DAYTONA SPV-AMC (ASSET MANAGEMENT COMPANY), INC. AND BEACON HILL RESOURCES MANAGEMENT INC., PETITIONERS, VS. HON. DANILO P. GALVEZ, PRESIDING JUDGE, REGIONAL TRIAL COURT, SIXTH …

Daytona SPV-AMC versus Galvez

The Case

This is a petition for certiorari under Rule 65 filed by Daytona SPV-AMC, Incorporated and Beacon Hill Resources Management, Incorporated against Judge Danilo P. Galvez, in his capacity as Presiding Judge of the Regional Trial Court of Iloilo City, Branch 24. The petitioners ask the Supreme Court to annul two orders of the trial judge: the order denying their motion for summary dismissal of a complaint for specific performance, accounting and damages, and the order denying their motion for reconsideration. The case matters because it is the Court's cleanest statement on when a re-filed complaint is not forum-shopping, and on how the rule on the certificate of non-forum shopping bends to substantial justice.

Procedural History

The private respondent, the plaintiff below, first filed a complaint against the same petitioners and Export and Industry Bank before the Regional Trial Court of Iloilo, Branch 38. That earlier case was dismissed on June 6, 2011, when the plaintiffs and their counsel failed to appear at the pre-trial conference. The dismissal order stated that the case was dismissed without prejudice.

The private respondent then filed a new complaint for specific performance, accounting and damages, with a prayer for a temporary restraining order and preliminary mandatory injunction, this time before Branch 24, presided over by the public respondent. The petitioners moved for summary dismissal on the ground of forum-shopping, arguing that the certificate of non-forum shopping was false because it did not disclose the earlier case. The trial judge denied the motion on November 15, 2011, relying on the rule that a re-filed complaint need not state the prior filing or dismissal. The motion for reconsideration was denied on January 9, 2012. The petitioners then went straight to the Supreme Court by petition for certiorari under Rule 65, alleging grave abuse of discretion amounting to lack or excess of jurisdiction.

Facts

The dispute traces back to the foreclosure by Export and Industry Bank of properties formerly owned by the spouses Jarantilla. With the foreclosure, the certificates of title were transferred to the bank. To retain possession, the private respondent, who is the sister of Benjamin Jarantilla's wife, offered to buy the foreclosed properties from the bank. She paid substantial amounts, but the contract to sell was never executed in her favor. Instead, she was declared in default and told she was not entitled to any refund.

She then filed the earlier case, together with the spouses Jarantilla, seeking to restrain the defendants from ejecting them from the properties. That injunctive relief was denied, the trial court reasoning that a writ of injunction restrains the wrongdoer and does not protect him. The earlier case was later dismissed without prejudice for failure to appear at pre-trial.

In the new complaint, the private respondent asked that the defendants be restrained from selling the foreclosed properties, and that a writ of preliminary mandatory injunction issue ordering the bank to restore her, through the spouses Jarantilla, to possession. By then the spouses Jarantilla had already been evicted, so the relief sought was restoration, not the prevention of eviction. Her certificate of non-forum shopping, however, stated that she had not commenced any other action involving the same issues.

Issues

• Whether or not the private respondent committed forum-shopping when she filed the new complaint after the earlier case was dismissed without prejudice, without disclosing that earlier case in her certificate of non-forum shopping.
• Whether or not the public respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying the motion for summary dismissal and refusing to dismiss the complaint.

Applicable Provisions

Section 5, Rule 18 of the Rules of Court provides:

Section 5. Effect of failure to appear. The failure of the plaintiff to appear when so required pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice unless otherwise ordered by the court.

This is the provision under which the earlier case was dismissed, and it is decisive because it leaves to the sound discretion of the trial court whether the dismissal is with or without prejudice.

Ruling

On the first issue, the Court held that there was no forum-shopping. Forum-shopping is the act of litigants who repetitively avail themselves of multiple judicial remedies in different fora, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, raising substantially similar issues either pending in or already resolved adversely by some other court, or for the purpose of increasing their chances of obtaining a favorable decision. The Court noted the three ways it can be committed: by filing multiple cases based on the same cause of action and the same prayer while the previous case is pending, which is litis pendentia; by filing them after the previous case has been finally resolved, which is res judicata; and by filing multiple cases on the same cause of action but with different prayers, which is splitting of causes of action.

The petitioners anchored their claim on the second mode, res judicata. But the Court held that res judicata requires, among others, a judgment or order on the merits. The earlier case was never tried on the merits; it was dismissed without prejudice under Section 5, Rule 18. The Court stressed that whether the dismissal is with or without prejudice is left to the sound discretion of the trial court, not to the party. Hence, the private respondent could not be faulted for following the order and filing anew, and she was not barred from doing so.

The Court also rejected the argument that she deliberately absented herself from pre-trial to obtain a dismissal without prejudice, calling it speculative, since she had no control over how her failure would be treated. Nor were the injunctive reliefs identical: the earlier case sought to enjoin eviction, while the new case sought to restrain the sale of the properties and to restore possession after eviction had already occurred.

On the inaccurate certificate, the Court conceded that the private respondent falsely stated that she had not commenced any other action involving the same issues. Still, it held that the verification requirement is a formal, not a jurisdictional, requirement, and that substantial justice dictates a liberal construction where there was no actual forum-shopping. On the second issue, the Court defined grave abuse of discretion as capricious and whimsical exercise of judgment equivalent to an excess or lack of jurisdiction, so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law. Finding nothing arbitrary in the trial judge's reliance on the without prejudice dismissal, the Court found no grave abuse of discretion.

Doctrine

A dismissal without prejudice is not an adjudication on the merits and therefore cannot serve as res judicata; the plaintiff may re-institute the same action. Whether a dismissal under Section 5, Rule 18 is with or without prejudice rests in the sound discretion of the trial court, not the party. The certificate of non-forum shopping is a formal, not a jurisdictional, requirement, and its inaccurate or false contents may be excused in the interest of substantial justice where no actual forum-shopping exists. Grave abuse of discretion means capricious and whimsical exercise of judgment equivalent to lack or excess of jurisdiction.

Disposition

The petition was denied, and the orders of the trial judge denying the motion for summary dismissal and the motion for reconsideration were affirmed; the private respondent prevailed.

Remember This

Memorize this line: a dismissal without prejudice is no adjudication on the merits, so it cannot be res judicata and the refiling is not forum-shopping. Examiners use this case on the three modes of forum-shopping, on the requisites of res judicata, and on the liberal treatment of a defective certificate of non-forum shopping.