 dated 23 January 2004 and 17
February 2004 are REVERSED. No costs.

SO ORDERED.

G.R. No. 142066 February 6, 2004

CRISELDA LEONARDO and CELING MARTINEZ, petitioners

vs.
S.T. BEST, INC., respondent.

DECISION

TINGA, J.:

On March 15, 1996, respondent S.T. Best, Inc. brought an action for damages with prayer for issuance
of a writ of injunction against herein petitioners Criselda Leonardo and Celing Martinez and one
Consuelo Germar. The Complaint, filed before the Regional Trial Court, Branch 57 of Makati City,
sought payment of damages for the injury to respondents property resulting from petitioners illegal
quarrying activities. Apparently, petitioners and respondent were owners of adjacent parcels of land,
with respondents lots forming part of a residential subdivision. Respondent claimed that petitioners
had been conducting quarrying activities since 1994 without a permit and in violation of the property
boundary limits. The excavation was done in an oblique direction thereby undermining the
foundation of respondents lots.

Respondent sought to restrain petitioners from further quarrying activities and prayed for the
issuance of a temporary restraining order (TRO). The trial court issued the TRO after a hearing, which
petitioners and their counsel then, Atty. Elison G. Natividad, failed to attend despite due notice. 1 The
trial court then set the hearing on the issuance of a writ of preliminary injunction on April 11, 1996.

On April 1, 1996, petitioners filed a motion to dismiss the complaint on grounds of improper venue,
lack of jurisdiction over the person of defendant Consuelo Germar, and failure to state a cause of
action. The motion was denied.2

23
Petitioners, through Atty. Natividad, filed an Answer with Compulsory Counterclaim on May 17, 1996.3
They contended that the quarrying activities were wholly undertaken by one Rolando Somera under a
contract for a minimal fee or royalty. Rolando Somera took charge of the quarrying activities and
petitioners had no control over the operations, they claimed. Petitioners also argued that they did not
encroach on the property boundary line since the area where the quarrying activities were conducted
was actually within the confines of their property, and that it was really respondent who first
committed the encroachment.

At the hearing of the application for preliminary injunction, neither petitioners nor their counsel were
present. Hence, the trial court allowed respondent to present its evidence ex parte on June 19, 1996.
Respondents witness, Engineer Helset Gutoman, testified that the illegal quarrying had nearly
encroached on the property line of three parcels of land owned by respondent and the oblique
direction of the excavation had weakened the foundation of respondents property. He was of the
opinion that a retaining wall had to be constructed to protect respondents land. The estimated cost
for the construction of the retaining wall added up to 1,040,070.00. 4

Pre-trial conference was scheduled on July 16, 1996 with all parties duly notified.5 On June 10, 1996,
counsel for petitioners filed a Pre-trial Brief, furnishing respondents counsel with a copy thereof. On
the scheduled date, however, only counsel for respondent was present. The pre-trial was reset to
September 10, 1996 since it appeared that the absence of petitioners and their counsel was due to an
ongoing negotiation for settlement between the parties before the Mayor of Sta. Maria, Bulacan. 6

Petitioners and their counsel still failed to appear for the pre-trial conference on September 10, 1996.
Upon motion of counsel for respondent, petitioners were declared as in default, and respondent was
given fifteen (15) days to present its evidence ex parte.7

Petitioners moved for reconsideration8 of the default order, averring that they were made to believe
that they had already reached a settlement before the Mayor of Sta. Maria, Bulacan, i.e., one party
will spend for the materials for the reconstruction of the damaged portions of the lots while the other
party will furnish the labor. Thus, petitioners informed their counsel that they had settled the case
and from then on discontinued communicating with him, believing in good faith that the case had
already been settled.

The trial court granted the motion for reconsideration and scheduled the pre-trial on December 3,
1996.9 Pre-trial was reset to January 21, 1997,10 then later to March 5, 199711 in view of the
retirement of the Presiding Judge. Pre-trial was again moved to May 27, 1997 since no Presiding Judge
had yet been appointed.12

On May 27, 1997, only counsel for respondent was present since it appeared from the records that
petitioners did not receive a copy of the Constancia dated March 4, 1997, informing them of the re-
scheduled pre-trial conference. Hence, pre-trial was again moved to July 7, 1997,13 but on said date
only counsel for respondent appeared. Once again neither petitioners nor their counsel were in
attendance. Upon motion of respondent, petitioners were declared as in default for the second time
and respondent was directed to present evidence ex parte on July 21, 1997. Respondent adopted the
24
evidence it offered at the June 10, 1996 hearing for the issuance of a preliminary injunction and
rested its case.14

Thereafter, the trial court rendered its Decision,15 dated January 28, 1998, in favor of respondent.
Petitioners were ordered to observe the required distance from the property boundary line and pay
respondent actual damages of 1,000,000.00, exemplary damages of 100,000.00 and attorneys fees
of 50,000.00, plus costs.

