RULE 9.

EFFECT OF FAILURE TO PLEAD

FINANCIAL BUILDING CORPORATION, vs. FORBES PARK

ASSOCIATION, INC.,

[G.R. No. 133119. August 17, 2000]

FACTS:
The then Union of Soviet Socialist Republic (hereafter, USSR) was the owner of a 4,223 square meter
residential lot located at No. 10, Narra Place, Forbes Park Village in Makati City. On December 2, 1985, the
USSR engaged the services of Financial Building for the construction of a multi-level office and staff
apartment building at the said lot, which would be used by the Trade Representative of the USSR.[3] Due to
the USSRs representation that it would be building a residence for its Trade Representative, Forbes Park
authorized its construction and work began shortly thereafter.

On June 30, 1986, Forbes Park reminded the USSR of existing regulations [4] authorizing only the
construction of a single-family residential building in each lot within the village. It also elicited a
reassurance from the USSR that such restriction has been complied with. [5] Promptly, the USSR gave its
assurance that it has been complying with all regulations of Forbes Park. [6] Despite this, Financial Building
submitted to the Makati City Government a second building plan for the construction of a multi-level
apartment building, which was different from the first plan for the construction of a residential building
submitted to Forbes Park.

Forbes Park discovered the second plan and subsequent ocular inspection of the USSRs subject lot
confirmed the violation of the deed of restrictions. Thus, it enjoined further construction work. On March
27, 1987, Forbes Park suspended all permits of entry for the personnel and materials of Financial Building
in the said construction site. The parties attempted to meet to settle their differences but it did not push
through.

Instead, on April 9, 1987, Financial Building filed in the Regional Trial Court of Makati, Metro Manila, a
Complaint[7] for Injunction and Damages with a prayer for Preliminary Injunction against Forbes Park. The
latter, in turn, filed a Motion to Dismiss on the ground that Financial Building had no cause of action
because it was not the real party-in-interest. The trial court issued a writ of preliminary injunction against
Forbes Park but the Court of Appeals nullified it and dismissed the complaint.

After Financial Buildings case, was terminated with finality, Forbes Park sought to vindicate its rights by
filing on October 27, 1989 with the Regional Trial Court of Makati a Complaint[9] for Damages, against
Financial Building, arising from the violation of its rules and regulations. The damages claimed are in the
following amounts: (a) P3,000,000.00 as actual damages; (b) P1,000,000.00 as moral damages; (c)
P1,000,000.00 as exemplary damages; and (d) P1,000,000.00 as attorneys fees.

ISSUE/S:
1. WHETHER OR NOT COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE
COMPLAINT FILED BY RESPONDENT FPA DESPITE THE FACT THAT ITS ALLEGED CLAIMS
AND CAUSES OF ACTION THEREIN ARE BARRED BY PRIOR JUDGMENT AND/OR ARE
DEEMED WAIVED FOR ITS FAILURE TO INTERPOSE THE SAME AS COMPULSORY
COUNTERCLAIMS.
2. WHETHER OR NOT COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE
COMPLAINT FILED BY RESPONDENT FPA AGAINST PETITIONER FBC SINCE RESPONDENT
FPA HAS NO CAUSE OF ACTION AGAINST PETITIONER FBC.
3. WHETHER OR NOT COURT OF APPEALS GRAVELY ERRED IN AWARDING DAMAGES IN
FAVOR OF RESPONDENT FPA DESPITE THE FACT THAT ON THE BASIS OF THE EVIDENCE
ON RECORD, RESPONDENT FPA IS NOT ENTITLED THERETO AND PETITIONER FBC IS NOT
LIABLE THEREFOR.

RULING:

1. The instant case is barred due to Forbes Parks failure to set it up as a compulsory counterclaim in
Civil Case No. 16540, the prior injunction suit initiated by Financial Building against Forbes Park.

A compulsory counterclaim is one which arises out of or is necessarily connected with the transaction
or occurrence that is the subject matter of the opposing party’s claim.[15] If it is within the jurisdiction of the
court and it does not require for its adjudication the presence of third parties over whom the court cannot
acquire jurisdiction, such compulsory counterclaim is barred if it is not set up in the action filed by the
opposing party.

The prior Civil Case No. 16540 and the instant case arose from the same occurrence the construction
work done by Financial Building on the USSRs lot in Forbes Park Village. The issues of fact and law in both
cases are identical. The factual issue is whether the structures erected by Financial Building violate Forbes
Parks rules and regulations, whereas the legal issue is whether Financial Building, as an independent
contractor working for the USSR, could be enjoined from continuing with the construction and be held
liable for damages if it is found to have violated Forbes Parks rules.

As a result of the controversy, Financial Building seized the initiative by filing the prior injunction case,
which was anchored on the contention that Forbes Parks prohibition on the construction work in the subject
premises was improper. The instant case on the other hand was initiated by Forbes Park to compel Financial
Building to remove the same structures it has erected in the same premises involved in the prior case and
to claim damages for undertaking the said construction. Thus, the logical relation between the two cases is
patent and it is obvious that substantially the same evidence is involved in the said cases.

Moreover, the two cases involve the same parties. The aggregate amount of the claims in the instant
case is within the jurisdiction of the regional trial court, had it been set up as a counterclaim in Civil Case
No. 16540.Therefore, Forbes Parks claims in the instant case should have been filed as a counterclaim in
Civil Case No. 16540.

2. Since Forbes Park filed a motion to dismiss in Civil Case No. 16540, its existing compulsory
counterclaim at that time is now barred.

A compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its
jurisdictional support therefrom.[19] A counterclaim presupposes the existence of a claim against the party
filing the counterclaim. Hence, where there is no claim against the counterclaimant, the counterclaim is
improper and it must dismissed, more so where the complaint is dismissed at the instance of the
counterclaimant.[20] In other words, if the dismissal of the main action results in the dismissal of the
counterclaim already filed, it stands to reason that the filing of a motion to dismiss the complaint is an
implied waiver of the compulsory counterclaim because the grant of the motion ultimately results in the
dismissal of the counterclaim.

Thus, the filing of a motion to dismiss and the setting up of a compulsory counterclaim are
incompatible remedies. In the event that a defending party has a ground for dismissal and a compulsory
counterclaim at the same time, he must choose only one remedy. If he decides to file a motion to dismiss,
he will lose his compulsory counterclaim. But if he opts to set up his compulsory counterclaim, he may still
plead his ground for dismissal as an affirmative defense in his answer.[21] The latter option is obviously more
favorable to the defendant although such fact was lost on Forbes Park.

The ground for dismissal invoked by Forbes Park in Civil Case No. 16540 was lack of cause of
action. There was no need to plead such ground in a motion to dismiss or in the answer since the same was
not deemed waived if it was not pleaded. [22] Nonetheless, Forbes Park still filed a motion to dismiss and
thus exercised bad judgment in its choice of remedies. Thus, it has no one to blame but itself for the
consequent loss of its counterclaim as a result of such choice.

3. Inasmuch as the action for damages filed by Forbes Park should be as it is hereby dismissed for
being barred by the prior judgment in G.R. No. 79319 (supra) and/or deemed waived by Forbes
 Park to interpose the same under the rule on compulsory counterclaims, there is no need to discuss
the other issues raised by the herein petitioner.

WHEREFORE, the instant petition is hereby GRANTED and the Decision dated March 20, 1998 of
the Court of Appeals in CA-G.R. CV No. 48194 is hereby REVERSED and SET ASIDE.
CAVILI vs. FLORENDO
FACTS:

Private respondents filed a civil case with the CFI of Negros Oriental against petitioners for Partition,
Accounting, and Damages. The case was raffled to Branch I presided over by Judge Augusto S. Villarin-
summons was issued to the 3 petitioners, all at Bayawan Negros Oriental which was the address indicated
in the complaint.

After trying to effect service, the process server went back to the court with the following return of service
to Quirino and Primitivo Cavili not contacted, according to Perfecta Cavili, subject persons is staying in
Kabangkalan, Negros Occidental.

Atty. Jose P. Alamino filed a motion for extension to answer in behalf of the defendants, manifesting the
representation of his client Perfecta Cavili that she will inform her brothers Primitivo and Quirino about
the case.

Defendants, failed to file their answer within the request period and upon motion of the plaintiffs, the
defendants were declared in default on October 5, 1979.

Records however show that a Manifestation was filed by Atty. Jose P. Alamino informing the court that
since he never met Primitivo and Quirino Cavili, who are residents of another province, he desisted from
further appearing in the case in their behalf.

December 1979 - Atty. Alamillo filed a motion for new trial in behalf of the defendants on grounds of lack
of jurisdiction and, with a meritorious defense that the properties sought to be partitioned have already
been the subject of a written partition agreement between the direct heirs of the late Bernardo Cavili who
are the predecessors of the parties in this case.

