Dotmatrix Trading v. Legaspi (October 26, 2009) DOCTRINE: Litis pendentia literally means a pending suit.

As a ground for dismissal, it refers to a situation where 2 actions are pending between the same parties for the same cause of action, so that one becomes unnecessary and vexatious. This rule is based on policy against multiplicity of suits. In earlier cases, the court applied the priority-in-time rule to determine which case should be dismissed. Later, however, the more appropriate action test and anticipatory test rules were applied to determine which action should be dismissed. Under the established jurisprudence on litis pendentia, the following considerations predominate in the ascending order of importance in determining which action should prevail: (1) the date of filing, with preference generally given to the first action filed to be retained; (2) whether the action sought to be dismissed was filed merely to preempt the later action or to anticipate its filing and lay the basis for its dismissal; and (3) whether the action is the appropriate vehicle for litigating the issues between the parties. NATURE: Petition for review on certiorari PONENTE: Brion FACTS: 1. Petitioner Dotmatrix was engaged in the business of buying and selling commodities. Legaspi was proprietor of Big J Farms and RBL Farm, petitioners supplier of day-old chicks from Sept to Dec 2001. 2. In May 2002, Legaspi sent a demand letter to Dotmatrix for payment of delivered chicks. Dotmatrix replied that they have already paid 1.36M but Legaspi was only able to deliver 1.136M worth of chicks, leaving deficiency of 223Ks worth of chicks. Dotmatrix demanded delivery of deficiency or a refund. When neither complied with others demands, both went to court. 3. June 11, 2002, Dotmatrix filed in Tarlac RTC a complaint for sum of money against Legaspi. It sought return of overpayment plus damages. 4. June 19, 2002, Legaspi filed in Malolos RTC a complaint for sum of money against Dotmatrix. He alleged full delivery but that he was not fully paid so sought payment of balance plus damages.

5. Upon receipt of summons on August 21, 2002, Legaspi filed a motion to dismiss the case before Tarlac RTC on the ground of litis pendentia because it is merely anticipatory and defensive of Legaspis claim for collection in the case before Malolos RTC. RTC Ruling: dismissed case in Tarlac RTC on the ground of litis pendentia. Found that case was just anticipatory of collection suit to be filed by Legaspi and that Dotmatrix filed case only after receiving demand letter from Legaspi. RTC-> RTC MR (denied) -> SC (petition for review on certiorari) ISSUES: Whether Tarlac RTC case (buyers action to recover overpayment) filed ahead of Malolos RTC case (sellers collection su it)- should be dismissed on the ground of litis pendentia. HELD: Elements of litis pendentia are present. RATIO/RULING: Litis pendentia is a Latin term, which literally means "a pending suit referred to in some decisions as lis pendens and auter action pendant. As a ground for the dismissal of a civil action, it refers to the situation where two actions are pending between the same parties for the same cause of action, so that one of them becomes unnecessary and vexatious. It is based on the policy against multiplicity of suits. To constitute litis pendentia, not only must the parties in the two actions be the same; there must as well be substantial identity in the causes of action and in the reliefs sought. Further, the identity should be such that any judgment that may be rendered in one case, regardless of which party is successful, would amount to res judicata in the other. Undisputably, all requisite are present in this case. Parties are the same. They are suing each other for sums of money which arose from their supply contract. Reliefs prayed for are based on same facts and identity exists on the rights asserted. Any judgment in one case would necessarily amount to res judicata in the other. The rule on litis pendentia does not require that the case later in time should yield to the earlier case; what is required merely is that there be another pending action, not a prior pending action. Neither is it required that the party be served with summons before lis pendens can apply; it is the filing of the action, not the receipt of summons, which determines priority in date.

Early on, we applied the principle of Qui prior est tempore, potior est jure (literally, he who is before in time is better in right ) in dismissing a case on the ground of litis pendentia. In early cases, we gave preference to the first action filed to be retained. The "priority-in-time rule," however, is not absolute. In the 1956 case of Teodoro v. Mirasol,17 we deviated from the "priority-in-time rule" and applied the "more appropriate action test" and the "anticipatory test." The "more appropriate action test" considers the real issue raised by the pleadings and the ultimate objective of the parties; the more appropriate action is the one where the real issues raised can be fully and completely settled. In Teodoro, the lessee filed an action for declaratory relief to fix the period of the lease, but the lessor moved for its dismissal because he had subsequently filed an action for ejectment against the lessee. We noted that the unlawful detainer suit was the more appropriate action to resolve the real issue between the parties whether or not the lessee should be allowed to continue occupying the land under the terms of the lease contract; this was the subject matter of the second suit for unlawful detainer, and was also the main or principal purpose of the first suit for declaratory relief. In the "anticipatory test," the bona fides or good faith of the parties is the critical element. If the first suit is filed merely to preempt the later action or to anticipate its filing and lay the basis for its dismissal, then the first suit should be dismissed. In Teodoro, we noted that the first action, declaratory relief, was filed by the lessee to anticipate the filing of the second action, unlawful detainer, considering the lessors letter informing the lessee that the lease contract had expired. A more recent case Abines v. Bank of the Philippine Islands22 in 2006 saw the application of both the "priority-in-time rule" and the "more appropriate action test." In this case, the respondent filed a complaint for collection of sum of money against the petitioners to enforce its rights under the promissory notes and real estate mortgages, while the petitioners subsequently filed a complaint for reformation of the promissory notes and real estate mortgages. We held that the first case, the collection case, should subsist because it is the first action filed and the more appropriate vehicle for litigating all the issues in the controversy. We noted that in the second case, the reformation case, the petitioners acknowledged their indebtedness to the respondent; they merely contested the amounts of the principal, interest and the remaining

