GOLDLOOP PROPERTIES, INC., PETITIONER, VS. COURT OF APPEALS, ROBERTO S. ROBLES AND ALICIA G. ROBLES, RESPONDENTS.

This is a petition for review on certiorari of the Decision
of the Court of Appeals of 27 November 1990^[1]
annulling and setting aside the order of dismissal issued by the Regional Trial
Court of Pasig, Branch 158, in Civil Case No. 58027, as well as the Resolution
of 14 May 1991 denying the motion for reconsideration.

The present recourse proceeds from the Order of 25 October 1989
of the Regional Trial Court of Pasig, Branch 158, which motu proprio dismissed
for failure to prosecute the complaint for reformation of instrument filed
by private respondent-spouses Roberto S. Robles and Alicia G. Robles against
petitioner Goldloop Properties, Inc. The order of dismissal reads:

“By virtue of this Court’s Order dated 10 August 1989, the
parties are given fifteen (15) days upon receipt of the same to file a Compromise
Agreement. To date, nothing has been
filed, nor have plaintiffs done anything to further prosecute this case.

“WHEREFORE, for failure to prosecute, this case is
dismissed.”^[2]

Upon its elevation to the Court of Appeals, said Order was
nullified in its Decision of 27 November 1990. Petitioner now assails the
validity of the decision in this instant petition for review on certiorari
and seeks the reinstatement of the order of dismissal issued by the trial
court.

The records show that on 27 March 1989, the Robles spouses
instituted a complaint for reformation of instrument with damages maintaining
that the contract they entered into with Goldloop Properties, Inc., on 17 June
1988 was a mortgage and not an absolute sale. They prayed for a writ of preliminary injunction to stop petitioner from
making any encumbrance or disposition of the property which is a prime commercial parcel of land consisting of 618
square meters located at San Juan, Metro Manila.

On 2 August 1989, while the application for preliminary
injunction was being heard, the parties manifested the possibility of an
amicable settlement; whereupon, the hearing was deferred to 10 August 1989, on
which date the parties were granted fifteen (15) days within which to submit a compromise agreement. However, no such agreement was
presented. On 25 October 1989, the
trial court dismissed the complaint “for failure to prosecute.”

On 8 November 1989, respondent-spouses received the order of
dismissal. Fourteen (14) days later,
they filed their Motion for Reconsideration wherein they intimated that
negotiations for a compromise were still ongoing.

Unfortunately, respondent-spouses failed to include a notice of
hearing in their motion, so that on 6 February 1990, the trial court denied the
motion. On 14 February 1990,
respondent-spouses received the order of denial. Thereafter, on 16 February 1990, they filed a Notice of Appeal.

Initially, the trial court gave due course to the appeal and
elevated the records to the Court of Appeals. On 26 March 1990, on motion of petitioner, the trial court recalled its
prior order giving due course to the appeal.

On 23 April 1990, respondent-spouses filed a motion for
reconsideration. On 2 May 1990, the
trial court denied the motion on the ground that the dismissal had become final
and executory.

Subsequently, said respondents sued for extension of time to file
a petition for review with the Court of Appeals, docketed as CA-G.R. SP No.
20778. However, for their failure to
allege the date of receipt of the Order of 25 October 1989 and the filing of
the corresponding motion for reconsideration, their motion was denied by the
appellate court, and on 27 July 1990 entry of judgment was made.

On 25 September 1990, respondent-spouses instituted a petition
for mandamus in the Court of Appeals, docketed as CA-G.R. SP No. 22893,
to set aside the order of dismissal and compel the trial court to set the case immediately for
continuation of hearing on the preliminary injunction.

On 27 November 1990, treating the petition for mandamus as
one also for certiorari, the appellate court annulled and set aside the
assailed order of dismissal and directed the lower court to set the case for
continuation of hearing on the preliminary injunction. Moreover, as respondent court observed –

“x x x there are equities of the case that should not be
overlooked. The petitioners are trying
to recover their property from the respondent Corporation. A parcel of land with 618 square meters
located in San Juan, Metro Manila, in a commercial district on which an 8-door
apartment stands, it is alleged to have a fair market value of
P4,000,000.00. It is claimed
that the petitioners were forced by the circumstance that they were hard
pressed to execute a deed of sale of their property for P650,000.00 only, which
was not the true agreement. The
petitioners, therefore, should have been afforded a chance to negotiate with
the respondent Corporation for the repurchase of their property. Dismissal of the action is precipitate.^[3]

Petitioner moved for reconsideration but the same was
denied. Hence, this petition.