July 1981 – after a re-raffle of the case, Judge Cipriano Vamenta whom the case had been assigned, directed
the execution of the October 5, 1979 (declaration of default) decision without qualification ruling that the
petitioners' remedy should have been appeal rather than new trial. Their motion for reconsideration having
been denied. The defendants, now petitioners, brought the case to this Court through a petition for
certiorari.

Oct. 1982 –Petition for certionari was granted.

At the pre-trial & trial - defendants, (now petitioners), presented Perfecta Cavili dela Cruz as their 1st
witness.

The respondents moved for her disqualification as a witness on the ground that having been declared in
default, Perfecta Cavili has lost her standing in court and she cannot be allowed to participate in all premise
the even as a witness. The court, through the respondent judge, sustained the respondents' contention and
disqualified her from testifying.

ISSUES:

1. WHETHER OR NOT PERFECTA CAVILI IS DISQUALIFIED AS A WITNESS

2. WHETHER OR NOT PETITIONERS (PRIMITIVO & QUIRINO) ARE IN DEFAULT AND HAVE
LOST STANDING IN COURT.

RULING:

1. NO. Section 18 of Rule 130 . Witnesses; their qualifications. — Except as provided in the next
succeeding section, all persons who, having organs of sense, can perceive, and perceiving, can make
known their perception to others, may be witnesses. Neither parties nor other persons interested
in the outcome of a case shall be excluded; nor those who have been convicted of crime; nor any
person on account of his opinion on matters of religious belief.

There is no provision of the Rules disqualifying parties declared in default from taking the witness stand
for non-disqualified parties. The law does not provide default as an exception. The specific enumeration of
disqualified witnesses excludes the operation of causes of disability other than those mentioned in the
Rules.

General Rule: where there are express exceptions, these comprise the only limitations on the operation of
a statute and no other exception will be implied. The Rules should not be interpreted to include an exception
not embodied therein.

2. NO. Section 2 of Rule 18 - Effect of order of default.— Except as provided in section 9 of Rule 13, a
party declared in default shall not be entitled to notice of subsequent proceedings nor to take part
in the trial. They advance the argument that to allow Perfecta Cavili to stand as witness would be
to permit a party in default "to take part in the trial." An explanation of the Rule is in order.

Loss of standing in court is the consequence of an order of default. Thus, a party declared in default is
considered out of court and cannot appear therein, adduce evidence, and be heard and for that reason he is
not entitled to notice.

However, "loss of pending" must be understood to mean only the forfeiture of one's rights as a party litigant,
contestant or legal adversary. A party in default loses his right to present his defense, control the
proceedings, and examine or cross- examine witnesses. He has no right to expect that his pleadings would
be acted upon by the court nor may he object to or refute evidence or motions filed against him. There is
nothing in the rule, however, which contemplates a disqualification to be a witness or a opponent in a case.
Default does not make him an incompetent.

A party in default may thus be cited as a witness by his co- defendants who have the standing and the right
to present evidence which the former may provide. The incidental benefit giving the party in default the
opportunity to present evidence which may eventually redound to his advantage or bring about a desired
result, through his co-defendants, is of minor consequence.

Of greater concern or importance in allowing the presence of Perfecta Cavili as a witness in the case at bar,
is the preservation of the right of petitioners Quirino and Primitivo Cavili to secure the attendance of
witnesses and the production of evidence in their behalf. To reject Perfecta Cavili's presentation of
testimonial evidence would be to treat Primitivo and Quirino, as if they too were in default.

There is no reason why the latter should also be made to bear the consequences of Perfecta's omission.
Moreover, we cannot deprive Quirino and Primitivo of the only instrument of proof available to them, as
Perfecta alone has been in possession and administration of the claim.

Petition is hereby GRANTED.

SERAFIN TIJAM, ET AL. vs. MAGDALENO
SIBONGHANOY alias GAVINO SIBONGHANOY and
LUCIA BAGUIO, G.R. No. L-21450 - - April 15, 1968

FACTS:

The action at bar, which is a suit for collection of a sum of money in the sum of exactly P 1,908.00, exclusive
of interest filed by Serafin Tijam and Felicitas Tagalog against Spouses Magdaleno Sibonghanoy and Lucia
Baguio, was originally instituted in the Court of First Instance of Cebu on July 19, 1948. A month prior to
the filing of the complaint, the Judiciary Act of 1948 (R.A. 296) took effect depriving the Court of First
Instance of original jurisdiction over cases in which the demand, exclusive of interest, is not more than P
2,000.00 (Secs. 44[c] and 86[b], R.A. 296.)

The case has already been pending now for almost 15 years, and throughout the entire proceeding the
appellant never raised the question of jurisdiction until the receipt of the Court of Appeals' adverse decision.

Considering that the Supreme Court has the exclusive appellate jurisdiction over all cases in which
jurisdiction of any inferior court is in issue, the Court of Appeals certified the case to the Supreme Court
along with the records of the case.

ISSUE:

Whether or not the appellant's motion to dismiss on the ground of lack of jurisdiction of the Court of First
Instance during the pendency of the appeal will prosper.

RULING:

A party may be estopped or barred from raising a question in different ways and for different reasons. Thus
we speak of estoppel in pais, or estoppel by deed or by record, and of estoppel by laches.

Laches, in a general sense is failure or neglect, for an unreasonable and unexplained length of time, to do
that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission
to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either
has abandoned it or declined to assert it.

The doctrine of laches or of "stale demands" is based upon grounds of public policy which requires, for the
peace of society, the discouragement of stale claims and, unlike the statute of limitations, is not a mere
question of time but is principally a question of the inequity or unfairness of permitting a right or claim to
be enforced or asserted.

It has been held that a party can not invoke the jurisdiction of a court to sure affirmative relief against his
opponent and, after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction
(Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of explaining the rule, it was further
said that the question whether the court had jurisdiction either of the subject-matter of the action or of the
parties was not important in such cases because the party is barred from such conduct not because the
judgment or order of the court is valid and conclusive as an adjudication, but for the reason that such a
practice can not be tolerated — obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and encountering an adverse
decision on the merits, it is too late for the loser to question the jurisdiction or power of the court (Pease vs.
Rathbun-Jones etc., 243 U.S. 273, 61 L. Ed. 715, 37 S. Ct. 283; St. Louis etc. vs. McBride, 141 U.S. 127, 35 L.
Ed. 659). And in Littleton vs. Burgess, 16 Wyo. 58, the Court said that it is not right for a party who has
affirmed and invoked the jurisdiction of a court in a particular matter to secure an affirmative relief, to
afterwards deny that same jurisdiction to escape a penalty.

Upon this same principle is what We said in the three cases mentioned in the resolution of the Court of
Appeals of May 20, 1963 (supra) — to the effect that we frown upon the "undesirable practice" of a party
submitting his case for decision and then accepting the judgment, only if favorable, and attacking it for lack
of jurisdiction, when adverse — as well as in Pindañgan etc. vs. Dans, et al., G.R. L-14591, September 26,
1962; Montelibano, et al., vs. Bacolod-Murcia Milling Co., Inc., G.R. L-15092; Young Men Labor Union etc.
vs. The Court of Industrial Relation et al., G.R. L-20307, Feb. 26, 1965, and Mejia vs. Lucas, 100 Phil. p.
277.

The facts of this case show that from the time the Surety became a quasi-party on July 31, 1948, it could
have raised the question of the lack of jurisdiction of the Court of First Instance of Cebu to take cognizance
of the present action by reason of the sum of money involved which, according to the law then in force, was
within the original exclusive jurisdiction of inferior courts. It failed to do so. Instead, at several stages of the
proceedings in the court a quo as well as in the Court of Appeals, it invoked the jurisdiction of said courts
to obtain affirmative relief and submitted its case for a final adjudication on the merits. It was only after an
adverse decision was rendered by the Court of Appeals that it finally woke up to raise the question of
jurisdiction. Were we to sanction such conduct on its part, We would in effect be declaring as useless all the
proceedings had in the present case since it was commenced on July 19, 1948 and compel the judgment
creditors to go up their Calvary once more. The inequity and unfairness of this is not only patent but
revolting.