Respondent moved for the execution of the decision in due course. The trial court required
petitioners to comment on the motion16 but they failed to do so. On August 15, 1998, the trial court
granted the motion.17 The Writ of Execution was issued and served upon all the petitioners.18 A Notice
of Levy was served upon the Register of Deeds of Meycauayan, Bulacan, and the Transfer Certificates
of Title of the properties owned by petitioners were levied upon, the properties sold on execution and
bought by respondent as the highest bidder.19

On October 7, 1999, petitioners filed a Petition to Annul Decision with Prayer to Lift Writ of Execution
with Application for Preliminary Injunction/Temporary Restraining Order before the Court of Appeals.
Petitioners alleged that they did not receive notice of the pre-trial conference and were not informed
by their former counsel, Atty. Natividad, of his receipt of such notice and that their presence was
required in said proceeding. They likewise claimed that they never received notice of the judgment by
default. Neither did Atty. Natividad inform them of the judgment. They pointed out that they learned
of the decision only sometime in October 1998 through respondents former counsel, Atty. Noel
Darren C. Damian, who in his visit to petitioner Celing Martinez house, informed them of the default
judgment and assured them that despite the decision, respondent would still settle the case amicably
with them. Relying on the assurances of respondents former counsel, petitioners waited for
whatever action that respondents former counsel would take. To their surprise, they received on
September 22, 1999 a copy of the Notice of Auction Sale.

The Court of Appeals dismissed the petition20 as it found that petitioners failed to prove extrinsic
fraud. Petitioners did not specify or establish any fraudulent act committed by the respondent which
prevented them from fully exhibiting their side of the case. The remedy of annulment of judgment
may be availed of only when the ordinary remedies of new trial, appeal, petition for relief or other
appropriate remedies are no longer available through no fault of the petitioner. 21 Petitioners failed to
avail of these remedies without sufficient justification, thus they could not now resort to an action for
annulment of judgment. The Court of Appeals also observed that petitioners did not act with
prudence and diligence with regard to their case since they left the lawsuit entirely in the hands of
their former counsel and did not even inquire from him about its status. Thus, the appellate court
ruled, petitioners were bound by the conduct, negligence and mistake of their former counsel.
Petitioners moved for reconsideration but the motion was denied.22

Petitioners now assail the Court of Appeals dismissal of the petition to annul judgment.

Petitioners question the appellate courts conclusion that they lacked prudence and diligence in
relying on the representation of their former counsel, Atty. Elison G. Natividad. He is the petitioners
25
second cousin. Petitioners believe that their familial relationship with their lawyer is more than
enough reason for them to entrust their case to him. Their blood ties assured them that Atty.
Natividad would take care of the case for them especially since they finished only third grade
elementary schooling and have very limited knowledge of legal procedure.

While it may be that petitioners, being uneducated, believed that their former counsel was properly
handling their case, they appear to have been negligent as well. Even though they received various
notices and orders of the trial court, they did not exhibit even a modicum of curiosity as to the
progress of the suit by inquiring from their former counsel what the notices they received signified.
This lack of concern or complacency is likewise demonstrated by their inaction when they were
allegedly informed by respondents counsel of the judgment by default against them. Petitioners did
not even seek to confirm this piece of news with their counsel. Petitioners total reliance on the
supposed assurance of amicable settlement by respondents counsel despite the judgment by default
against them is unusual for and atypical of defendants in civil cases. Petitioners manifestly failed to
display the expected degree of concern or attention to their case. They did practically nothing to
protect their interest in the litigation.

As clients, petitioners should have maintained contact with their counsel from time to time, and
informed themselves of the progress of their case, thereby exercising that standard of care "which an
ordinarily prudent man bestows upon his business."23

Next, petitioners contend that respondents former counsel, Atty. Damian, committed extrinsic fraud
when he informed them sometime in October 1998 of the unfavorable decision against them and
assured them that despite the judgment by default, respondent will still settle the case amicably with
them. Relying on Atty. Damians assurance, petitioners failed to appeal the judgment by default until
the same became final and executory. Atty. Damians actions allegedly caused petitioners to be
denied due process.

The issue in every petition for annulment of judgment is whether extrinsic fraud attended the
rendition of the assailed decision. Extrinsic fraud refers to any fraudulent act of the prevailing party in
litigation committed outside of the trial of the case, whereby the defeated party is prevented from
fully exhibiting his side of the case by fraud or deception practiced on him by his opponent, such as by
keeping him away from court, by giving a false promise of a compromise, or where the defendant
never had any knowledge of the suit, being kept in ignorance by the acts of the plaintiff, or where an
attorney fraudulently or without authority connives at his defeat.24 These instances show that there
was never really a real contest in the trial or hearing of the case so that the former judgment should
be annulled and the case set for a new and fair hearing.25

By no stretch of the imagination can the alleged acts of counsel for respondent constitute extrinsic
fraud. Extrinsic fraud requires that the losing party be prevented by the prevailing party from fully
exhibiting his defense before the court. Here, when the purported fraudulent act was committed on
October 1998, the judgment by default had long become final and executory on January 28, 1998. The
records show that petitioners were served a copy of the decision through their former counsel Atty.

