THE HONGKONG & SHANGHAI BANKING CORP. vs. ALDECOA & CO.

G.R. No. L-8437

March 23, 1915
FACTS:
Aldecoa and Co. obtained a credit worth P450,000 from HSBC secured by a
mortgage of shares and real properties. On Dec. of 1906, the firm of Aldecoa and
Co. went into liquidation and obtained another P50,000 from the bank upon the
condition that this would be covered by the previous mortgage. In October 1908,
Joaquin and Zoilo Ibaez de Aldecoa filed an action against the bank for the purpose
of annulling the mortgages executed by them on the grounds that they were minors
at the time incapable of creating a valid mortgage upon their real property. The
Court of First Instance dismissed the complaint as to Joaquin upon the ground that
he had ratified those mortgages after becoming of age, but entered a judgment
annulling said mortgages with respect to Zoilo. Both parties appealed from this
decision and the case was still pending in the Supreme Court when HSBC filed an
action against Aldecoa and Co. and its partners for the collection of a sum of money
and foreclosure of the mortgaged properties. Judgement was entered in favor of the
bank.
ISSUE:
Whether or not the action filed by the bank should be dismissed on the ground of lis
pendens.
RULING:
No. A plea of the pendency of a prior action is not available unless the prior action is
of such a character that, had a judgment been rendered therein on the merits, such
a judgment would be conclusive between the parties and could be pleaded in bar of
the second action.
In the instant case, the former suit is to annul the mortgages while the other one is
for the foreclosure. If the final judgment in the former action is that the mortgages
be annulled, such an adjudication will deny the right of the bank to foreclose the
mortgages. But a valid decree will not prevent the bank from foreclosing them. In
such an event, the judgment would not be a bar to the prosecution of the present
action. The rule is not predicated upon such a contingency. It is applicable, between
the same parties, only when the judgment to be rendered in the action first
instituted will be such that, regardless of which party is successful, it will
amount to res adjudicata against the second action.

1. Shimizu vs. Magsalin, FGU Corp et.al

Facts:

Petitioner claims that Magsalin had breached their subcontract agreement for the
supply, delivery, installation and finishing of the tiles in certain floors in petitioners
condominium project.

The agreement was terminated.

Due to Magsalins refusal to returnunliquidated advance payment and other

monetary liabilities, petitioner sent a notice to respondent FGU Insurance
demanding damages pursuant to the bonds the former had issued for the
subcontract.

Petitioner filed a complaint for actual damages for breach of contract against
Magsalin and FGU

FGU was duly served with summons. With respect to Magsalin, despite efforts, their
new addresses could not be determined.

FGU filed a motion to dismiss but was denied. Likewise, MR was denied. FGU was
obliged to file an answer.

Petitioner filed a motion for leave to serve summons on respondent Magsalin by way
of publication. Then, the petitioner filed its reply to FGU Insurances answer.

FGU filed a motion for leave of court to file a third-party complaint. Baetiong, G.
Garcia and C. Garcia were named as third-party defendants.

FGU claims that the three had executed counter-guaranties over bonds it executed
for the subcontract w/ Magsalin and, hence, should be held jointly and severally
liable

RTC admitted the third-party complaint and denied the motion to serve summons by
publication on the ground that the action against respondent Magsalin was in
personam.

RTC issued a notice setting the case for hearing. FGU filed a motion to cancel the
hearing on the ground that the third-party defendants had not yet filed their
answer. The motion was granted.

Of the three third-party defendants, only Baetiong filed an answer, the officers
returns on the summons to the Garcias state that both could not be located at their
given addresses. Petitioner was not served w/ Baetiongs answer.

For failure of petitioner to prosecute, RTC dismissed the case. RTC denied the
petitioners MR prompting the latter to elevate its case to the CA via a Rule 41
petition for review.

CA dismissed the appeal on the ground of lack of jurisdiction. The appeal raised a
pure question of law as it did not dispute the proceedings before the issuance of the
December 16, 2003 dismissal order.

Petitioner thus filed the present petition for review on certiorari.