Coming now to the merits of the appeal: after going over the entire record, We have become persuaded that
We can do nothing better than to quote in toto, with approval, the decision rendered by the Court of Appeals
x x x granting plaintiffs' motion for execution against the surety x x x

UPON ALL THE FOREGOING, the orders appealed from are hereby affirmed, with costs against the
appellant Manila Surety and Fidelity Company, Inc.
NATIVIDAD LIM, vs. NATIONAL POWER CORPORATION,

G.R. No. 178789 November 14, 2012

FACTS:

On February 8, 1995 respondent National Power Corporation (NPC) filed an expropriation suit 1 against
petitioner Natividad B. Lim (Lim) before the Regional Trial Court (RTC) of Lingayen, Pangasinan, Branch
37 in Civil Case 17352 covering Lots 2373 and 2374 that the NPC needed for its Sual Coal-Fired Thermal
Power Project. Since Lim was residing in the United States, the court caused the service of summons on her
on February 20, 1995 through her tenant, a certain Wilfredo Tabongbong. 2 On March 1, 1995, upon notice
to Lim and the deposit of the provisional value of the property, the RTC ordered the issued writ of possession
in NPC’s favor that would enable it to cause the removal of Lim from the land.3

On April 24, 1995, however, Lim, represented by her husband Delfin, filed an omnibus motion to dismiss
the action and to suspend the writ of possession,4 questioning the RTC’s jurisdiction over Lim’s person and
the nature of the action. She also assailed the failure of the complaint to state a cause of action. The RTC
denied the motions.5

Respondent spouses Roberto and Arabela Arcinue (the Arcinues) filed a motion for leave to admit
complaint in intervention,6 alleging that they owned and were in possession of Lot 2374, one of the two lots
subject of the expropriation. The RTC granted the Arcinues’ motion and required both the NPC and Lim to
answer the complaint-in-intervention within 10 days from receipt of its order.7

When Lim and the NPC still did not file their answers to the complaint-in-intervention after 10 months,the
Arcinues filed a motion for judgment by default.8 When Lim and the NPC still did not file their answers to
the complaint-in-intervention after 10 months, on D Arcinues filed a motion for judgment by default. 8 Lim
sought to expunge the motion on the ground that it lacked the requisite explanation why the Arcinues
resorted to service by registered mail rather than to personal service. At the scheduled hearing of the
motion, Lim’s counsel did not appear. The NPC for its part manifested that it did not file an answer since
its interest lay in determining who was entitled to just compensation.

On March 1, 1999 the RTC issued an order of default against both Lim and the NPC. The RTC pointed out
that the Arcinues’ failure to explain their resort to service by registered mail had already been cured by the
manifestation of Lim’s counsel that he received a copy of the Arcinues’ motion on December 7, 1998 or 10
days before its scheduled hearing. Lim filed a motion for reconsideration 10 to lift the default order but the
Court denied the motion,11 prompting Lim to file a petition for certiorari12 before the Court of Appeals (CA).
On March 23, 2007 the CA rendered a decision13 that affirmed the RTC’s order of default. Lim filed a motion
for reconsideration14 but the CA denied it,15 prompting her to file the present petition for review. 16 On
September 24, 2007 the Court initially denied Lim’s petition17 but on motion for reconsideration, the Court
reinstated the same.

ISSUE:

Whether or not the CA gravely abused its discretion in affirming the order of default that the RTC entered
against Lim.

RULING:

Lim points out that an answer-in-intervention cannot give rise to default since the filing of such an answer
is only permissive. But Section 4, Rule 1919 of the 1997 Rules of Civil Procedure requires the original parties
to file an answer to the complaint-in-intervention within 15 days from notice of the order admitting the
same, unless a different period is fixed by the court. This changes the procedure under the former rule where
such an answer was regarded as optional.20 Thus, Lim’s failure to file the required answer can give rise to
default.

The trial court had been liberal with Lim. It considered her motion for reconsideration as a motion to lift
the order of default and gave her an opportunity to explain her side. The court set her motion for hearing
but Lim’s counsel did not show up in court. She remained unable to show that her failure to file the required
answer was due to fraud, accident, mistake, or excusable negligence. And, although she claimed that she
had a meritorious defense, she was unable to specify what constituted such defense. 21

Lim points out that the RTC should have ordered the Arcinues’ motion for judgment by default expunged
from the records since it lacked the requisite explanation as to why they resorted to service by registered
mail in place of personal service.

There is no question that the Arcinues’ motion failed to comply with the requirement of Section 11, Rule 13
of the 1997 Rules of Civil Procedure which provides:

SECTION 11. Priorities in modes of service and filing. — Whenever practicable, the service and filing of
pleadings and other papers shall be done personally. Except with respect to papers emanating from the
court, a resort to other modes must be accompanied by a written explanation, why the service or filing was
not done personally. A violation of this Rule may be cause to consider the paper as not filed.

But the above does not provide for automatic sanction should a party fail to submit the required
explanation. It merely provides for that possibility considering its use of the term "may." The question is
whether or not the RTC gravely abused its discretion in not going for the sanction of striking out the erring
motion.1âwphi1

The Court finds no such grave abuse of discretion here. As the RTC pointed out, notwithstanding that the
Arcinues' failed to explain their resort to service by registered mail rather than by personal service, the fact
is that Lim's counsel expressly admitted having received a copy of the Arcinues' motion for judgment by
default on December 7, 1998 or I 0 days before its scheduled hearing. This means that the Arcinues were
diligent enough to file their motion by registered mail long before the scheduled hearing.

Personal service is required precisely because it often happens that hearings do not push through because,
while a copy of the motion may have been served by registered mail before the date of the hearing, such is
received by the adverse party already after the hearing. Thus, the rules prefer personal service. But it does
not altogether prohibit service by registered mail when such service, when adopted, ensures as in this case
receipt by the adverse party.

WHEREFORE, the Court DENIES the petition and AFFIRMS the Court of Appeals Decision. The Court
DIRECTS the RTC to proceed with its hearing and adjudication of the case.

SO ORDERED.
MAGDIWANG REALTY CORPORATION, RENATO P. DRAGON
and ESPERANZA TOLENTINO, Petitioners, vs. THE MANILA
BANKING CORPORATION, substituted by FIRST SOVEREIGN
ASSET MANAGEMENT (SPV-AMC), INC., Respondent.

FACTS:

The case stems from a complaint3 for sum of money filed on April 18, 2000 before the Regional Trial Court
(RTC), Makati City by herein respondent, The Manila Banking Corporation (TMBC), against herein
petitioners, Magdiwang Realty Corporation (Magdiwang), Renato P. Dragon (Dragon) and Esperanza
Tolentino (Tolentino), after said petitioners allegedly defaulted in the payment of their debts under the five
promissory notes4 they executed in favor of TMBC.

All promissory notes included stipulations on the payment of interest and additional charges in case of
default by the debtors. Despite several demands for payment made by TMBC, the petitioners allegedly failed
to heed to the bank’s demands, prompting the filing of the complaint for sum of money. The case was raffled
to Branch 148 of the RTC of Makati City.

Instead of filing a responsive pleading with the trial court, the petitioners filed on October 12, 2000, which
was notably beyond the fifteen (15)-day period allowed for the filing of a responsive pleading, a Motion for
Leave to Admit Attached Motion to Dismiss 5 and a Motion to Dismiss,6 raising therein the issues of
novation, lack of cause of action against individuals Dragon and Tolentino, and the impossibility of the
novated contract due to a subsequent act of the Congress. The motions were opposed by the respondent
TMBC, via its Opposition7 which likewise asked that the petitioners be declared in default for their failure
to file their responsive pleading within the period allowed under the law.

The petitioners’ motion for reconsideration was denied by the trial court. The ex parte presentation of
evidence by the bank before the trial court’s Presiding Judge was scheduled.

Unsatisfied with the RTC orders, the petitioners filed with the CA a petition for certiorari. In a Decision,
the CA affirmed the RTC orders after ruling that the trial court did not commit grave abuse of discretion
when it declared herein petitioners in default. The denial of petitioners’ motion for reconsideration
prompted the filing of a petition for review on certiorari before this Court, which, through its Resolutions
and denied the petition for lack of merit.

In the meantime, TMBC’s presentation of evidence ex parte proceeded before Presiding Judge Oscar B.
Pimentel of the RTC of Makati City.

The petitioners’ motion for reconsideration was denied by the trial court. Feeling aggrieved, the petitioners
appealed to the CA, imputing error on the part of the trial court in: (1) not declaring that TMBC’s cause of
action was already barred by the statute of limitations; (2) declaring herein petitioners liable to pay TMBC
despite the alleged novation of the subject obligations; (3) declaring TMBC entitled to its claims despite the
alleged failure of the bank to substantiate its claims; (4) declaring TMBC entitled to attorney’s fees and
litigation expenses; and (5) declaring herein petitioners in default.

While appeal was pending before the appellate court, TMBC and First Sovereign Asset Management (SPV-
AMC), Inc. (FSAMI) filed a Joint Motion for Substitution, asking that TMBC be substituted by FSAMI after
the former executed in favor of the latter a Deed of Assignment covering all of its rights, title and interest
over the loans subject of the case.