26
Natividad who received it on April 27, 1998.26 Petitioners had fifteen (15) days within which to appeal
the decision or to file a motion for new trial or reconsideration but they failed to do so.

In other words, the alleged fraudulent act came after the parties were allowed to present their
evidence, or were given the opportunity to do so, after the petitioners were declared as in default for
failure to appear at the pre-trial conference, and after the questioned decision already became final
and executory and no longer appealable. Other than this allegation, petitioners do not cite any other
specific act of respondents counsel before or during trial that would constitute extrinsic fraud.
Petitioners claim that Atty. Damians alleged acts caused them to dispense with an appeal of the
judgment by default, therefore, is patently without merit.

Finally, petitioners argue that they were denied their right to be heard when they were not given
notice to attend the pre-trial conference, and that the trial court relied solely on the evidence
presented by respondent without giving petitioners the opportunity to cross-examine respondents
witness.

The records belie petitioners claim that they never received notices informing them of the pre-trial.
Registry return cards bearing the signatures of petitioners representative and lawyer Atty. Natividad
prove their receipt of the notices diligently sent by the trial court. When the trial court declared
petitioners as in default for the second time for their continued failure to attend pre-trial, it did so in
accordance with Rule 18 of the 1997 Rules of Civil Procedure and with due regard to the
constitutional guarantee of due process. Petitioners were given the opportunity to be heard and to
submit evidence in their defense. The trial court gave petitioners every chance to air their side and
even reconsidered its first order declaring petitioners as in default. Nonetheless, petitioners and their
counsel failed to take advantage of such opportunity. As, they were declared as in default, they were
not entitled to present evidence in their behalf or to cross-examine respondents witness. Under
Section 5, Rule 18 of the 1997 Rules of Civil Procedure, failure on the part of the defendants and their
counsel to appear at the pre-trial shall be cause to allow the plaintiff to present his evidence ex parte,
and the court to render judgment on the basis thereof. Plainly, petitioners cannot complain that they
were denied due process.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

G.R. No. 192716 June 13, 2012

ELOISA MERCHANDISING, INC. and TREBEL INTERNATIONAL, INC., Petitioners,

vs.
BANCO DE ORO UNIVERSAL BANK and ENGRACIO M. ESCASINAS, JR., in his capacity as Ex-Officio
Sheriff of the RTC of Makati City, Respondents.

27
 DECISION

VILLARAMA, JR., J.:

Assailed in this petition for review on certiorari under Rule 45 are the Decision1 dated March 30, 2010
and Resolution2 dated June 15, 2010 of the Court of Appeals (CA) in CA-G.R. CV No. 89779. The CA
affirmed the trial courts dismissal of petitioners complaint on the ground of failure to prosecute.

On November 11, 1993, petitioner Eloisa Merchandising, Inc. (EMI) executed in favor of respondent
Banco de Oro Universal Bank (BDO) a real estate mortgage (REM) over its properties located at No.
129 Neptune St., Bel-Air Village II, Makati City, Metro Manila and covered by Transfer Certificate of
Title Nos. 157092 and 157093. The REM was further amended on May 16, 1996, December 23, 1996,
September 16, 1998 and July 2, 1999 to secure the principal obligation totalling Twenty-Nine Million
Nine Hundred Thousand Pesos (29,900,000.00) drawn from the Credit Line Agreement of EMI and
Term Loan Agreement of Trebel International, Inc. (Trebel). EMI likewise executed a Continuing
Suretyship in favor of BDO to secure the credit accommodation extended by BDO to petitioners
affiliate, Trebel.3

On January 10, 2002, BDO initiated foreclosure proceedings by filing an application for extrajudicial
foreclosure before the Office of the Ex-Officio Sheriff of the Regional Trial Court (RTC) of Makati City.4
Accordingly, respondent Engracio M. Escasinas, Jr. issued a notice setting the auction sale of the
mortgaged property on March 7, 2002.

On March 1, 2002, petitioners filed a Complaint5 for "annulment of Real Estate Mortgage, Injunction
& Damages With Prayer for Issuance of a Writ of Preliminary Injunction and/or Temporary Restraining
Order," docketed as Civil Case No. 02-245 of the RTC of Makati City, Branch 59. Petitioners alleged the
following as grounds for nullity of the REM: (1) the contract is in the nature of a third-party mortgage
to secure the loans of Trebel despite the fact that EMI is not in the suretyship business; (2) after
maturity of the loans, BDO granted Trebel extensions of time to pay without notice to EMI, thus
extinguishing the corporate guaranty or suretyship and REM, pursuant to Art. 2079 of the Civil Code;
(3) under the promissory notes, BDO unilaterally fixed an adjustable, "floating" interest rate on each
interest period as may be favorable to it, a potestative condition which is null and void under Art.
1308 of the Civil Code; and (4) the penalty of 3% per month or 36% per annum is exorbitant and
excessive. Petitioners further claimed that BDO acted with malice and evident bad faith in initiating
the extrajudicial foreclosure proceedings.

BDO filed a motion to dismiss6 on the ground of lack of cause of action which can be determined from
the facts alleged in the complaint and considering all annexes, motions and evidence on record.