Issues:

W/N THE LOWER COURT ERRED IN DECLARING THAT PETITIONER FAILED TO

PROSECUTE THE CASE

W/N THE APPELLATE COURT HAS JURISDICTION TO DETERMINE THE MERITS OF THE
APPEAL AS THE MATTERS THEREIN INVOLVE BOTH QUESTIONS OF LAW AND FACT.

W/N IT IS EVIDENT THAT THE LOWER COURTS DISMISSAL OF THE CASE IS A CLEAR
DENIAL OF DUE PROCESS.
RULING:
The petition is granted.
The Dismissal Order is Void
The December 16, 2003 dismissal order shows that it is an unqualified order and, as
such, is deemed to be a dismissal with prejudice.
Dismissals of actions for failure of the plaintiff to prosecute is authorized under
Section 3, Rule 17 of the Rules of Court. Dismissal with prejudice means dismissal
on adjudication of merits.
It is imperative that the dismissal order conform with Section 1, Rule 36 of the Rules
of Court on the writing of valid judgments and final orders.
(Section 1. Rendition of judgments and final orders. A judgment or final order
determining the merits of the case shall be in writing personally and directly
prepared by the judge, stating clearly and distinctly the facts and the law on which
it is based, signed by him, and filed with the clerk of the court.)
The December 16, 2003 dismissal order clearly violates this rule for its failure to
disclose how and why the petitioner failed to prosecute its complaint. A trial court
should always specify the reasons for a complaints dismissal so that on appeal, the
reviewing court can readily determine the prima facie justification for the dismissal

There was a denial of due process. Elementary due process demands that the
parties to a litigation be given information on how the case was decided, as well as
an explanation of the factual and legal reasons that led to the conclusions of the
court.Where the reasons are absent, a decision has absolutely nothing to support it
and is thus a nullity.
The appeal was properly filedunder Rule 41 of the Rules of Court
In Olave vs. Mistas, among the critical factual questions was whether, based
on the records, there had been factual basis for the dismissal of the subject
complaint. This same question is particularly significant in the present case given
that the order appealed does not even indicate the factual basis for the dismissal of
the case.
Due to the absence of any stated factual basis, and despite the admissions of
the parties, the CA still had to delve into the records to check whether facts to
justify the prejudicial dismissal even exist. Since the dismissal of the case appears
to have been rendered motuproprio (as the December 16, 2003 dismissal order
does not state if it was issued upon the respondents or the trial courts motion), the
facts to be determined by the CA should include the grounds specified under
Section 3, Rule 17 of the Rules of Court. A court could only issue
a motuproprio dismissal pursuant to the grounds mentioned in this rule and for lack
of jurisdiction over the subject matter. [32] These grounds are matters of facts. Thus,
given that the dismissal order does not disclose its factual basis, we are thus
persuaded that the petitioner had properly filed its appeal from the dismissal order
under Rule 41 of the Rules of Court.
The dismissal of the case is not supported by the facts of the case
The following events were chronologically proximate to the dismissal of Civil
Case No. 02-488: (a) the court admitted FGU Insurances third-party complaint; (b)
the trial court cancelled hearing upon FGU Insurances motion; and (c) Baetiong
filed his Answer to the third-party complaint but did not serve it upon the petitioner.
None of these events square with the grounds specified by Section 3, Rule 17 of the
Rules of Court for the motupropriodismissal of a case for failure to prosecute.
This does not satisfy the standards of non prosequitur. The fundamental test
for non prosequitur is whether, under the circumstances, the plaintiff is chargeable
with want of due diligence in failing to proceed with reasonable promptitude.There
must be unwillingness on the part of the plaintiff to prosecute.
In this case, the parties own narrations of facts demonstrate the petitioners
willingness to prosecute its complaint. Indeed, neither respondents FGU Insurance
nor Baetiong was able to point to any specific act committed by the petitioner to
justify the dismissal of their case.
While it is discretionary on the trial court to dismiss cases, dismissals of actions
should be made with care. The sound discretion demands vigilance in duly

recognizing the circumstances surrounding the case to the end that technicality
shall not prevail over substantial justice.