ISSUES:

1. WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE PRESCRIPTIVE
PERIOD WAS LEGALLY INTERRUPTED ON 19 SEPTEMBER 1984 WHEN PETITIONERS, THROUGH
SEVERAL LETTERS, PROPOSED FOR THE RESTRUCTURING OF THEIR LOANS UNTIL THE
RESPONDENT SENT ITS FINAL DEMAND LETTER ON 10 SEPTEMBER 1999.

2. WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE TRIAL COURT’S
RULING HOLDING THAT PETITIONERS ARE LIABLE FOR ATTORNEY’S FEES.

RULING:

The petition is dismissible.

1. On the first issue of prescription, the petitioners argue that there was no written extrajudicial
demand by the creditor TMBC that could have validly interrupted the ten (10)-year prescriptive
period.24 They claim, among other things, that the bank failed to prove that it sent the demand letter
dated September 10, 1999 to the petitioners, and that it was actually received by said petitioners.
The petitioners also question the several other letters supposedly exchanged between the parties.
These contentions are now being raised even after the trial court that admitted the evidence of the
respondent has categorically declared in its Decision dated May 20, 2007 the fact of the
respondent’s service, and the petitioners’ receipt, of the demands.25 In its Order dated November 5,
2007, the trial court had also cited the several other correspondences exchanged between the
parties, including the letters of November 14, 1984, March 24, 1987, February 14, 1990 and
September 10, 1999 that negated the defenses of prescription and novation.26

On appeal, these factual findings were even affirmed by the CA, which again cited the several letters
exchanged between the parties in relation to the subject debts, and which correspondences were declared
to have effectively interrupted the running of the prescriptive period to initiate the action for sum of money
against the petitioners.

Applying the guidelines laid down by jurisprudence on the criteria for distinguishing a question of law from
a question of fact, it is clear that the petitioners are now asking this Court to determine a question of fact,
as their arguments delve on the truth or falsity of the trial and appellate courts’ factual findings, the
existence and authenticity of the respondent’s documentary evidence, as well as the truth or falsity of the
TMBC’s narration of facts in their complaint and the testimonial evidence presented before the Presiding
Judge in support of said allegations.

Similarly, the issue of the alleged novation involves a question of fact, as it necessarily requires a factual
determination on the existence of the following requisites of novation: (1) there must be a previous valid
obligation; (2) the parties concerned must agree to a new contract; (3) the old contract must be
extinguished; and (4) there must be a valid new contract.27 Needless to say, the respondent’s entitlement to
attorney’s fees also depends upon the questioned factual findings.

The settled rule is that conclusions and findings of fact of the trial court are entitled to great weight on
appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a better
position to examine real evidence, as well as observe the demeanor of the witnesses while testifying in the
case. The fact that the CA adopted the findings of fact of the trial court makes the same binding upon this
Court.28 The Supreme Court is not a trier of facts. It is not our function to review, examine and evaluate or
weigh the probative value of the evidence presented. A question of fact would arise in such event. 29 Although
jurisprudence admits of several exceptions to the foregoing rules, the present case does not fall under any
of them.

Even granting that the issues being raised by the petitioners may still be validly entertained by this Court
through the instant petition for review on certiorari, we hold that their arguments and defenses are bound
to fail for lack of merit.

Significantly, the petitioners failed to file their answer to TMBC’s complaint within the reglementary period
allowed under the Rules of Court. The validity of the trial court’s declaration of their default is a settled
matter, following the denial of the petitions previously brought by the petitioners before the CA and this
Court questioning it.

The petitioners’ default by their failure to file their answer led to certain consequences. Where defendants
before a trial court are declared in default, they thereby lose their right to object to the reception of the
plaintiff’s evidence establishing his cause of action.31 This is akin to a failure to, despite due notice, attend
in court hearings for the presentation of the complainant’s evidence, which absence would amount to the
waiver of such defendant’s right to object to the evidence presented during such hearing, and to cross-
examine the witnesses presented therein.32
Taking into consideration the bank’s allegations in its complaint and the totality of the evidence presented
in support thereof, coupled with the said circumstance that the petitioners, by their own inaction, failed to
make their timely objection or opposition to the evidence, both documentary and testimonial, presented by
TMBC to support its case, we find no cogent reason to reverse the trial and appellate courts’ findings. We
stress that in civil cases, the party having the burden of proof must establish his case only by a
preponderance of evidence. Preponderance of evidence is the weight, credit, and value of the aggregate
evidence on either side and is usually considered to be synonymous with the term "greater weight of
evidence" or "greater weight of the credible evidence." Preponderance of evidence is a phrase which, in the
last analysis, means probability to truth. It is evidence which is more convincing to the court as worthier of
belief than that which is offered in opposition thereto.33

We agree with the trial and appellate courts, for as the records bear, that the ten (10)-year prescriptive
period to file an action based on the subject promissory notes was interrupted by the several letters
exchanged between the parties. This is in conformity with the second and third circumstances under Article
1155 of the New Civil Code (NCC) which provides that the prescription of actions is interrupted when: (1)
they are filed before the court; (2) there is a written extrajudicial demand by the creditors; and (3) there is
any written acknowledgment of the debt by the debtor. In TMBC’s complaint against the petitioners, the
bank sufficiently made the allegations on its service and the petitioners’ receipt of the subject demand
letters, even attaching thereto copies thereof for the trial court’s consideration.

During the bank’s presentation of evidence ex parte, the testimony of witness Mr. Megdonio Isanan was
also offered to further support the claim on the demand made by the bank upon the petitioners. In the
absence of a timely objection from the petitioners on these claims, no error can be imputed on the part of
the trial court, and even the appellate court, in taking due consideration thereof.1âwphi1

As against the bare denial belatedly made by the petitioners of their receipt of the written extrajudicial
demands made by TMBC, especially of the letter of September 10, 1999 which was the written demand sent
closest in time to the institution of the civil case, the appreciation of evidence and pronouncements of the
trial court in its Order dated November 5, 2007 shall stand, to wit:

In the 14 November 1984 Letter of Kalilid Wood Industries, Inc., through Mr. Uriel Balboa, the counter-
offer of the plaintiff was acknowledged but Kalilid, while manifesting that the counter offer is acceptable,
made some reservations and other conditions which likewise constitute as counter offers. Hence, no
meeting of the minds happened regarding the restructuring of the loan. Likewise, based on this letter, the
debt was also acknowledged. Another letter dated 24 March 1987 was issued and a repayment plan has been
proposed by the Magdiwang Realty Corporation. There was also a correspondence dated February 14, 1990
from defendant Renato P. Dragon’s Office regarding the obligation. While a demand letter dated September
1999 was given by the plaintiff to the defendants. Hence, from all indications, the prescription of the
obligation does not set in.35
In addition to these, we take note that letters prior to the letter of September 1999 also form part of the case
records, and the existence of said letters were not directly denied by the petitioners. The following letters
that form part of the complaint and included in TMBC’s formal offer of exhibits were correctly claimed by
the respondents in their Comment36 as also containing the petitioners’ acknowledgment of their debts and
TMBC’s demand to its debtors: (1) Exhibit "M-29", which is a letter dated January 4, 1995 requesting for
an updated Statement of Account of the corporations owned by petitioner Dragon, including the account of
petitioner Magdiwang; and (2) Exhibit "M-30", which is the letter dated January 12, 1995 from the Office
of the Statutory Receiver of TMBC and providing the Statements of Account requested for in the letter of
January 4, 1995. Significantly, the petitioners failed to adequately negate the authority of the first letter’s
signatory to act for and on behalf of the petitioners, the reasonable conclusion being that said signatory and
the company it represented were designated by the petitioners, as the debtors in the loans therein indicated,
to deal with the TMBC.

2. Regarding the award of attorney’s fees, the applicable provision is Article 2208(2) of the NCC which
allows the grant thereof when the defendants’ act or omission compelled the plaintiff to litigate or
to incur expenses to protect its interest. Considering the circumstances that led to the filing of the
complaint in court, and the clear refusal of the petitioners to satisfy their existing debt to the bank
despite the long period of time and the accommodations granted to it by the respondent to enable
them to satisfy their obligations, we agree that the respondent was compelled by the petitioners'
acts to litigate for the protection of the bank's interests, making the award of attorney's fees proper.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision dated October
11, 2010 and Resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. CV No. 90098 are
hereby AFFIRMED.

SO ORDERED.
PHILIPPINE TOURISM AUTHORITY vs. PHILIPPINE
GOLF DEVELOPMENT & EQUIPMENT, INC.,
FACTS:

On April 3, 1996, PTA, an agency of the Department of Tourism, whose main function is to bolster
and promote tourism, entered into a contract with Atlantic Erectors, Inc. (AEI) for the
construction of the Intramuros Golf Course Expansion Projects (PAR 60-66) for a contract price
of Fifty-Seven Million Nine Hundred Fifty-Four Thousand Six Hundred Forty-Seven and 94/100
Pesos (P57,954,647.94).