On May 7, 2002, petitioners filed an amended complaint7 which impleaded the Register of Deeds and
alleged that the mortgaged property was sold at a public auction on March 7, 2002.

28
On July 18, 2002, petitioners filed a "Motion for Leave to File and to Admit Second Amended
Complaint,"8 which averred that the Register of Deeds of Makati City has consolidated the titles over
the foreclosed properties and issued new titles in the name of BDO.

On November 28, 2002, the trial court issued an order9 granting the motion to admit second
amended complaint and denying the motion to dismiss. BDO was directed to file a responsive
pleading.

On January 17, 2003, BDO filed its Answer10 traversing the allegations of the complaint and asserting
that: (1) there was only forbearance on BDOs part before filing the extrajudicial foreclosure due to
insistent request of petitioners who repeatedly promised to settle their obligations, and for
humanitarian reasons; (2) the loan documents clearly stated that no prior demand is necessary before
the entire obligation becomes due and demandable; (3) on June 22, 1999, Trebel obtained a "Term
Loan Agreement" in addition to the previously granted 5,000,000.00 Credit/Trust Receipts Line
granted by BDO, from which Trebel availed of 19,900,000.00, part of which was used to pay off
EMIs loans; in consideration thereof, EMI executed a Continuing Suretyship and the Fourth Amended
REM to the extent of 29,900,000.00 in favor of BDO; (4) Trebel subsequently made several drawings
from its own credit lines in the total amount of 29,880,000.00 under Promissory Notes (PNs)
executed on various dates; (5) because Trebel failed to satisfy its loan obligations under the aforesaid
PNs, BDO was compelled to file an application for extrajudicial foreclosure of the REM on January 10,
2002, and BDO won as the highest bidder during the public auction sale; (6) EMI was not a third-party
mortgagor considering that it secured its own obligations and Trebel has assumed its obligations in
full; the veil of corporate fiction maybe pierced in this case, and EMI is already estopped from raising
the issue of ultra vires act after Trebel had defaulted on its obligations; (7) with the execution of the
Continuing Suretyship, EMI bound itself solidarily with the principal debtor, Trebel, and the right of
BDO to proceed against EMI as surety exists independently of its right to proceed against Trebel; EMI
as surety is not even entitled to a notice of the principals default; (8) the Conforme Letter dated June
14, 1999 sent by BDO to EMI showed the consent of Mr. Roberto L. Del Rosario (President) and Ms.
Emma M. Del Rosario (Finance Manager) who both signed the said letter which provides for a floating
interest rate based on the 364-day Treasury Bill Rates plus 4% or the BDO Reference Rate plus 7.5%;
T-Bill Rates are one of the most objective and generally used standard for interest rates; and (9) the
liquidated penalty was part of the parties agreement, which will not accrue until Trebel defaults on
its obligations with BDO.

In the Notice of Pre-Trial11 dated January 22, 2003, the trial court set the pre-trial conference on
February 27, 2003. In compliance with the trial courts directive, the parties submitted their
respective pre-trial briefs.

On March 13, 2003, petitioners filed a "Motion to Admit Supplemental Complaint" which further
alleged that BDOs petition for issuance of a writ of possession was granted by the RTC of Makati City,
Branch 143 in a Decision dated February 18, 2003. EMI reiterated that its rights as surety-mortgagor
were violated in the railroaded ex parte proceedings implementing the writ of possession even as
EMIs pending motion for reconsideration was still unresolved by Branch 143.12

29
In its Order13 dated June 19, 2003, the trial court denied the motion to admit supplemental
complaint on the ground that the matters raised in the supplemental complaint were improper as
they pertain to issuances by another branch in a separate petition for writ of possession.

At the scheduled pre-trial conference on June 26, 2003, on motion of petitioners, they were allowed
to present evidence exparte in view of the absence of BDO which was non-suited. In its motion for
reconsideration, BDOs counsel cited extraordinary and non-moving traffic as reason for his failure to
arrive on time for the pre-trial conference. The trial court, in an Order dated August 27, 2003, granted
the said motion, reinstated the case and set the case again for pre-trial conference on September 26,
2003, later moved to November 10, 2003, and finally rescheduled to January 12, 2004 by agreement
of the parties.14

On July 16, 2003, petitioners filed a motion for reconsideration of the June 19, 2003 Order denying
their motion to admit supplemental complaint; BDO filed its opposition to the said motion.

