MARIA MONSERRAT R. KOR, PETITIONER, VS. HONORABLE INTERMEDIATE APPELLATE COURT, HON. JOB. B. MADAYAG IN HIS CAPACITY AS THE PRESIDING JUDGE, OF BRANCH CXLV, REGIONAL TRIAL COURT…

Kor versus Intermediate Appellate Court

The Case

This is a petition for review on certiorari brought by Maria Monserrat Kor against the Intermediate Appellate Court, now the Court of Appeals, and against Judge Job Madayag of the Regional Trial Court of Makati, together with the First Interstate Bank of California. The petitioner asks the Supreme Court to set aside the appellate court's refusal to annul two orders of the trial judge, which had denied her motion to dismiss a complaint for recovery of an overpayment. The case matters because it is the Supreme Court's clearest early statement on two points every civil procedure examinee must know: that the modes of discovery are not mandatory, and that a dismissal for failure to comply with a mere notice signed by a court officer, and not by the judge, is void and cannot operate as an adjudication on the merits.

Procedural History

The bank first sued the petitioner in the Regional Trial Court of Makati, Branch 141. That case was dismissed on the strength of a notice of case status issued by the officer-in-charge. The bank then refiled its complaint, which was assigned to Branch 143, presided over by Judge Madayag. The petitioner moved to dismiss on the ground of res adjudicata, meaning that the first dismissal barred the second suit. Judge Madayag denied the motion, and later denied the motion for reconsideration, reasoning that the dismissal was too drastic, that the trial court should have set the case for pre-trial anyway, and that it was better for the petitioner to have a definite ruling on her liability rather than win on a technicality. The petitioner then went to the Intermediate Appellate Court on certiorari, asking that those orders be declared null and void. The appellate court refused to give the petition due course and affirmed, holding that the dismissal order was itself null and void for lack of legal basis, because the notice of case status was not an order of the court. The petitioner elevated the matter to the Supreme Court by petition for review on certiorari.

Facts

On September 30, 1981, the petitioner's father sent her 500 dollars through the Metropolitan Bank and Trust Company, the remitting bank of the First Interstate Bank of California. Because of a computer error, the bank's Los Angeles office overstated the amount to 8,500 dollars instead of 500 dollars. The bank then issued and delivered to the petitioner a cashier's check for 8,500 dollars, dated October 8, 1981, which she deposited to her account and later withdrew.

On June 15, 1983, the bank sued her to recover the overpayment of 7,434 dollars and 90 cents, or its equivalent in Philippine currency. In her Answer dated August 17, 1983, the petitioner admitted the allegations of the complaint. She alleged that after receiving a formal demand letter, she had offered to pay the overpayment through the bank's lawyer in installments of 100 dollars a month, but that the offer was unreasonably rejected.

On August 19, 1983, the officer-in-charge of Branch 141 issued a notice of case status, telling the parties that pre-trial would be scheduled only after they had resorted to the modes of discovery, or had filed manifestations dispensing with them, and warning that if no manifestation was filed within 30 days the case would be archived or dismissed. No manifestation was filed. On November 29, 1983, the presiding judge, not Judge Madayag, issued an order dismissing the case for non-compliance with that notice. The bank's counsel received the order on December 28, 1983, but neither moved for reconsideration nor appealed. On July 4, 1984, the bank, through new counsel, refiled its complaint, and that refiled complaint gave rise to this case.

Issues

• Whether or not the order dismissing the first complaint operated as an adjudication upon the merits, so that the refiled complaint was barred by res adjudicata.
• Whether or not the notice of case status issued by the officer-in-charge was an order of the court whose disobedience could justify dismissal under the rule on failure to prosecute.
• Whether or not the trial court should have set the case for pre-trial after the last pleading was filed, instead of requiring the parties to resort first to the modes of discovery.

Applicable Provisions

Section 3 of Rule 17 of the Revised Rules of Court, on failure to prosecute, provides:

Failure to prosecute. — If plaintiff fails to appear at the time of the trial or to prosecute his action for an unreasonable length of time, or to comply with these rules or any order of the court, the action may be dismissed upon motion of the defendant or upon the court's own motion. The dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by court.

This is the provision the petitioner invokes, and the whole question is whether the dismissal of the first case fell under it, because only then would it bar the refiled complaint.

Section 1 of Rule 20, on pre-trial, provides:

Section 1. Pre-trial conference. — After the last pleading has been served and filed, it shall be the duty of the plaintiff to promptly move ex parte that the case be set for pre-trial conference.

The Court uses this provision to show that pre-trial is mandatory once the last pleading is filed, and that discovery cannot be imposed as a condition before it.

Ruling

On the first issue, the Court held that the dismissal did not operate as an adjudication on the merits and did not bar the second complaint. The petitioner had admitted in her Answer that there was an overpayment of 8,000 dollars due to computer error, and had offered to pay it in installments. On those admissions, the trial court could even have rendered judgment on the pleadings in favor of the bank. There was therefore no justification for treating the dismissal as an adjudication on the merits.

On the second issue, the Court held that the notice of case status was not an order of the court. It was signed by Mr. Belen, the officer-in-charge, and even its warning was ambiguous. Disobedience of it was not disobedience of a lawful order of the court, and so the dismissal could not carry the effect that Section 3 of Rule 17 gives to a dismissal for failure to prosecute. The Court acknowledged that the bank's counsel had been negligent in not seeking reconsideration or appealing, but held that this negligence was not fatal in view of the defective procedure that produced the dismissal. The Court also distinguished the Arellano case, because the dismissal there rested on a failure to answer interrogatories under the specific rule on interrogatories, which is not the situation here.

On the third issue, the Court held that recourse to the modes of discovery is not mandatory. Their purpose is to enable each party to obtain knowledge of material facts and evidence held by the other, so that all may lay their cards on the table and justice may be rendered on the merits. But if the parties choose not to resort to them, the pre-trial conference must still be set under Section 1 of Rule 20. The Court added that the petitioner's counterclaim for damages did not require an answer, so it was the last pleading, and after its submission the court should have issued a pre-trial order and the clerk of court should have placed the case in the pre-trial calendar.

Doctrine

First, the modes of discovery under the Rules of Court are permissive, not mandatory. A party cannot be compelled to resort to them as a condition for pre-trial, and once the last pleading is filed, the setting of the pre-trial conference is mandatory.

Second, a dismissal for failure to prosecute, which carries the effect of an adjudication upon the merits under Section 3 of Rule 17, requires a failure to comply with the rules or with a lawful order of the court. A notice signed by a clerk or officer-in-charge, and not by the judge, is not such an order, and a dismissal based on it is void and cannot bar a refiled action.

Third, where the defendant's own admissions show that the plaintiff has a clear right to recover, the dismissal of the first complaint cannot be allowed to defeat that right on a technicality.

Disposition

The Supreme Court affirmed the decision of the appellate court, with costs against the petitioner, and declared its decision immediately executory.

Remember This

Memorize this line: discovery is not mandatory, pre-trial is, and only disobedience of a lawful order of the court can trigger a dismissal that bars refiling. Examiners use this case to test the effect of a dismissal for failure to prosecute and the validity of processes signed by court personnel rather than the judge.