The civil works of the project commenced. Since AEI was incapable of constructing the
golf course aspect of the project, it entered into a sub-contract agreement with PHILGOLF, a duly
organized domestic corporation, to build the golf course amounting to Twenty-Seven Million
Pesos (P27,000,000.00). The sub-contract agreement also provides that PHILGOLF shall submit
its progress billings directly to PTA and, in turn, PTA shall directly pay PHILGOLF.[3]

On October 2, 2003, PHILGOLF filed a collection suit against PTA amounting to Eleven
Million Eight Hundred Twenty Thousand Five Hundred Fifty and 53/100 Pesos (P11,820,550.53),
plus interest, for the construction of the golf course. Within the period to file a responsive
pleading, PTA filed a motion for extension of time to file an answer.

On October 30, 2003, the RTC granted the motion for extension of time. PTA filed another
motion for extension of time to file an answer. The RTC again granted the motion

Despite the RTCs liberality of granting two successive motions for extension of time, PTA
failed to answer the complaint. Hence, on April 6, 2004, the RTC rendered a judgment of default.

On July 11, 2005, PTA seasonably appealed the case to the CA. But before the appeal of
PTA could be perfected, PHILGOLF already filed a motion for execution pending appeal with the
RTC. The RTC, in an Order dated June 2, 2004, granted the motion and a writ of execution
pending appeal was issued against PTA. On June 3, 2004, a notice of garnishment was issued
against PTAs bank account at the Land Bank of the Philippines, NAIA-BOC Branch to fully satisfy
the judgment.

PTA filed a petition for certiorari with the CA, imputing grave abuse of discretion on the
part of the RTC for granting the motion for execution pending appeal. The CA ruled in favor of
PTA and set aside the order granting the motion for execution pending appeal.
 On July 11, 2005, PTA withdrew its appeal of the RTC decision and, instead, filed a
petition[5]for annulment of judgment under Rule 47 of the Rules of Court. The petition for
annulment of judgment was premised on the argument that the gross negligence of PTAs counsel
prevented the presentation of evidence before the RTC.

On December 13, 2006, the CA dismissed the petition for annulment of judgment for lack
of merit. PTA questions this CA action in the present petition for certiorari.

ISSUES:

1. Whether or not that the negligence of PTAs counsel amounted to an extrinsic fraud
warranting an annulment of judgment.
2. Whether or not that since PTA is a government entity, it should not be bound by the

inactions or negligence of its counsel.

3. Whether or not there were no other available remedies left for PTA but a petition for
annulment of judgment.

RULING:

We find the petition unmeritorious.

1. There was no extrinsic fraud

Extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation which is
committed outside of the trial of the case, whereby the unsuccessful party has been prevented
from exhibiting fully his case, by fraud or deception practiced on him by his opponent. [9] Under
the doctrine of this cited case, we do not see the acts of PTAs counsel to be constitutive of extrinsic
fraud.

The records reveal that the judgment of default[10] was sent via registered mail to PTAs counsel.

However, PTA never availed of the remedy of a motion to lift the order of default. [11] Since the
failure of PTA to present its evidence was not a product of any fraudulent acts committed outside
trial, the RTC did not err in declaring PTA in default.
 2. PTA was acting in a proprietary character

PTA also erred in invoking state immunity simply because it is a government entity. The
application of state immunity is proper only when the proceedings arise out of sovereign
transactions and not in cases of commercial activities or economic affairs. The State, in entering
into a business contract, descends to the level of an individual and is deemed to have tacitly given
its consent to be sued.[13]

Since the Intramuros Golf Course Expansion Projects partakes of a proprietary character entered
into between PTA and PHILGOLF, PTA cannot avoid its financial liability by merely invoking
immunity from suit.

3. Annulment of judgment is not the proper remedy

PTAs appropriate remedy was only to appeal the RTC decision. Annulment of Judgment under
Rule 47 of the Rules of Court is a recourse equitable in character and allowed only in exceptional
cases where the ordinary remedies of new trial, appeal, petition for relief or other appropriate
remedies are no longer available through no fault of petitioner.[12]

In this case, appeal was an available remedy. There was also no extraordinary reason for a petition
for annulment of judgment, nor was there any adequate explanation on why the remedy for new
trial or petition for relief could not be used. The Court is actually at a loss why PTA had withdrawn
a properly filed appeal and substituted it with another petition, when PTA could have merely
raised the same issues through an ordinary appeal.

A special civil action for certiorari under Rule 65 is proper only when there is no other
plain, speedy, and adequate remedy

Lastly, a special civil action under Rule 65 of the Rules of Court is only available in cases when a tribunal,
board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary course of law. It is not a mode of
appeal, and cannot also be made as a substitute for appeal. It will not lie in cases where other remedies are
available under the law.

In Land Bank of the Philippines v. Court of Appeals,[14] the Court had the occasion to state:
 The general rule is that a [certiorari] will not issue where the remedy of appeal is
available to the aggrieved party. The remedies of appeal in the ordinary course of law and
that of certiorari under Rule 65 of the Revised Rules of Court are mutually exclusive and
not alternative or cumulative. Hence, the special civil action for certiorari under Rule 65 is
not and cannot be a substitute for an appeal, where the latter remedy is available. xxx

xxxx

The proper recourse of the aggrieved party from a decision of the CA is a petition
for review on certiorari under Rule 45 of the Revised Rules of Court. On the other hand, if
the error subject of the recourse is one of jurisdiction, or the act complained of was
perpetrated by a quasi-judicial officer or agency with grave abuse of discretion amounting
to lack or excess of jurisdiction, the proper remedy available to the aggrieved party is a
petition for certiorari under Rule 65 of the said Rules. [emphases supplied; citations
omitted]

In sum, PTA had the remedy of appealing the RTC decision to the CA and, thereafter, to us. Under
the circumstances, we find no adequate reason to justify the elevation of this case to the CA and then to us,
under Rule 65 of the Rules of Court.

WHEREFORE, premises considered, we hereby DISMISS the petition for certiorari. No costs.

SO ORDERED.
 RULE 18
JACINTO SAGUID, vs. HON. COURT OF
APPEALS, THE REGIONAL TRIAL COURT, BRANCH 94,
BOAC, MARINDUQUE and GINA S. REY
[G.R. No. 150611. June 10, 2003]

FACTS:

The regime of limited co-ownership of property governing the union of parties who are not legally
capacitated to marry each other, but who nonetheless live together as husband and wife, applies to
properties acquired during said cohabitation in proportion to their respective contributions. Co-ownership
will only be up to the extent of the proven actual contribution of money, property or industry. Absent proof
of the extent thereof, their contributions and corresponding shares shall be presumed to be equal. [1]

Seventeen-year old Gina S. Rey was married,[2] but separated de facto from her husband, when she
met petitioner Jacinto Saguid in Marinduque, sometime in July 1987.[3] After a brief courtship, the two
decided to cohabit as husband and wife in a house built on a lot owned by Jacintos father.[4] Their
cohabitation was not blessed with any children. Jacinto made a living as the patron of their fishing vessel
Saguid Brothers.[5] Gina, on the other hand, worked as a fish dealer, but decided to work as an entertainer
in Japan from 1992 to 1994 when her relationship with Jacintos relatives turned sour. Her periodic absence,
however, did not ebb away the conflict with petitioners relatives. In 1996, the couple decided to separate
and end up their 9-year cohabitation.[6]

Private respondent filed a complaint for Partition and Recovery of Personal Property with Receivership
against the petitioner with the Regional Trial Court of Boac, Marinduque. She alleged that from her salary
of $1,500.00 a month as entertainer in Japan, she was able to contribute P70,000.00 in the completion of
their unfinished house. Also, from her own earnings as an entertainer and fish dealer, she was able to
acquire and accumulate appliances, pieces of furniture and household effects, with a total value of
P111,375.00. She prayed that she be declared the sole owner of these personal properties and that the
amount of P70,000.00, representing her contribution to the construction of their house, be reimbursed to
her.

Private respondent testified that she deposited part of her earnings in her savings account with First
Allied Development Bank.[7] Her Pass Book shows that as of May 23, 1995, she had a balance of
P21,046.08.[8] She further stated that she had a total of P35,465.00 [9] share in the joint account deposit
which she and the petitioner maintained with the same bank.[10] Gina declared that said deposits were spent
for the purchase of construction materials, appliances and other personal properties. [11]

In his answer[12] to the complaint, petitioner claimed that the expenses for the construction of their
house were defrayed solely from his income as a captain of their fishing vessel. He averred that private
respondents meager income as fish dealer rendered her unable to contribute in the construction of said
house. Besides, selling fish was a mere pastime to her; as such, she was contented with the small quantity
of fish allotted to her from his fishing trips. Petitioner further contended that Gina did not work
continuously in Japan from 1992 to 1994, but only for a 6-month duration each year. When their house was
repaired and improved sometime in 1995-1996, private respondent did not share in the expenses because
her earnings as entertainer were spent on the daily needs and business of her parents. From his income in
the fishing business, he claimed to have saved a total of P130,000.00, P75,000.00 of which was placed in a
joint account deposit with private respondent. This savings, according to petitioner was spent in purchasing
the disputed personal properties.