Goldloop Properties, Inc., contends that respondent Court of
Appeals erred in not holding that
the disputed order of dismissal was final and executory and, consequently,
respondent-spouses could no longer avail of the special civil action of certiorari
in lieu of their lost appeal.

In their Comment, respondent-spouses maintain that the order of
dismissal of the trial court is void ab
initio. Correspondingly, there is no judgment
at all that could acquire finality. Respondent-spouses also invoke the cardinal rule that “remedial
laws should be construed liberally in order x x x that a possible denial
of substantial justice, due to legal technicalities, can be avoided.”^[4]

Admittedly, the filing of respondent-spouses’ motion for
reconsideration did not stop the running of the period of appeal because of the
absence of a notice of hearing required in Secs. 3, 4 and 5, Rule 15, of the
Rules of Court. As we have repeatedly held,
a motion that does not contain a notice of hearing is a mere scrap of paper; it
presents no question which merits the attention of the court. Being a mere scrap of paper, the trial court
had no alternative but to disregard it.^[5] Such being
the case, it was as if no motion for reconsideration was filed and,
therefore, the reglementary period within which respondent-spouses should have filed an appeal expired on 23
November 1989.^[6]

But, where a rigid application of that rule will result in a
manifest failure or miscarriage of justice, then the rule may be relaxed,^[7]
especially if a party successfully shows that the alleged defect in the
questioned final and executory judgment is not apparent on its face or from the
recitals contained therein.^[8]
Technicalities may thus be disregarded in order to resolve the case. After all, no party can ever claim a vested
right in technicalities. Litigations
should, as much as possible, be decided on the merits and not on technicalities.^[9]

Hence, this Court should not easily allow a party to lose title
and ownership over a property worth P4,000,000.00
for a measly P650,000.00 without affording him ample opportunity to prove his
claim that the transaction entered into was not in fact an absolute sale but
one of mortgage. Such grave injustice
must not be permitted to prevail on the anvil of technicalities.

Under authority of Sec. 9, par. (2), of B.P. 129, a party may
petition the Court of Appeals to annul and set aside judgments of Regional
Trial Courts.^[10]
Thus, “[t]he Intermediate Appellate Court (now Court of Appeals) shall
exercise: x x x x (2) Exclusive
original jurisdiction over actions for annulment of judgments of Regional Trial
Courts x x x x” However, certain requisites must first be established
before a final and executory judgment can be the subject of an action for
annulment. It must either be void for
want of jurisdiction or for lack
of due process of law, or it has been obtained by fraud.^[11]
A close examination of the questioned order reveals that it is void for lack of
jurisdiction, emanating as it does from the non­-observance, if not utter
disregard, of procedural due process.

As regards the dismissal of actions motu proprio, Sec. 3, Rule 17, of the Revised Rules of Court
provides –

“Sec. 3. 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. This dismissal shall have the effect of an adjudication upon the merits,
unless otherwise provided by court.”

The aforequoted Rule contemplates of three (3) instances whereby
a trial court may dismiss an action on its own volition for failure to prosecute,
namely: (1) where the plaintiff fails
to appear at the time of the trial; (2) where he fails to prosecute his action
for an unreasonable length of time; and, (3) when he fails to comply with these
rules or any order of the court.

In the disputed order, the trial court obviously relied on the
last two (2) grounds in dismissing the complaint. Notably, that respondent-spouses, as plaintiffs in the trial
court, failed to submit their compromise agreement within fifteen (15) days,
and that they failed to take further steps to prosecute their action for an
unreasonable length of time.

Anent the first ground, it should be stressed that the Order of
10 August 1989 only states that “[t]he parties are given a period of
fifteen (15) days from today within which to submit a Compromise
Agreement.” The Order did not even require the submission of a compromise
agreement; nor did it warn the parties that should they fail to submit the same
within the period therein given their case would be dismissed. As We
view the Order, it only meant that should they fail in their
negotiations the proceedings would continue from where they left off. For sure, there was never any agreement that
should the parties fail to settle their differences in fifteen (15) days their
case would be dismissed. Nor did the
parties ever expect that in the event of their failure to submit the
contemplated compromise agreement their case would be dismissed. Since there is nothing in the Rules that
imposes the sanction of dismissal for failing to submit a compromise agreement,
then it is obvious that the dismissal of the complaint on the basis thereof
amounts no less to a gross procedural infirmity assailable by certiorari. For such submission could at most be
directory and could not result in throwing out the case for failure to effect a
compromise. While a compromise is
encouraged, very strongly in fact, failure to consummate one does not warrant
any procedural sanction, much less an authority to jettison a civil complaint
worth P4,000,000.00.