For failure of the petitioners to appear despite due notice at the scheduled pre-trial conference on
January 12, 2004, the case was ordered dismissed.15 In their motion for reconsideration, petitioners
counsel claimed that his failure to attend was due to his accidental falling on the stairs of his house in
the morning of January 12, 2004, due to which he had to be attended by a "hilot". In an Order dated
May 7, 2004, the trial court reconsidered the dismissal and scheduled anew the pre-trial conference
on June 29, 2004, which date was subsequently reset to August 3, 2004 for lack of proof of service
upon petitioners counsel.16

Since petitioners again failed to appear on the re-scheduled pre-trial conference on August 3, 2004,
the trial court issued the following Order:

When this case was called for pre-trial conference, only counsel for the defendants appeared. There
was no appearance on the part of the plaintiffs, despite the fact that as early as June 29, 2004, they
were notified for todays hearing. The Court, however, is in receipt of a Motion to Reset filed by
counsel for the plaintiff, alleging among others, that he is to appear at the MTC of San Jose, Batangas,
which was set earlier than the hearing of this case. The Court finds the ground not meritorious
because counsel of plaintiffs in open Court on June 29, 2004 signed the notification for the hearing of
this case. Counsel could have objected to the chosen date if indeed he was not available. Likewise, the
records will show that on January 12, 2004, this case was also dismissed for failure of the plaintiffs to
appear for pre-trial conference. This should have served as a warning to herein plaintiffs.

In view hereof, upon motion of the herein defendants, the above-entitled case is hereby ordered
dismissed pursuant to Section 5, Rule 18 of the Rules of Court.

SO ORDERED.17 (Italics supplied.)

Petitioners moved to reconsider the above order, their counsel alleging that he had misplaced or lost
his calendar book and could not have ascertained the availability of his schedule. Stressing that he

30
had no intention to ignore the hearing as in fact he filed a motion to reset the same six days prior to
the scheduled hearing, petitioners counsel pleaded for the kind indulgence of the court.

On December 29, 2004, the trial court issued an Order18 granting petitioners motion for
reconsideration "in the interest of justice" and reinstating the case. The trial court, however directed
petitioners to be "more circumspect in attending to this case."

In its Order19 dated September 20, 2005, the trial court dismissed the case for failure of petitioners
to prosecute their case. Citing the two previous dismissals on account of petitioners non-appearance
at the pre-trial conference, the trial court said that "[f]rom the date of its second reconsideration of
the order of dismissal on December 29, 2004 until today, plaintiffs did not do anything to prosecute
the instant case."

Petitioners filed a motion for reconsideration in which they averred that:

1. After the reconsideration of the Order of dismissal on December 29, 2004, the plaintiffs
counsel, Atty. Anselmo A. Marqueda, on several occasion, passed by the court and diligently
followed-up the hearing of this case. He was assured by an officer of the court to just wait for
the notice of hearing that they will issue in the instant case.

2. While waiting for the notice of hearing from this court, the respective counsels of the parties
negotiated in earnest for an amicable settlement of the case. During the last telephone
conversation with Atty. Roy P.R. Talao, the defendants bank counsel, and the undersigned
agree on some proposals for settlement which are however subject to final confirmation of
their respective clients. The plaintiff believe that the parties are very close to agree and enter
into an amicable settlement of this case.

3. Apart from the reliance of the undersigned counsel on the statement of the court officer to
just wait for the notice of hearing, the undersigned counsel suffered a handicap in making a
personal follow-up of this case because of his numerous travels and lengthy sojourn in the
province due to family conflict and death of a member of the family.

x x x x20

In its Order21 dated April 10, 2006, the trial court denied petitioners motion for reconsideration, as
follows:

x x x Records show that this case has been dismissed thrice (January 12, 2004; August 3, 2004 and
September 20, 2005). The first two dismissals were due to the failure of the plaintiffs to appear during
the pre-trial conference despite notice. In both cases plaintiffs were admonished to be more
circumspect in attending to this case. This time the instant case was dismissed due to inaction of
herein plaintiffs for unreasonable length of time.

31
The Court has been lenient for quite sometime however, plaintiffs seemed inclined to abuse the
Courts leniency. Finding no compelling reason to reconsider the assailed order, motion is hereby
DENIED.

SO ORDERED.

Aggrieved, petitioners appealed to the CA arguing that the trial court erred in dismissing the case for
failure to prosecute considering that (1) the trial court has not yet resolved petitioners motion for
reconsideration of the order denying their motion to admit supplemental complaint; (2) petitioners
are very much interested to prosecute this case to protect their rights in the premises; (3) petitioners
have valid and meritorious causes of action; (4) petitioners may not be deprived of their day in court
by the negligence of their counsel; and (5) non-suit or default judgment is not encouraged as it
violates due process.22

By Decision dated March 30, 2010, the CA affirmed the trial courts dismissal of the case. The CA said
that petitioners cannot justify their prolonged inaction by belatedly raising as issue the pending
motion for reconsideration from the trial courts denial of their motion to admit the supplemental
complaint, when all along they were aware that the case was at the pre-trial stage as in fact the case
was twice dismissed for their failure to attend the pre-trial conference. Under the circumstances
stated in its September 20, 2005 Order, the CA held that the trial court cannot be faulted for
dismissing the case on the ground of petitioners failure to prosecute their action, citing this Courts
ruling in Olave v. Mistas.23

The CA also denied the motion for reconsideration filed by the petitioners.

