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DEVELOPMENT BANK OF PHILIPPINES v. EMMANUEL C. CARPIO

FACTS:

In August 2001, a group of individuals represented by their attorney-in-fact filed a complaint against Development Bank of the Philippines (DBP) and Guarantee Fund for Small and Medium Enterprise (GFSME) for the delivery of certificates of title, damages, and attorney's fees before the Regional Trial Court (RTC). They claimed that their certificates of title were unlawfully detained by DBP and GFSME. The RTC issued a writ of seizure for their certificates of title. DBP filed a motion to dismiss and to quash the writ of seizure on the ground of improper venue, which the RTC granted. DBP later filed a motion for the return of the certificates of title, which the RTC granted. DBP then filed a motion to call on the plaintiff's surety bond for damages resulting from the failure to return the certificates of title. The RTC denied the motion, believing that it was no longer within their residual power. DBP filed a petition for certiorari and mandamus before the Court of Appeals (CA), which dismissed the petition. Aggrieved, DBP filed a petition for review before the Supreme Court.

ISSUES:

  1. Whether the trial court reached the residual jurisdiction stage in this case.

  2. Whether the order of dismissal without prejudice is appealable.

  3. Whether or not the application for damages filed by DBP is belatedly filed.

  4. Whether or not DBP's recourse to other remedies precludes it from filing an application for damages.

  5. Whether or not the RTC has residual jurisdiction over DBP's claim for damages.

  6. Whether DBP could enforce its guarantee agreement with GFSME.

  7. Whether DBP may file an action for damages against respondents for unlawfully taking the certificates of title.

  8. Whether DBP can institute an action for collection of a sum of money against respondents.

RULING:

  1. The trial court did not reach the residual jurisdiction stage because there was no trial on the merits and no appeal was filed. The case was dismissed due to improper venue and the order of dismissal was without prejudice. Residual jurisdiction is only available after a trial on the merits, a rendered judgment, and an appeal has been filed.

  2. The order of dismissal without prejudice is not appealable. Section 1(h), Rule 41 of the Rules of Civil Procedure states that no appeal may be taken from an order dismissing an action without prejudice. The proper remedy in such a case is to file a special civil action under Rule 65.

  3. Yes, the application for damages filed by DBP is belatedly filed. The Rules of Court require that the application must be filed before the trial or before appeal is perfected or before the judgment becomes executory. In this case, DBP filed the application for damages long after the order of dismissal had become final and executory. Thus, the application is barred.

  4. No, DBP's recourse to other remedies does not preclude it from filing an application for damages. The filing of an application for damages does not preclude resort to other remedies. DBP could have easily filed an application before the judgment became executory. The fact that DBP perceived the attachment to be improper from the beginning should have prompted it to file the application in a timely manner.

  5. No, the RTC has no residual jurisdiction over DBP's claim for damages. The RTC's jurisdiction is limited to the main action, and all incidents arising from the same controversy must be settled in the same court. Since DBP filed the application for damages long after the order of dismissal became final and executory, the RTC no longer has jurisdiction to entertain the claim.

  6. DBP could enforce its guarantee agreement with GFSME. The Court held that a contract of guaranty gives rise to a subsidiary obligation on the part of the guarantor. The creditor, after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay. The guarantor agrees to pay if, by the use of due diligence, the debt cannot be made out of the principal debtor.

  7. DBP may file an action for damages against respondents for unlawfully taking the certificates of title. The Court cited Article 19 of the New Civil Code, also known as the principle of abuse of rights, which sets certain standards for the exercise of rights and duties. If a right is exercised in a manner that does not conform with the norms of human conduct and results in damage to another, a legal wrong is committed. Thus, DBP has the right to seek damages based on this provision.

  8. DBP can institute an action for collection of a sum of money against respondents. If the parcels of land covered by the certificates of title were mortgaged to the DBP, it has the option to either file a personal action for collection of a sum of money or institute a real action to foreclose on the mortgage security. The two remedies are alternative and each remedy is complete on its own. The mortgagee may choose to foreclose the mortgage or opt for the collection of the debt.

PRINCIPLES:

  • Residual jurisdiction refers to the authority of the trial court to issue orders for the protection and preservation of the rights of the parties which do not involve any matter litigated by the appeal.

  • The trial court retains residual jurisdiction after the perfection of appeals or approval of records on appeal, but prior to the transmittal of the original records or records on appeal.

  • Dismissals with prejudice bar the refiling of the same action or claim, while dismissals without prejudice do not preclude the refiling.

  • Orders dismissing an action without prejudice are not appealable and may be challenged through a special civil action under Rule 65.

  • Equity is applied only in the absence of, and never against, statutory law or judicial rules of procedure. The rules of procedure should preempt and prevail over abstract arguments based on equity.

  • To recover damages on a replevin bond (or on a bond for preliminary attachment, injunction, or receivership), the defendant-claimant must secure a favorable judgment in the main action, file the application for damages before trial or before appeal is perfected or before the judgment becomes executory, give due notice to the other party and his surety or sureties, and have a proper hearing. The award for damages should be included in the final judgment.

  • All incidents arising from the same controversy must be settled in the same court. The application for damages must be filed in the court which took cognizance of the case, with due notice to the other parties.

  • The filing of an application for damages does not preclude resort to other remedies. An application for damages does not bar the filing of a motion for a writ of seizure, a writ of execution, or any other applicable remedy.

  • The RTC has no residual jurisdiction over a claim for damages filed long after the order of dismissal became final and executory. The RTC's jurisdiction is limited to the main action.

  • A contract of guaranty gives rise to a subsidiary obligation on the part of the guarantor.

  • Article 19 of the New Civil Code sets certain standards for the exercise of rights and duties, including the principle of abuse of rights.

  • If a right is exercised in a manner that does not conform to the norms of human conduct and causes damage to another, a legal wrong is committed.

  • The mortgagee has the option to either file a personal action for collection of the debt or institute a real action to foreclose on the mortgage security.