balance. We observed, too, that the petitioners claims in the reformation case were in the nature of defenses to the collection case and should be asserted in this latter case. Under this established jurisprudence on litis pendentia, the following considerations predominate in the ascending order of importance in determining which action should prevail: (1) the date of filing, with preference generally given to the first action filed to be retained; (2) whether the action sought to be dismissed was filed merely to preempt the later action or to anticipate its filing and lay the basis for its dismissal; and (3) whether the action is the appropriate vehicle for litigating the issues between the parties. Malolos case is the more appropriate case In the present case, the undisputed facts show that the respondent initiated the preparatory moves that led to the present litigation when he sent the petitioners in May 2002, or about five months after the end of their supply contract a demand letter for the payment of delivered day-old chicks. The petitioners only reacted to this demand when they replied that there was in fact an overpayment that should be refunded. Under these facts, and given the law on sales that business is keenly aware of, we can safely conclude that the petitioners knew that a case for sum of money would be filed against them and thus filed Tarlac case in anticipation of this coming case which became the Malolos case; the purpose, under this view, is purely preemptive, i.e., to seek the dismissal of the coming action. The more compelling reason that strikes us, however, is that the Malolos case is the more appropriate action to rule on the real issue between the parties whether or not the correct payment had been made on the delivered day-old chicks; the petitioners claim of overpayment in the Tarlac case is more in the nature of a defense to the respondents action for collection in the Malolos case. From this perspective, the real issue is better asserted in Malolos case the collection case rather than in the action that merely serves as a defense to the collection case. Another and equally compelling reason why Malolos case should prevail is the reason we put forward in Pampanga Bus Company, Inc. v. Ocfemia the stage of this case at this point. With the seven-year pendency of the present

case (since the filing of Malolos case on June 11, 2002) and with no restraining order from this Court, there is no doubt that trial on the merits has already been conducted in Malolos case, with the petitioners given the full opportunity to present evidence on their defense. To dismiss Malolos case at this point would result in needless delay in the resolution of the parties dispute and bring them back to square one. This consequence will defeat the public policy reasons behind litis pendentia which, like the rule on forum shopping, aims to prevent the unnecessary burdening of our courts and undue taxing of the manpower and financial resources of the judiciary; to avoid the situation where co-equal courts issue conflicting decisions over the same cause; and to preclude one party from harassing the other party through the filing of an unnecessary or vexatious suit. DISPOSITION: Denied for failure to show RTC committed reversible error in dismissing complaint. VOTE: 2nd Division. Quisumbing, Abad, Carpio, Carpio-Morales concur CONCURRING/DISSENTING OPINION: None

Kayamanan filed a case against Denso for recovery of unpaid rental and cost of repair for damage caused by fire and unrealized monthly rents. Summons was served on Denso but was not immediately referred by Denso to its counsel. Counsel filed a "MOTION FOR EXTENSION OF TIME TO FILE ANSWER" because of the late referral, need to attend to other legal work of equal importance time requirement for study of the factual and legal points involved in the action. An additional 15 days was prayed for. The motion was closed with "NOTICE OF HEARING" addressed to clerk of court. Motion for extension was, however, denied. That same day, Kayamanan filed an "Ex parte Motion to Declare Defendant in Default" asserting that the reglementary period of 15 days for DENSO to file answer had expired without any answer having been filed, but making no reference to DENSO's motion for extension. Denso was declared in default and hearing for ex-parte presentation of evidence of Kayamanan was set. DENSO learned of the order of default and moved to be allowed to cross-examine Kayamanans witnesses but this was denied. and the judgment by default. It then filed a verified motion for reconsideration of said order and judgment. Issue in IAC: "the propriety or impropriety" of the order of September 3, 1985 which, while setting aside the previous order of default and the judgment by default, prescribed that the evidence already presented would remain in the record and denied petitioner the right to cross-examine the respondent's witnesses who had testified at theex-parte hearing. It declared unnecessary further consideration of the order of default and judgment by default thus set aside, and limited its review of the proceedings to the question of whether or not the petitioner was properly denied the right of cross-examination. IAC Ruling: Appellate Court ruled that the right of crossexamination, while a part of due process so that denial thereof amounts to depriving a party of his day in court, is nonetheless waivable; that since petitioner received on September 16, 1985 copy of the order of September 3, 1985 setting the judgment by default aside and scheduling the case for hearing only for reception of defendant's evidence without right to cross-examine plaintiff's witnesses but did not move for its reconsideration until October 24, 1985, or after a lapse of 38 days, such inaction amounted to a waiver of the claimed right to cross-examine; and, moreover, said