Petitioners contend that the only reason for the trial courts dismissal of the case was the failure of
their counsel to move to set the case for pre-trial. However, Section 1, Rule 18 of the 1997 Rules of
Civil Procedure, as amended, imposing upon the plaintiff the duty to promptly move to set the case
for pre-trial, had been repealed and amended by A.M. No. 03-1-09-SC which took effect on August 16,
2004. This amendment to the rule on pre-trial now imposes on the clerk of court the duty to issue a
notice of pre-trial if the plaintiff fails to file a motion to set the case for pre-trial conference.

Petitioners point out that the case was not yet ripe for pre-trial because of the unresolved pending
motion for reconsideration of the trial courts denial of the motion to admit supplemental complaint.
In any event, petitioners assert that they are very much interested to prosecute the case as they have
presented evidence in their application for the issuance of TRO and writ of preliminary injunction,
amended the complaint several times, their representatives have always been attending as notified
by their lawyers, and their counsel was following up the case but the Clerk of Court could not set the
case for pre-trial because of the pending motion. As to the prior dismissals of the case, these should
not be taken as badges of failure to prosecute because these had been set aside on meritorious
grounds. The circumstances that respondent BDO itself had been declared in default for failure to
appear at the pre-trial on June 26, 2003 and has asked repeatedly for extensions of time from the
court, the ongoing negotiations with BDO for amicable settlement even at the appeal stage, and

32
petitioners meritorious causes of action, justify a liberal application of the rules so that petitioners
will be given their day in court.

Respondent BDO, on the other hand, asserts that the failure of petitioners to move for the setting of
the case for pre-trial conference, coupled with their repeated violations of the Rules which prompted
the trial court to dismiss their complaint twice, are sufficient grounds for the trial court to finally
dismiss the complaint. A.M. No. 03-1-09-SC did not remove plaintiffs obligation to set the case for
pre-trial. Petitioners claim that they relied on a supposed assurance by a court personnel to set the
case for pre-trial is doubtful, aside from being contradictory to the admission of petitioners counsel
that he "suffered a handicap in making a personal follow-up of this case because of [his] numerous
travels and lengthy sojourn in the province due to family conflict and death of a member of the
family."

As to the alleged negotiations for an amicable settlement, respondent admitted there were talks
during court hearings and telephone calls but these were casual and at best, exploratory. No serious
offer was made by petitioners, much less concretized. At any rate, even if true, such talks is not a
ground to tarry and delay the prosecution of the case which had been pending with the trial court for
more than three years and had not even left the pre-trial stage. If indeed petitioners were sincere in
their desire to settle, they should have promptly moved for the setting of pre-trial so that the case
can be referred for mandatory mediation proceedings.

The petition has no merit.

Under Section 3,24 Rule 17 of the 1997 Rules of Civil Procedure, as amended, the failure on the part
of the plaintiff, without any justifiable cause, to comply with any order of the court or the Rules, or to
prosecute his action for an unreasonable length of time, may result in the dismissal of the complaint
either motu proprio or on motion by the defendant. The failure of a plaintiff to prosecute the action
without any justifiable cause within a reasonable period of time will give rise to the presumption that
he is no longer interested to obtain from the court the relief prayed for in his complaint; hence, the
court is authorized to order the dismissal of the complaint on its own motion or on motion of the
defendants. The presumption is not, by any means, conclusive because the plaintiff, on a motion for
reconsideration of the order of dismissal, may allege and establish a justifiable cause for such
failure.25 The burden to show that there are compelling reasons that would make a dismissal of the
case unjustified is on the petitioners.26

Under Section 1, Rule 18 of the 1997 Rules of Civil Procedure, as amended, it is the duty of the
plaintiff, after the last pleading has been served and filed, to promptly move ex parte that the case be
set for pre-trial. On August 16, 2004, A.M. No. 03-1-09-SC (Re: Proposed Rule on Guidelines to be
Observed by Trial Court Judges and Clerks of Court in the Conduct of Pre-Trial and Use of Deposition-
Discovery Measures) took effect, which provides that:

Within five (5) days from date of filing of the reply, the plaintiff must promptly move ex parte that the
case be set for pre-trial conference. If the plaintiff fails to file said motion within the given period, the
Branch COC shall issue a notice of pre-trial.
33
We note that when the above guidelines took effect, the case was already at the pre-trial stage and it
was the failure of petitioners to set the case anew for pre-trial conference which prompted the trial
court to dismiss their complaint.

In Olave v. Mistas,27 this Court said that even if the plaintiff fails to promptly move for pre-trial
without any justifiable cause for such delay, the extreme sanction of dismissal of the complaint might
not be warranted if no substantial prejudice would be caused to the defendant, and there are special
and compelling reasons which would make the strict application of the rule clearly unjustified. In the
more recent case of Espiritu v. Lazaro,28 this Court affirmed the dismissal of a case for failure to
prosecute, the plaintiff having failed to take the initiative to set the case for pre-trial for almost one
year from their receipt of the Answer. Although said case was decided prior to the effectivity of A.M.
No. 03-1-09-SC, the Court considered the circumstances showing petitioners and their counsels lack
of interest and laxity in prosecuting their case.