On May 21, 1997, the trial court declared the petitioner as in default for failure to file a pre-trial brief
as required by Supreme Court Circular No. 1-89.[13]

On May 26, 1997, petitioner filed a motion for reconsideration[14] of the May 21, 1997 order, which was
denied on June 2, 1997, and private respondent was allowed to present evidence ex parte.[15] Petitioner filed
another motion for reconsideration but the same was also denied on October 8, 1997.

On July 15, 1998, a decision[16] was rendered in favor of private respondent.

ISSUE:

Whether or not the trial court erred in allowing private respondent to present evidence ex parte.

RULING:

1. Under Section 6, Rule 18 of the 1997 Rules of Civil Procedure, the failure of the defendant to file a
pre-trial brief shall have the same effect as failure to appear at the pre-trial, i.e., the plaintiff may
present his evidence ex parte and the court shall render judgment on the basis thereof.[20] The
remedy of the defendant is to file a motion for reconsideration [21] showing that his failure to file a
pre-trial brief was due to fraud, accident, mistake or excusable neglect. [22] The motion need not
really stress the fact that the defendant has a valid and meritorious defense because his answer
which contains his defenses is already on record.
 In the case at bar, petitioner insists that his failure to file a pre-trial brief is justified because he was
not represented by counsel. This justification is not, however, sufficient to set aside the order directing
private respondent to present evidence ex parte, inasmuch as the petitioner chose at his own risk not to be
represented by counsel. Even without the assistance of a lawyer, petitioner was able to file a motion for
extension to file answer, the required answer stating therein the special and affirmative defenses, and
several other motions. If it were true that petitioner did not understand the import of the April 23, 1997
order directing him to file a pre-trial brief, he could have inquired from the court or filed a motion for
extension of time to file the brief. Instead, he waited until May 26, 1997, or 14 days from his alleged receipt
of the April 23, 1997 order before he filed a motion asking the court to excuse his failure to file a brief. Pre-
trial rules are not to be belittled or dismissed because their non-observance may result in prejudice to a
partys substantive rights. Like all rules, they should be followed except only for the most persuasive of
reasons when they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of
his thoughtlessness in not complying with the procedure prescribed.

In the instant case, the fact that petitioner was not assisted by a lawyer is not a persuasive reason to
relax the application of the rules. There is nothing in the Constitution which mandates that a party in a non-
criminal proceeding be represented by counsel and that the absence of such representation amounts to a
denial of due process. The assistance of lawyers, while desirable, is not indispensable. The legal profession
is not engrafted in the due process clause such that without the participation of its members the safeguard
is deemed ignored or violated.

However, the Court of Appeals erred in ruling that the effectivity of the 1997 Rules of Civil Procedure,
specifically, Section 6, Rule 18 thereof, rendered moot and academic the issue of whether or not the plaintiff
may be allowed to present evidence ex parte for failure of the defendant to file a pre-trial brief. While the
rules may indeed be applied retroactively, the same is not called for in the case at bar. Even before the 1997
Rules of Civil Procedure took effect on July 1, 1997, the filing of a pre-trial brief was required under Circular
No. 1-89 which became effective on February 1, 1989. Pursuant to the said circular, [f]ailure to file pre-trial
briefs may be given the same effect as the failure to appear at the pre-trial, that is, the party may be declared
non-suited or considered as in default.
ANDRES C. SARMIENTO vs. THE HON. CELESTINO C.
JUAN, PRESIDING JUDGE, BRANCH X, COURT OF
FIRST INSTANCE OF MANILA and BELFAST SURETY &
INSURANCE CO., INC.

G.R. No. L-56605 January 28, 1983

FACTS:

Civil Case No. 126113 was an action filed by private respondent Belfast Surety & Insurance Co., Inc.
against herein petitioner and his father Benjamin R. Sarmiento, Sr. for indemnification under an
Indemnity Agreement executed by them in connection with a bail bond. The case was assigned to
Branch X of the Court of First Instance of Manila presided over by respondent Judge Celestino C.
Juan who had since retired.

After the petitioner filed an answer with compulsory counterclaim, private respondent filed a motion to
dismiss the case against defendant Benjamin R. Sarmiento, Sr., and to schedule the case for pre-trial.
This motion was granted by Judge Juan and the pre-trial was set.

At the said pre-trial, nobody appeared except Atty. Federico T. Castillo, Jr., counsel for the private
respondent. However, the petitioner sent to the Court on the same date an urgent motion for
postponement stating therein that when he was preparing to go to the Court, he felt severe stomach
pain followed by loose bowel movements, and he accordingly prayed that the pre-trial be postponed
to another date.

The urgent motion for postponement filed by the petitioner was denied in the order of Judge Juan. On
motion of Atty. Castillo, the petitioner was "declared non-suited" (should have been "as in default")
and the private respondent allowed to present its evidence ex-parte.

On February 25, 1980, the petitioner filed a motion for reconsideration. Judge Juan denied the said
motion for reconsideration "for lack of merit," and reiterated the permission for the private respondent
to present its evidence ex-parte.
ISSUE:

Whether or not petitioner is in default for failure to appear in the pre – trial.

RULING:

We, however, find merit in the petitioner's two other contentions. The denial by Judge Juan of the
petitioner's motion to postpone the pre-trial scheduled on February 5, 1980 may have appeared valid at the
outset, considering that it was filed at the last minute and was not accompanied by a medical certificate
although the ground alleged was illness on the part of the petitioner. Nonetheless, a different appraisal of
the petitioner's plea should have been made after the petitioner filed a motion for reconsideration which
was made under oath. Due regard should have been given to the repeated pronouncements by this Court
against default judgments and proceedings that lay more emphasis on procedural niceties to the sacrifice
of substantial justice. After all, the ex-parte presentation of evidence had not yet been conducted nor had a
decision been rendered in the case. It appeared to be a simple matter of giving the petitioner a chance to
have his day in court in order to defend himself against the claim filed by the private respondent. As it
turned out, the procedure adopted by the trial court proved unprofitable and disadvantageous to all parties
concerned, including the courts. The case would have been disposed of in a much easier and more
expeditious manner if the trial court had heeded the petitioner's simple plea for a chance to be heard.
Thereby, all the proceedings taken subsequent to the disputed orders of the trial court could have been
avoided, and the Court of Appeals and the Supreme Court spared from the trouble of resolving the petitions
filed before them.

The petitioner also has valid reason to complain about the apparent overanxiousness of the trial court to
finish the case in summary fashion. The petitioner had manifested to the Court that his inability to appear
before the pre-trial was due to a sudden ailment that befell him while he was preparing to go to Court. While
it is true that the motion for postponement was not accompanied by a medical certificate, it must be
considered that not every ailment is attended to by a physician, or if so, a medical certificate under oath as
required by the Rules could be secured within the limited time available. There has been no refutation of
the cause of the non-appearance of the petitioner as claimed by the latter. Said cause had been reiterated
under oath in the petitioner's motion for reconsideration to which the trial court turned a deaf ear. Any
suspicion that the petitioner was merely suing for delay is readily dispelled by the fact that the pre-trial was
being set for the first time, and that the petitioner took immediate steps against the refusal of the trial court
to set aside the default declaration and to pursue remedies steadfastly against the same in the higher
tribunals.
The declaration default on the part of the petitioner may not be considered as entirely proper under the
circumstances surrounding the same. It is undenied that nobody appeared at the pre-trial except the
counsel for the private respondent. Under settled doctrines, not even the private respondent may be
considered as having appeared at the said pre-trial, it not having made appearance thereat through a duly
authorized representative. In such a situation, the trial court would have acted more properly if it dismissed
the case, or declared the private respondent as plaintiff therein as non-suited instead of declaring the
petitioner as in default (erroneously stated by it as "non-suited.") This is because while the court may
declare the plaintiff non- suited for non-appearance at the pre-trial or dismiss the case for his non-
appearance at the trial without motion on the part of the defendant (Sec. 3, Rule 17), the latter may not be
declared in default without such motion on the part of the plaintiff. (Sec. 1. Rule 18; Trajano vs. Cruz, 80
SCRA 712.) A plaintiff who makes no valid appearance at pre-trial may not ask that the defendant be
punished for the same shortcoming it was equally guilty of.

