UNITED ALLOY PHILIPPINES CORPORATION, PETITIONER, VS. UNITED COCONUT PLANTERS BANK [UCPB] AND/OR PHILIPPINE DEPOSIT INSURANCE CORPORATION [PDIC], JAKOB VAN DER SLUIS AND ROBERT …

United Alloy Philippines versus United Coconut Planters Bank

The Case

This is a petition for review on certiorari brought by United Alloy Philippines Corporation, a domestic manufacturer of alloy products, against United Coconut Planters Bank, its vice-president Robert Chua, its former chairman Jakob Van Der Sluis, and the Philippine Deposit Insurance Corporation as assignee of the bank's loan account. United Alloy asks the Supreme Court to reverse the Court of Appeals, Cagayan de Oro City Station, which had affirmed the trial court's dismissal of its complaint for annulment and reformation of contract with damages and prayer for injunctive relief, and which had refused to issue a writ of preliminary mandatory injunction restoring it to the leased premises. The case matters because it teaches the working rule that the dismissal of the principal action carries with it the denial, disallowance, or revocation of every relief ancillary to the main remedy sought — a rule every examinee must be able to state cold.

Procedural History

United Alloy filed its complaint before the Regional Trial Court of Cagayan de Oro City, Branch 40, sitting as a Special Commercial Court. The trial court granted the motions to dismiss on the grounds of improper venue, forum-shopping, and harassment, and ordered United Alloy to turn over possession of the disputed premises to the bank. On motion, the trial court issued a writ of execution, which was satisfied. United Alloy then filed a petition for certiorari and mandamus before the Court of Appeals, Manila Station. That court issued a temporary restraining order and later a resolution granting the ancillary prayer for a writ of preliminary injunction upon posting of a bond, but no writ actually issued because the Supreme Court restrained enforcement while it resolved the bank's own certiorari petition. The Supreme Court eventually denied the bank's petition and sustained the Manila Station's resolution. Meanwhile, the records were forwarded to the Court of Appeals, Cagayan de Oro City Station, under Republic Act Number 8246. That station denied United Alloy's motion to issue and implement the writ, and later denied reconsideration. It then rendered its decision affirming the trial court and holding that United Alloy's proper recourse was an appeal, which it had allowed to lapse. United Alloy came to the Supreme Court by petition for review on certiorari.

Facts

On September 10, 1999, United Alloy and the bank entered into a Lease Purchase Agreement over several parcels of land in Tagoloan, Misamis Oriental, with a three-year lease running from August 1, 1999 to July 31, 2002, and a stipulated purchase price of 300 million pesos payable on a staggered basis upon expiration. United Alloy also obtained loans from the bank.

On August 27, 2001, United Alloy filed its complaint, alleging that Jakob Van Der Sluis, through misrepresentation and manipulation, took control of the corporation, and that the respondents connived to obtain fictitious loans evidenced by three promissory notes. It prayed for annulment or reformation of the notes, nullification of the bank's unilateral rescission of the Lease Purchase Agreement, and injunctive relief. The same day, the executive judge issued a seventy-two hour temporary restraining order.

The trial court dismissed the complaint, holding venue improperly laid because the credit documents stipulated exclusive venue in Makati City, and finding forum-shopping for failure to disclose a pending related case. It ordered United Alloy to surrender possession, and a writ of execution was satisfied, with the bank placed in possession. The Court of Appeals stations thereafter took conflicting paths, culminating in the challenged decision affirming the dismissal.

Issues

• Whether or not the Court of Appeals, Cagayan de Oro City Station, erred in dismissing United Alloy's petition for certiorari and mandamus, considering that the dismissal of the complaint was without prejudice and that a Rule 65 petition, not an appeal, was the proper remedy.
• Whether or not the trial court correctly dismissed the complaint on the grounds of improper venue, forum-shopping, and harassment.
• Whether or not the dismissal of the principal action carried with it the dissolution of the ancillary writ of preliminary injunction earlier granted by the Court of Appeals, Manila Station, and sustained by the Supreme Court.
• Whether or not the Court of Appeals, Cagayan de Oro City Station, violated the doctrine of judicial stability or non-interference in refusing to give effect to the Manila Station's resolution and the Supreme Court's decision.