In this case, while there was no substantial prejudice caused to herein respondent, who has already
consolidated the ownership of petitioners properties, secured new titles in its name and successfully
implemented a writ of possession issued by another branch, there was neither patent abuse in the
trial courts dismissal of the complaint for the third time, the earlier two dismissals having been
precipitated by petitioners non-appearance at the pre-trial conference. Contrary to petitioners
assertion, the trial court did not find their offered excuses as meritorious or justifiable; the trial court
in the exercise of discretion simply reinstated the case "in the interest of justice" but explicitly warned
petitioners to be more circumspect in attending to the case.

However, despite the trial courts leniency and admonition, petitioners continued to exhibit laxity and
inattention in attending to their case. Assuming domestic problems had beset petitioners counsel in
the interregnum, with greater reason should he make proper coordination with the trial court to
ensure his availability on the date to be chosen by the trial court for the long-delayed conduct of a
pre-trial conference. Petitioners themselves did nothing to get the case moving for nine months and
set the case anew for pre-trial even as BDO was already seeking their judicial ejectment with the
implementation of the writ of possession issued by Branch 143. Such circumstance also belies their
pretense that the parties were then still negotiating for a settlement. We have held that a party
cannot blame his counsel when he himself was guilty of neglect; and that the laws aid the vigilant, not
those who slumber on their rights. Vigilantibus sed non dormientibus jura subveniunt.29

We also agree with the CA that petitioners are belatedly raising as issue the unresolved motion for
reconsideration of the denial of petitioners motion to admit supplemental complaint. Petitioners did
not even file a motion to resolve the said pending incident which, in any event, could have been
brought to the trial courts attention had petitioners acted promptly to have the case set anew for
pre-trial conference soon after or within a reasonable time from the reinstatement of the case on
December 29, 2004.

While under the present Rules, it is now the duty of the clerk of court to set the case for pre-trial if
the plaintiff fails to do so within the prescribed period, this does not relieve the plaintiff of his own
duty to prosecute the case diligently. This case had been at the pre-trial stage for more than two
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years and petitioners have not shown special circumstances or compelling reasons to convince us that
the dismissal of their complaint for failure to prosecute was unjustified.

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated March 30, 2010 and
Resolution dated June 15, 2010 of the Court of Appeals in CA-G.R. CV No. 89779 are hereby
AFFIRMED and UPHELD.

Costs against the petitioners.

SO ORDERED.

G.R. No. 156606 August 17, 2007

REPUBLIC OF THE PHILIPPINES, represented by the Regional Executive Director, Department of

Environment and Natural Resources, Regional Office IV, Petitioner,
vs.
ILDEFONSO T. OLETA, Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari1 of the Decision2 dated 30 July 2002 and the Resolution3
dated 3 January 2003 of the Court of Appeals in CA-G.R. SP No. 66714. The 30 July 2002 Decision set
aside the 24 July 2001 and 6 September 2001 Orders of the Regional Trial Court, Branch 80, Morong,
Rizal (trial court) which reinstated the complaint filed by petitioner Republic of the Philippines
(petitioner) and denied respondent Ildefonso Oletas (respondent) motion for reconsideration,
respectively. The 3 January 2003 Resolution denied petitioners motion for reconsideration.

The Facts

On 29 December 1999, petitioner filed a complaint for cancellation of free patent, original certificate
of title, and reversion against respondent and the Register of Deeds of Rizal. On 17 April 2000,
respondent filed his answer. Thereafter, the trial court issued an Order dated 4 July 2000 directing
petitioner "to take the legal steps so that the case can be expedited."

On 11 January 2001, the trial court issued an Order4 dismissing the complaint without prejudice
because of petitioners failure to set the case for pre-trial. Upon petitioners motion and over
respondents opposition, the trial court reinstated the complaint on 15 March 2001. 5

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Pre-trial was set for 17 May 2001. However, on 8 May 2001, petitioner moved that the pre-trial be
reset to 14 June 2001 at 10:00 a.m. The trial court granted petitioners motion and reset the pre-trial
to 14 June 2001 at 8:30 a.m. The trial court warned petitioner that failure to appear at the scheduled
pre-trial would constrain the trial court to act accordingly.

On the 14 June 2001 pre-trial, petitioner and petitioners counsel failed to appear. Records also
showed that petitioner failed to file a pre-trial brief. In an Order6 dated the same day, the trial court
dismissed the complaint for failure to prosecute.

Petitioner filed a motion for reconsideration. Petitioners counsel explained that he arrived at the pre-
trial conference at 9:55 a.m. because he expected the pre-trial to start at 10:00 a.m., the time
requested in the motion for postponement. Petitioner also explained that the pre-trial brief was filed
on 8 June 2001 by registered mail and that it was unfortunate that neither the trial court nor
respondent received it on time. Petitioner asked the trial court to reconsider its 14 June 2001 Order
and reset the pre-trial to 2 August 2001.

In its 24 July 2001 Order,7 the trial court, in the interest of substantial justice, granted petitioners
motion and reinstated the complaint. Respondent filed an Urgent Motion for Reconsideration. In its 6
September 2001 Order,8 the trial court denied respondents motion.