Denso (Phils.) Inc, v. Intermediate Appellate Court (February 27, 1987) DOCTRINE: If a defendant is improperly declared in default his time to answer not having expired because of a timely exparte motion for extension he should be entitled to relief which should consist not only in the admission of his responsive pleading, but of the right to cross-examine the witnesses presented and to object to the exhibits offered in his absence, if not indeed to have trial commence all over again. NATURE: Petition for review on certiorari PONENTE: Narvasa FACTS: Fire broke out at the building owned by Kayamanan and leased by Denso. As a result, Denso and Kayamanan suffered losses.

motion for reconsideration came too late because the order sought to be reconsidered was by then already final, the applicable period of appeal being only fifteen (15) days from notice of said order, and that (in any event) DENSO was guilty of laches ISSUES: WON IAC was correct in saying that Densos inaction for 38 days amounted to a waiver and that Denso was guilty of laches. HELD: No. RATIO/RULING: 1. (not so relevant) The error in these pronouncements is immediately apparent. They assume that the order in question is a final-and appealable order, when it is in fact interlocutory. The distinction between final and interlocutory orders is a well-settled one. The concept of "final" judgment, as distinguished from one which has "become final" (or "executory" as of right [final and executory]), is definite and settled. A "final" judgment or order is one that finally disposes of a case, leaving nothing more to be done by the Court in respect thereto, e.g., an adjudication on the merits which, on the basis of the evidence presented at the trial, declares categorically what the rights and obligations of the parties are and which party is in the right; or a judgment or order that dismisses an action on the ground, for instance, of res judicata or prescription. Once rendered, the task of the Court is ended, as far as deciding the controversy or determining the rights and liabilities of the litigants is concerned. Nothing more remains to be done by the Court except to await the parties' next move (which among others, may consist of the filing of a motion for new trial or reconsideration, or the taking of an appeal) and ultimately, of course, to cause the execution of the judgment once it becomes 'final' or, to use the established and more distinctive term, "final and executory." ... Conversely, an order that does not finally dispose of the case, and does not end the Court's task of adjudicating the parties' contentions and determining their rights and liabilities as regards each other, but obviously indicates that other things remain to be

done by the Court, is "interlocutory," e.g., an order denying a motion to dismiss under Rule 16 of the Rules, or granting a motion for extension of time to file a pleading, or authorizing amendment thereof, or granting or denying applications for postponement, or production or inspection of documents or things, etc. Unlike a "final" judgment or order, which is appealable, as above pointed out, an "interlocutory" order may not be questioned on appeal except only as part of an appeal that may eventually be taken from the final judgment rendered in the case. That the order of September 3, 1985 was interlocutory in character is beyond cavil. In setting aside the order of default and the succeeding judgment by default, it left the case open for further proceedings before the Trial Court, not the least of which was the reception of evidence for the petitioner. Therefore, it could not become final in the sense that final judgments become "final and executory." No appeal therefrom would lie except in the context and as part of an appeal from a subsequent final judgment on the merits, and a motion for reconsideration thereof was not subject to the limiting fifteen-day period of appeal prescribed for final judgments or orders. 2. (relevant) Neither will the Court consider laches as having set in by reason of petitioner's allowing thirty-eight (38) days to pass before seeking a reconsideration of the order, having in mind not only that such a relatively brief period cannot by any reckoning be deemed an unreasonable length of time, but also the fact that while laches is a defense which operates independently of the statute of limitations and is subject to no fixed periods, it is also founded on equity and may be invoked only if the delay in asserting a claim has worked a change in the conditions such as would render unjust or inequitable the grant of the relief sought. In order that the defense of laches may prosper, the following elements must be present: (1) conduct on the part of defendant, or one under whom he claims, giving rise to the situation complained of, (2) delay in asserting complainant's right after knowledge or notice of defendant's conduct and an opportunity to sue, (3) lack of knowledge or notice on the part of the defendant that complainant would assert the right on which he bases suit,