WHEREFORE, the judgment of the Court of Appeals rendered in CA-G.R. No. 10649 promulgated on
August 29, 1980, and the Resolution issued in said case dated March 29, 1981 which denied a motion for
the reconsideration of the said judgment are hereby REVERSED and SET ASIDE. The orders of the Court
of First Instance of Manila in Civil Case No. 126113 dated February 5, 1980 and February 26, 1980 are
ordered ANNULLED and SET ASIDE. Let the said case be rescheduled for pre-trial and for subsequent
proceedings thereafter. Costs against the private respondent.
LIBRADO M. CABRERA vs. THE COMMISSION ON
ELECTIONS and MICHAEL D. MONTENEGRO

G.R. No. 182084

FACTS:

Dissatisfied with the results of the mayoralty race in Taal, Batangas during the May 14, 2007
National and Local Elections, petitioner Librado M. Cabrera (Cabrera), the candidate who placed
second with 10,272 votes, filed an election protest against private respondent Michael D.
Montenegro (Montenegro), the winning candidate who garnered 10,742 votes. The case was filed
with the Regional Trial Court (RTC) of Taal, Batangas, Branch 86.

Following Montenegros filing of an answer with counterclaim, the trial court set the case for
preliminary conference and required the parties to submit their respective preliminary conference
briefs. On June 12, 2007, the parties filed the requisite pleadings.

Finding fatal defects in Cabreras preliminary conference brief, Montenegro, on June 15, 2007,
moved for the dismissal of the protest on the following grounds: (1) Cabrera did not serve a copy
of his preliminary conference brief to Montenegro at least one day before the scheduled
conference; and (2) Cabrera did not comply with Rule 9, Section 4 of A.M. No. 07-4-15-SC or
the Rules of Procedure in Election Contests Before the Courts Involving Elective
Municipal andBarangay Officials,[5] particularly on the required contents of the
preliminary conference brief.

Unconvinced by Montenegros contention, the trial court denied the motion to dismiss, and his
subsequent motion for reconsideration.[7] This prompted him to bring the issue to the COMELEC
via a petition for certiorari and prohibition.

Finding fatal defects in Cabreras preliminary conference brief, Montenegro, on June 15, 2007,
moved for the dismissal of the protest on the following grounds: (1) Cabrera did not serve a copy
of his preliminary conference brief to Montenegro at least one day before the scheduled
conference; and (2) Cabrera did not comply with Rule 9, Section 4 of A.M. No. 07-4-15-SC or
the Rules of Procedure in Election Contests Before the Courts Involving Elective Municipal and
Barangay Officials,[5] particularly on the required contents of the preliminary conference brief.[6]

Unconvinced by Montenegros contention, the trial court denied the motion to dismiss, and his
subsequent motion for reconsideration.[7] This prompted him to bring the issue to the COMELEC
via a petition for certiorari and prohibition.

In the assailed Resolution,[9] the First Division of the Commission granted Montenegros
petition, annulled and set aside the orders of the trial court denying the motion to dismiss,
directed it to cease and desist from continuing with the proceedings in the election protest and
consequently to dismiss the same. The First Division ruled that Rule 9 of the aforementioned
Rules of Procedure in Election Contests, providing for the dismissal of the protest in case of failure
to state in the preliminary conference brief its required contents, was mandatory in character and
would leave no room for the exercise of discretion on the part of the trial judge. Given that Cabrera
admitted his failure to include the following in the Protestants Brief for Preliminary
Conference[10](1) a manifestation of his having availed, or his intention to avail, of discovery
procedures or referral to commissioners; (2) a manifestation of withdrawal of certain protested or
counter-protested precincts, if such is the case; and (3) in case the election protest or counter-
protest seeks the examination, verification or re-tabulation of election returns, the procedure to
be followed the trial court gravely abused its discretion in denying the motion to dismiss. Mere
substantial compliance would not suffice to cure the obvious omissions because the rules demand
strict compliance.[11]

Aggrieved, Cabrera moved for the reconsideration of the division ruling. The
COMELEC en banc, however, denied his motion in the further challenged March 12,
2008 Resolution.[12] Left with no other recourse, he instituted the instant petition for certiorari.

ISSUE:
Whether or not the Commission (First Division) and the En Banc, in rendering the Resolution
respectively, committed grave abuse of discretion tantamount to lack of, or excess of jurisdiction
when they resolved to consider as ground for the dismissal of the election protest case, the
omission in Petitioners Preliminary Conference Brief of matters which even the New Rules of
Procedure allows the exercise of option either to include or omit .
RULING:

Dismiss the petition.

In applying for a certiorari writ, it is imperative for the petitioner to show that caprice and
arbitrariness characterized the act of the court or agency whose exercise of discretion is being assailed. This
is because grave abuse of discretion is the capricious and whimsical exercise of judgment that amounts to
lack of jurisdiction. It contemplates a situation where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility so patent and gross as to amount to an evasion of positive
duty or a virtual refusal to perform the duty enjoined by, or to act at all in contemplation of, law.
Grave abuse of discretion arises when a lower court or tribunal violates the Constitution, the law or existing
jurisprudence.[14]

In the instant case, the petitioner has utterly failed to show to the Court that the COMELEC, in
issuing the assailed resolutions, acted capriciously, whimsically and arbitrarily, such that its act is
annullable by the extraordinary writ of certiorari.

The nullification by the COMELEC of the RTCs orders and the consequent dismissal of Election
Case No. 1-2007 are in accordance with the express mandate of the Rules of Procedure in Election Contests
Before the Courts Involving Elective Municipal and Barangay Officials (A.M. No. 07-4-15-SC),[15] Rule 9,
Sections 4, 5 and 6 of which provide as follows:
SEC. 4. Preliminary conference brief. The parties shall file with the court and serve
on the adverse party, in such manner as shall ensure their receipt at least one day before
the date of the preliminary conference, their respective briefs which shall contain the
following:

1. A summary of admitted facts and proposed stipulation of facts;

2. The issues to be tried or resolved;

3. The pre-marked documents or exhibits to be presented, stating their purpose;

4. A manifestation of their having availed or their intention to avail

themselves of discovery procedures or referral to commissioners;

5. The number and names of the witnesses, their addresses, and the substance
of their respective testimonies. The testimonies of the witnesses shall be by
affidavits in question and answer form as their direct testimonies, subject to
oral cross examination;

6. A manifestation of withdrawal of certain protested or counter-

protested precincts, if such is the case;

7. The proposed number of revision committees and names of their revisors and
alternate revisors; and
 8. In case the election protest or counter-protest seeks the
examination, verification or re-tabulation of election returns, the
procedure to be followed.

SEC. 5. Failure to file brief. Failure to file the brief or to comply with its
required contents shall have the same effect as failure to appear at the
preliminary conference.

SEC. 6. Effect of failure to appear. The failure of the protestant or counsel to appear
at the preliminary conference shall be cause for dismissal, motu proprio, of the
protest or counter-protest. The failure of the protestee or counsel to appear at the
preliminary conference shall have the same effect as provided in Section 4(c), Rule 4 of
these Rules, that is, the court may allow the protestant to present evidence ex parte and
render judgment based on the evidence presented.[16]

Clearly, the said Rules command, in no uncertain terms, the filing of the preliminary conference
brief and compliance with the required contents of the said brief. By the Rules express language, the failure
to comply therewith shall have the same effect as failure to appear at the preliminary conference which, in
turn, shall be a sufficient cause for the dismissal of the protest.
The Court, however, observes that these proffered excuses are contradicted by the petitioners
preliminary conference brief[17] itself, which contains the following assertions: (1) protestant is to present
22 witnesses to testify on alleged irregularities in the voting and counting in 22 precincts;[18] (2) the
witnesses will further testify that votes for the protestant were not entered in the election returns; [19] and
(3) protestant shall also present as documentary evidence the election returns.[20]

The petitioners commitment that he does not seek the examination, verification or re-tabulation of
election returns is belied by the preliminary conference briefs statement that the protestant shall present
the election returns as documentary evidence, and that he will present witnesses who will testify that the
entries thereon are erroneous. Clearly, the testimonies of these witnesses will entail the examination or
verification of the election returns. Likewise, the petitioners undertaking that he does not intend to
withdraw any of the protested precincts appears inconsistent with the allegation in the preliminary
conference brief that protestant will present 22 witnesses (who served as watchers) to give evidence on
alleged irregularities in the voting and counting in 22 precincts. Considering that there is a total of
142[21] precincts in the locality, and in fact, the ballots in 88 precincts had already been revised by the trial
court,[22] the probability is great that petitioner may have to withdraw some precincts from his protest.