On 18 September 2001, respondent filed a petition9 for certiorari with prayer for preliminary
injunction or temporary restraining order with the Court of Appeals. Respondent alleged that the trial
court acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it issued
the 24 July 2001 and 6 September 2001 Orders because the trial court disregarded the rules on pre-
trial.

In its 30 July 2002 Decision, the Court of Appeals granted the petition and set aside the 24 July 2001
and 6 September 2001 Orders of the trial court. The Court of Appeals ruled that the trial court
"abused its discretion" when it reinstated the complaint even if petitioners counsel had no special
authority to represent plaintiff at pre-trial. The Court of Appeals added that the trial court had no
discretion on the matter of petitioners failure to file its pre-trial brief on time.

Petitioner filed a motion for reconsideration which the Court of Appeals denied in its 3 January 2003
Resolution.

Hence, this petition.

The Issue

Petitioner raises the sole issue of whether the Court of Appeals erred in setting aside the 24 July 2001
and 6 September 2001 Orders of the trial court.

The Ruling of the Court

36
The petition is meritorious.

On Failure to File Pre-trial Brief

Section 6, Rule 1810 of the Rules of Court (Rules) mandates that parties shall file with the court and
serve on the adverse party their pre-trial briefs at least three days before the scheduled pre-trial. The
Rules also provide that failure to file the pre-trial brief shall have the same effect as failure to appear
at the pre-trial.11 Therefore, plaintiffs failure to file the pre-trial brief shall be cause for dismissal of
the action.12

The Court of Appeals erred in ruling that the trial court had "no discretion" on the matter of a partys
failure to file a pre-trial brief. If the trial court has discretion to dismiss the case because of plaintiffs
failure to appear at pre-trial,13 then the trial court also has discretion to dismiss the case because of
plaintiffs failure to file the pre-trial brief. Moreover, whether an order of dismissal should be
maintained under the circumstances of a particular case or whether it should be set aside depends on
the sound discretion of the trial court.14

In this case, petitioner sufficiently explained that the pre-trial brief was sent by registered mail to the
trial court and respondent on 8 June 2001. That the trial court and respondent did not receive the
pre-trial brief at least three days prior to the pre-trial was already beyond petitioners control.
Therefore, the trial court had discretion to lift the order of dismissal after giving credence to
petitioners explanation.

On the Absence of a Special Power of Attorney

Petitioners counsel admits that he was not equipped with a special power of attorney when he
appeared at the 14 June 2001 pre-trial. However, petitioners counsel claims that the special authority
need not be in writing and may be established by competent evidence or subsequently ratified by the
party concerned.15

Section 4, Rule 18 of the Rules provides:

SEC. 4. Appearance of parties. It shall be the duty of the parties and their counsels to appear at the
pre-trial. The non-appearance of a party may be excused only if a valid cause is shown therefor or if a
representative shall appear in his behalf fully authorized in writing to enter into an amicable
settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or
admissions of facts and of documents.

Under the old rules, a representative was allowed to establish the authority needed by showing either
a written special power of attorney or competent evidence other than the self-serving assertions of
the representative.16 However, the new rules require nothing less than the authority be in writing. As
held in United Coconut Planters Bank v. Magpayo,17 "the rules now require the special power of
attorney be in writing because the courts can neither second-guess the specific powers given to the

37
representative, nor can the courts assume that all the powers specified in Section 4 of Rule 18 are
granted by the party to his representative."

The Court of Appeals ruled that the trial court "abused its discretion" when it reinstated the
complaint despite the fact that petitioners counsel had no special authority to represent petitioner at
pre-trial. However, abuse of discretion is not sufficient by itself to justify the issuance of a writ of
certiorari. The abuse must be grave and patent, and it must be shown that the discretion was
exercised arbitrarily and despotically.18 In this case, there is no showing that the trial court gravely
abused its discretion in reinstating petitioners complaint.1avvphi1

Moreover, in Calalang v. Court of Appeals,19 the Court ruled that "unless a partys conduct is so
negligent, irresponsible, contumacious, or dilatory as to provide substantial grounds for dismissal for
non-appearance, the courts should consider lesser sanctions which would still amount into achieving
the desired end." In this case, there is also no showing that petitioner willfully and flagrantly
disregarded the trial courts authority. There is also no indication that petitioner had manifested lack
of interest to prosecute or acted deliberately with the intention to delay the proceedings. Therefore,
the trial court acted accordingly when it set aside the order of dismissal and ordered the
reinstatement of petitioners complaint.

We are not saying that adherence to the Rules could be dispensed with. However, exigencies and
situations might occasionally demand flexibility in their application.20 In this instance, substantial
justice can be best served if both parties are given the full opportunity to litigate their claims in a full-
blown trial.

WHEREFORE, we GRANT the petition. We SET ASIDE the 30 July 2002 Decision and 3 January 2003
Resolution of the Court of Appeals in CA-G.R. SP No. 66714. We REINSTATE the 24 July 2001 and 6
September 2001 Orders of the Regional Trial Court, Branch 80, Morong, Rizal.

SO ORDERED.

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