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ELOISA MERCHANDISING v. BANCO DE ORO UNIVERSAL BANK

FACTS:

The case involves a dispute between petitioner Eloisa Merchandising, Inc. (EMI) and respondent Banco de Oro Universal Bank (BDO) over a real estate mortgage executed by EMI in favor of BDO. The mortgage was further amended several times to secure the principal obligation drawn from a credit line agreement and term loan agreement. BDO initiated foreclosure proceedings, prompting EMI to file a complaint for annulment of the mortgage, injunction, and damages. EMI alleged various grounds for nullity, including the nature of the mortgage as a third-party mortgage, the extension of time to pay without notice to EMI, the imposition of an adjustable interest rate, and the exorbitant penalty. EMI also claimed that BDO acted in bad faith. BDO filed a motion to dismiss for lack of cause of action. EMI later filed an amended complaint and a motion for leave to file a second amended complaint, which were both granted by the trial court. BDO filed its answer denying EMI's allegations and asserting that it was compelled to initiate foreclosure proceedings due to Trebel's failure to satisfy its loan obligations. The trial court set a pre-trial conference but ultimately dismissed the complaint for failure to prosecute, a decision affirmed by the Court of Appeals.

In this case, the petitioners filed a motion to admit a supplemental complaint alleging that their rights as surety-mortgagor were violated in the ex parte proceedings implementing the writ of possession. The trial court denied the motion, stating that the matters raised in the supplemental complaint pertain to issuances by another branch in a separate petition for writ of possession.

During the pre-trial conference, the petitioners were allowed to present evidence ex parte since the respondent, BDO, was absent. However, the respondent's counsel filed a motion for reconsideration, citing traffic as the reason for his tardiness. The trial court granted the motion and rescheduled the pre-trial conference multiple times.

The petitioners filed a motion for reconsideration of the trial court's denial of their motion to admit the supplemental complaint. The case was then dismissed for failure of the petitioners to appear at the scheduled pre-trial conference. The petitioners filed a motion for reconsideration, claiming that their counsel's absence was due to an accident. The trial court reconsidered the dismissal and rescheduled the pre-trial conference. However, the petitioners again failed to appear, leading to the trial court's dismissal of the case for failure to prosecute.

ISSUES:

  1. Whether the trial court erred in dismissing the case for failure to prosecute.

  2. Whether the trial court erred in denying petitioners' motion for reconsideration.

  3. Whether the trial court erred in dismissing the complaint for failure to prosecute.

  4. Whether the dismissal of the complaint was unjustified.

  5. Did the petitioners exhibit laxity and inattention in attending to their case?

  6. Did the petitioners fail to diligently prosecute the case?

  7. Did the dismissal of the complaint for failure to prosecute have legal basis?

RULING:

  1. The Court of Appeals affirmed the trial court's dismissal of the case and denied petitioners' motion for reconsideration. The CA held that petitioners cannot justify their prolonged inaction by belatedly raising the pending motion for reconsideration from the trial court's denial of their motion to admit the supplemental complaint. They were aware that the case was at the pre-trial stage since the case was twice dismissed for their failure to attend the pre-trial conference. The trial court was not to be faulted for dismissing the case on the ground of petitioners' failure to prosecute.

  2. The trial court did not err in dismissing the complaint for failure to prosecute. Under Section 3, Rule 17 of the 1997 Rules of Civil Procedure, the failure of the plaintiff to comply with any order of the court or the Rules, or to prosecute his action for an unreasonable length of time may result in the dismissal of the complaint. The burden is on the plaintiff to show that there are compelling reasons that would make a dismissal unjustified.

  3. The dismissal of the complaint was justified. The plaintiffs failed to promptly move for pre-trial, as required under Section 1, Rule 18 of the Rules. The trial court had already dismissed the complaint twice before due to the plaintiffs' non-appearance at the pre-trial conference. Although there was no substantial prejudice caused to the defendant, the trial court's dismissal was not a patent abuse of discretion.

  4. The petition for review on certiorari is denied. The Court of Appeals' decision and resolution upholding the dismissal of the complaint for failure to prosecute are affirmed.

PRINCIPLES:

  • Once an order of dismissal becomes final and executory, the case is deemed terminated and the court loses jurisdiction over it. (Rule 17, Section 3 of the Rules of Court)

  • It is incumbent upon the plaintiff to see to it that the notice of pre-trial conference is served upon the defendants pursuant to the Rule 18, Section 1 of the Rules of Court. However, A.M. No. 03-1-09-SC amended this rule and now imposes on the clerk of court the duty to issue a notice of pre-trial if the plaintiff fails to file a motion to set the case for pre-trial conference.

  • The failure of the plaintiff to prosecute the action without any justifiable cause within a reasonable period of time gives rise to the presumption that the plaintiff is no longer interested in obtaining the relief prayed for. The court may dismiss the complaint either motu proprio or on motion by the defendant. The presumption is not conclusive, and the plaintiff may allege and establish a justifiable cause for the failure. (Section 3, Rule 17)

  • It is the duty of the plaintiff to promptly move ex parte for the setting of the case for pre-trial conference after the last pleading has been served and filed. If the plaintiff fails to do so, the branch clerk of court shall issue a notice of pre-trial. (Section 1, Rule 18)

  • The strict application of the rule on dismissal for failure to prosecute may not be warranted if no substantial prejudice would be caused to the defendant, and there are special and compelling reasons that would make the dismissal clearly unjustified. (Olave v. Mistas)

  • The lack of interest and laxity in prosecuting the case may be considered in deciding to dismiss the complaint for failure to prosecute. (Espiritu v. Lazaro)

  • A party cannot blame his counsel when he himself was guilty of neglect.

  • The laws aid the vigilant, not those who slumber on their rights.

  • It is the duty of the plaintiff to prosecute the case diligently, even if 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.

  • Dismissal of a complaint for failure to prosecute is justified if the plaintiff fails to show special circumstances or compelling reasons to justify the delay.