Applicable Provisions

Section 1 of Rule 16 of the Rules of Court provides:

SECTION 1. Grounds. — Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds: (a) That the court has no jurisdiction over the person of the defending party; (b) That the court has no jurisdiction over the subject matter of the claim; (c) That venue is improperly laid; (d) That the plaintiff has no legal capacity to sue; (e) That there is another action pending between the same parties for the same cause; (f) That the cause of action is barred by a prior judgment or by the statute of limitations; (g) That the pleading asserting the claim states no cause of action; (h) That the claim or demand set forth in the plaintiffs pleading has been paid, waived, abandoned, or otherwise extinguished; (i) That the claim on which the action is founded is unenforceable under the provisions of the statute of frauds; and (j) That a condition precedent for filing the claim has not been complied with.

This provision fixes which dismissals are without prejudice, and therefore which orders may be challenged only by certiorari rather than appeal.

Paragraph 18 of the Lease Purchase Agreement, quoted by the Court, provides:

Any legal action arising out of or in connection with this Agreement shall be brought exclusively in the proper courts of Makati City, Metro Manila.

This stipulation is the contractual venue clause that the Court enforced against United Alloy's choice of forum.

Ruling

On the first issue, the Court held that United Alloy availed of the correct remedy. A dismissal based on improper venue, forum-shopping, or harassment does not fall under paragraphs (f), (h), or (i) of Section 1 of Rule 16, so the dismissal is without prejudice and the order is not appealable; the proper remedy is a special civil action for certiorari under Rule 65. The Court of Appeals therefore erred in faulting United Alloy for not appealing.

On the second issue, the Court nonetheless upheld the dismissal. On venue, the Court held that parties may agree in writing to limit the venue of future actions, and paragraph 18 of the Lease Purchase Agreement bound United Alloy to sue in Makati City. The complaint sought to nullify the bank's unilateral rescission of that very agreement, so the controversy arose out of and was inseparably related to it. On forum-shopping, the Court adopted the trial court's unrebutted finding that a related case involved the same transactions, essential facts, causes of action, subject matter, and issues, which United Alloy failed to disclose in its verification and certification.

On the third issue, the Court held that the dismissal of the main action dissolved the ancillary relief. A preliminary injunction is provisional and ancillary, existing only as an incident of the main action, and it persists only until dissolved or until the action terminates without a final injunction. The Court of Appeals decision dismissing the petition therefore superseded the Manila Station's resolution granting the writ. For the same reason, United Alloy had no basis to retain possession, and it had to restitute whatever it held by virtue of the dissolved provisional remedy, even absent a prayer from the opposing party.

On the fourth issue, the Court held that there was no violation of judicial stability. The doctrine of non-interference presupposes that the first court validly acquired jurisdiction and rendered a lawful order; it cannot shield an ancillary writ that has lost its life with the dismissal of the main case.

Doctrine

First, the dismissal of the principal action carries with it the denial, disallowance, or revocation of all reliefs ancillary to the main remedy sought in that action. A preliminary injunction is provisional and ancillary; it cannot survive the termination of the main case.

Second, where a motion to dismiss is granted on grounds other than those in paragraphs (f), (h), and (i) of Section 1 of Rule 16, the dismissal is without prejudice and is not appealable; the remedy is a petition for certiorari under Rule 65.

Third, parties may stipulate in writing on exclusive venue, and an action seeking to annul an act inseparably related to the contract falls within that stipulation.

Fourth, failure to disclose a pending related action in the certificate of non-forum-shopping is a ground for dismissal.

Disposition

The Supreme Court denied the petition and affirmed the Court of Appeals decision dismissing United Alloy's petition, leaving the dismissal of its complaint and the turnover of possession to the bank standing.

Remember This

Memorize the line: the dismissal of the principal action carries with it the denial, disallowance, or revocation of all reliefs ancillary to the main remedy sought. Examiners use this case to test the life span of a preliminary injunction and the Rule 16 distinction between dismissals with and without prejudice.