The Rules should not be taken lightly. The Court has painstakingly crafted A.M. No. 07-4-15-SC
precisely to curb the pernicious practice of prolonging election protests, a sizable number of which, in the
past, were finally resolved only when the term of office was about to expire, or worse, had already
expired. These Rules were purposely adopted to provide an expeditious and inexpensive procedure for the
just determination of election cases before the courts.[23] Thus, we emphasize that the preliminary
conference and its governing rules are not mere technicalities which the parties may blithely ignore or trifle
with.[24] They are tools meant to expedite the disposition of election cases and must, perforce, be obeyed.

WHEREFORE, premises considered, the petition for certiorari is DISMISSED. The November
20, 2007 Resolution of the Commission on Elections First Division and the March 12, 2008 Resolution of
the COMELEC en banc in SPR No. 18-2007 are AFFIRMED.
BANK OF THE PHILIPPINES, Petitioner, vs. SPOUSES
ROBERTO AND TERESITA GENUINO, Respondents.

G.R. No. 208792 July 22, 2015

FACTS:

On October 6, 2009, Bank of the Philippine Islands filed a Complaint for Sum of Money/Judgment on the
Deficiency against the Spouses Genuino before the Regional Trial Court of Makati. 10

The Complaint alleged that, the Spouses Genuino executed a Deed of Real Estate Mortgage over a 10,000-
square-meter11 parcel of land in General Trias, Cavite City, together with its improvements, to secure loans
and other credit accommodations obtained or to be obtained from the bank.12

The Spouses Genuino availed themselves of this credit accommodation in the amount of ₱8,840,000.00 as
evidenced by various promissory notes. They defaulted in their installment payments, and their failure to
pay despite demand resulted in the entire outstanding balance of the loan, plus interests and other charges,
becoming due and demandable.13

On April 18, 2004, Bank of the Philippine Islands foreclosed the mortgaged property after due notice and
publication, and sold it to the highest bidder at the public auction for ₱2,900,000.00. A deficiency of
₱27,744,762.49 remained after the tendered bid price had been deducted from the Spouses Genuino’s total
obligation of ₱30,644,762.49. The Spouses Genuino failed to pay the deficiency despite written demands
by the bank.14

Thus, Bank of the Philippine Islands filed the Complaint. It prayed for the reduced amount of 10,626,121.69,
waiving partly the stipulated interest, and waiving totally the late payment charges and attorney’s fees.15

On November 25, 2009, the Spouses Genuino filed their Answer with Special and Affirmative Defenses.
They argued nullity of the auction sale for lack of notice or demand made to them before and after the
alleged foreclosure. Even assuming the auction sale was valid, they argued that Bank of the Philippine
Islands waived the remedy of collection when it chose to foreclose the security. The Spouses Genuino
included a Compulsory Counterclaim for moral damages, exemplary damages, and attorney’s fees. 16

On December 2, 2009, Bank of the Philippine Islands received a copy of the Answer and opted not to file
any Reply.17
The Regional Trial Court, in its Order18 dated May 17, 2010, dismissed the case without prejudice for lack
of interest to prosecute under Rule 17, Section 3 of the Rules of Court. The Spouses Genuino’s counterclaim
was also dismissed without prejudice pursuant to Rule 17, Section 4 of the Rules of Court.19

ISSUE:

Whether or not the trial court acted with grave abuse of discretion in dismissing the case without
prejudice on the ground of failure to prosecute when Bank of the Philippine Islands failed to file a
motion to set case for pre-trial conference.

RULING:

We deny this Petition by Bank of the Philippine Islands.

The trial court dismissed the Complaint pursuant to Rule 17, Section 3 of the Rules of Court. This dismissal
operated as an adjudication on the merits:

SEC. 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause, the plaintiff fails to appear on the
date of the presentation of his evidence in chief on the complaint, or to prosecute his action for an
unreasonable length of time, or to comply with these Rules or any order of the court, the complaint may be
dismissed upon motion of the defendant or upon the court’s own motion without prejudice to the right of
the defendant to prosecute his counterclaim in the same or in a separate action. This dismissal shall have
the effect of an adjudication upon the merits, unless otherwise declared by the court.

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.1âwphi1 If the plaintiff fails to file said motion within the given period, the
Branch COC shall issue a notice of pre-trial.

In every action, the plaintiffs are duty-bound to prosecute their case with utmost diligence and with
reasonable dispatch to enable them to obtain the relief prayed for and, at the same time, to minimize the
clogging of the court dockets. Parallel to this is the defendants’ right to have a speedy disposition of the case
filed against them, essentially, to prevent their defenses from being impaired.

Since the incidents occurred prior to the effectivity of A.M. No. 03-1-09-SC on August 16, 2004, the
guidelines stated therein should not be made applicable to this case. Instead, the prevailing rule and
jurisprudence at that time should be utilized in resolving the case.
Section 1 of Rule 18 of the Rules of Court imposes upon the plaintiff the duty to set the case for pre-trial
after the last pleading is served and filed. Under Section 3 of Rule 17, failure to comply with the said duty
makes the case susceptible to dismissal for failure to prosecute for an unreasonable length of time or failure
to comply with the rules.

Reading A.M. No. 03-1-09-SC together with Rule 17, Section 3 and Rule 18, Section 1 of the Rules of Court
accommodates the outright dismissal of a complaint upon plaintiff’s failure to show justifiable reason for
not setting the case for pre-trial within the period provided by the Rules. Thus, trial courts must consider
the facts of each case

This court has allowed cases to proceed despite failure by the plaintiff to promptly move for pre-trial when
it finds that "the extreme sanction of dismissal of the complaint might not be warranted":36

It must be stressed 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.

This court discussed that "[w]hile 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."49

Regner does not involve the non-filing of a motion to set case for pretrial, but the failure to serve summons
on respondents in a Complaint for declaration of nullity of deed of donation filed in June 1999.50

Nevertheless, we can apply by analogy Regner’s ruling that "[a]lthough Section 1, Rule 14 of the Rules . . .
imposes upon the clerk of court the duty to serve summons, this does not relieve the petitioner of her own
duty as the plaintiff in a civil case to prosecute the case diligently[,] [and] [i]f the clerk had been negligent,
it was petitioner’s duty to call the court’s attention to that fact." 51 A plaintiff’s failure to vigilantly pursue his
or her case also affects respondent’s right to speedy trial.52

The Court of Appeals Decision discussed that petitioner Bank of the Philippine Islands "cannot simply ‘fold
its hands’ and say that it was the duty of the clerk of court to set the case for pre-trial for the prompt
disposition of its case."53

Trial courts should be more proactive in ensuring the progression of cases to pre-trial considering the
significance of this stage in civil actions:
Pre-trial is an answer to the clarion call for the speedy disposition of cases. Although it was discretionary
under the 1940 Rules of Court, it was made mandatory under the 1964 Rules and the subsequent
amendments in 1997. Hailed as "the most important procedural innovation in Anglo-Saxon justice in the
nineteenth century," pre-trial seeks to achieve the following:

(a) The possibility of an amicable settlement or of a submission to alternative modes of dispute

resolution;

(b) The simplification of the issues;

(c) The necessity or desirability of amendments to the pleadings;

(d) The possibility of obtaining stipulations or admissions of facts and of documents to avoid
unnecessary proof;

(e) The limitation of the number of witnesses;

(f) The advisability of a preliminary reference of issues to a commissioner;

(g) The propriety of rendering judgment on the pleadings, or summary judgment, or of dismissing
the action should a valid ground therefor be found to exist;

(h) The advisability or necessity of suspending the proceedings; and

(i) Such other matters as may aid in the prompt disposition of the action.54

Pre-trial promotes efficiency of case proceedings by allowing the parties to stipulate on facts and admissions
that no longer need proof, and to agree on key issues, among others. It protects the right to speedy trial
without compromising substantive justice.

A.M. No. 03-1-09-SC upholds this purpose in requiring the Clerk of Court to issue a notice of pre-trial "[i]f
the plaintiff fails to file [the] said motion [to set case for pre-trial] within the given period[.]"55

However, petitioner Bank of the Philippine Islands also has the duty to set the case for pre-trial after the
last pleading has been served and filed,56 and to diligently pursue its case and comply with the rules. Failure
to do so without justifiable cause warrants an outright dismissal of the Complaint.57

Petitioner Bank of the Philippine Islands’ explanation of misfiling by previous counsel’s secretary of the
case records together with terminated cases in the office bodega cannot be considered as justifiable cause
for its failure to set the case for pre-trial. This court has held that "a counsel is required to inquire, from
time to time, and whenever necessary, about the status of handled cases, as well as motions filed for a
client."58 Also, petitioner Bank of the Philippine Islands is one of the oldest and more established banks in
the country. There is reasonable expectation that it has the necessary organizational structures, system
flows, and procedures to address urgent matters and meet litigation deadlines.