and (4) injury or prejudice to defendant in the event relief is accorded. *** *** (I)t must be realized that, unlike prescription, the defense of laches is not dependent on the existence of a statutory period of limitation. It can be invoked without reckoning any specific or fixed period; it is sufficient that there be an unreasonable and unexplained delay in bringing the action that its maintenance would already constitute inequity or injustice to the party claiming it. *** No perceivable prejudice would attach to the respondent if the petitioner were allowed to cross-examine the witnesses it has presented. If said witnesses told the truth, respondent has nothing to fear from their cross-examination, the effect of which would only be to enhance their credibility. Petitioner's motion for reconsideration of the order of September 3, 1985, therefore, hardly deserved the short shrift that it received from the Intermediate Appellate Court because it was in no sense untimely, and neither lapse of a statutory period nor laches could correctly be invoked to justify the summary refusal to inquire into the antecedents of said order. What that Court considered to be moot and academic an inquiry into the merits of Judge Guadiz's separate orders of June 26, 1985 denying the motion for extension of time to file answer and declaring the petitioner in default lay precisely at the heart of the matter before it and now before this Court. Both orders were premised on what the Judge perceived to be a failure to comply with the rule that notice of motions must be served by the movant on all parties concerned at least three (3) days prior to the hearing thereof. What His Honor evidently overlooked-and this was error-was that the rule on notice is not unqualifiedly applicable to all motions, and that there are motions which may be heard ex-parte, as the Rules themselves clearly acknowledge. Among the latter class of motions are precisely those seeking extension of time to plead, and the reason these are not strictly held to the requirement of notice is that they are noncontentious and do not as a rule involve the substantial rights of the other parties in the suit.

* * * The motion for extension of time within which a party may plead is not a litigated motion where notice to the adverse party is necessary to afford the latter an opportunity to resist the application, but an ex-parte motion' made to the court in behalf of one or the other of the parties to the action, in the absence and usually without the knowledge of the other party or parties.' As 'a general rule, notice of motion is required where a party has a right to resist the relief sought by the motion and principles of natural justice demand that his rights be not affected without an opportunity to be heard. It has been said that "ex-parte motions are frequently permissible in procedural matters, and also in situations and under circumstances of emergency; and an exception to a rule requiring notice is sometimes made where notice or the resulting delay might tend to defeat the objection (sic) of the motion." Upon similar premises, this Court has consistently held, since as early as in 1946, that motions for extension of time to file record on appeal may be filed and passed upon ex-parte, and the rulings on that point are applicable, without differentiation, to motions for extension of time to file answer. Petitioner's motion for extension of time to file answer was, therefore, improperly denied for lack of proof of service on the respondent, said motion having been seasonably filed and, as already fully shown, there being no impediment to its being heard ex-parte. No pretense is made that the motion was denied as having been filed merely for delay, but even if that ground were read into the otherwise clear terms of the order of denial which do not even hint thereat, it would still be belied by the fact that what was sought was only an extension of the original reglementary period as well as that prima facie meritorious reasons were pleaded for the desired extension. The petitioner's answer, alleging defenses which, if established, could defeat the respondent's claim, wholly or in part, was filed well within the period of

extension prayed for. All these considered, the order declaring petitioner in default for alleged failure to timely file answer was clearly arbitrary; it ought not to have been issued and should be struck down. While the order of default was in fact set aside by the Trial Judge on motion of the petitioner, he failed to afford petitioner the complete relief that the arbitrary and improper issuance of said order and of the earlier order denying the motion for extension clearly called for. Ideally, the slate should have been wiped clean by setting aside also the hearing at which the respondent presented its evidence ex-parte, so that the parties would stand on even terms with neither having the advantage of the other. Instead, the Judge prescribed that the evidence presented by the KAYAMANAN would remain in the record without right on the part of DENSO to cross-examine the witnesses who had already testified, and by necessary implication, also denied DENSO the right to object to the documentary evidence submitted by respondent. This, too, was abuse of discretion. If a defendant is improperly declared in default his time to answer not having expired because of a timely ex-parte motion for extension he should be entitled to relief which should consist not only in the admission of his responsive pleading, but of the right to crossexamine the witnesses presented and to object to the exhibits offered in his absence, if not indeed to have trial commence all over again. He should not, under these circumstances, be penalized by loss of the right to cross-examine. This would be grossly unwarranted and unfair; it would amount to a denial of due process. DISPOSITION: Petition granted. IAC decision reversed. Petitioners answer to respondents complaint is ordered admitted. All orders issued in said case and complained of in petition, are vacated. Case shall stand for proceedings de novo as if only complaint and answer had been filed. Costs against respondents. VOTE: 1st Division. Yap, Melencio-Herrera, Cruz, Feliciano, Gancayco and Sarmiento concur. CONCURRING/DISSENTING OPINION: none