It may be worth repeating that the Order of 10 August 1989 does
not carry any sanction for failure to submit a compromise agreement. Neither does it contain a forewarning that
failure to amicably settle would result in the dismissal of the suit. Plainly, submission of a compromise
agreement is never mandatory, nor is it required by any rule. Upon manifestation of the parties of their
willingness to discuss a compromise, the trial court should have ordered the suspension
of the proceedings to allow them reasonable time to discuss and conclude an
amicable settlement, pursuant to Sec. 1, Rule 21, which states:

“Section 1. Grounds for suspension. – Any party to an action may, at
any time before the date set for pre-trial, file a petition with the court for
the suspension of the proceedings with a view of securing a possible compromise
if (1) it appears that any one
or both of the parties have expressed at any time willingness to discuss a
possible compromise, or (2) it is alleged
under oath that one of the parties, before commencement of the action or
proceeding, offered to discuss a possible compromise but the other party
refused the offer.”

If despite all efforts exerted by the trial court and the parties
the settlement conference still fails, then the action should have continued as
if no suspension had taken place. This
is laid down in Sec. 4, Rule 21, which reads –

“Section 4. Period of suspension. – No suspension for a period longer than sixty (60) days
from notice of the order of suspension shall be allowed except upon justifiable
grounds. If no compromise is
arrived at within the
period provided, the case shall continue as if no suspension of the proceeding had take
place.” (underscoring
ours).

Although the Rule allows the trial court to suspend the
proceedings up to sixty (60) days, in the instant case, the trial court only
gave the parties fifteen (15) days to come up with an amicable settlement. Indeed, it should not have dismissed the
action on its own motion because the parties, specifically respondent-spouses,
were anxious to pursue their case as manifested in their motion for
reconsideration. Their inadvertent
omission in setting their motion for reconsideration for hearing under Rule 15
of the Rules of Court should not deprive them of their judicial recourse. At the very least, such motion should have
been treated by the trial court as a manifestation that the negotiation was
still ongoing on the settlement
of their case. Even assuming arguendo that a dismissal was
warranted, still it should have been without prejudice considering its
extinctive effect on the spouses’ cause of action.

While We can perceive of a dismissal motu proprio by the court for a litigant’s inaction, yet
there must be sufficient basis on which to anchor a dismissal with
prejudice. Unfortunately, We perceive
none in the instant case. In fact,
there is every reason to hold that if dismissal should be decreed, it be
without prejudice considering the worth of the claim, the earnest efforts of
the respondent-spouses to settle, and their manifestation of interest in
pursuing their claim as may be gleaned from their motion for
reconsideration. Where it operates as an adjudication on the merits, as in
the case at bar, dismissal of an action for failure to submit a compromise
agreement, which is not even required by any rule, is definitely a harsh
action. Dismissal of suits should be
resorted to only in extreme circumstances where the actions of the party show deliberate and contumacious disregard of the trial court’s authority, or in instances where a party has been duly forewarned of the drastic
consequences should there be failure to comply. There must be, in all cases, a scrupulous regard for the rights
of the parties to the action.

No such unmindfulness, much less deliberate disregard of the
court’s authority, can be inferred from the actuations of
respondent-spouses. On the contrary,
the fact that negotiations for a
compromise agreement persisted even up
to the time of the dismissal of the case strongly demonstrates their
earnest efforts to abide by the trial court’s order to settle their dispute
amicably.

Indeed, to uphold the questioned order to submit a compromise agreement within fifteen
(15) days and, sans any warning, dismissing an action on account of the failure
of the parties to compromise, would be to render nugatory the pronounced policy
of the law to encourage compromises, and thus open the floodgates to parties
refusing to agree upon an
amicable settlement by simply railroading their opposing parties’ position, or
even defeating the latter’s claim by the expedient of an outright dismissal.

On the issue of whether
there was indeed failure to prosecute for an unreasonable length of
time, it is well settled that
what constitutes “unreasonable length of time” is properly left to
the discretion of the trial court. In Montejo
v. Urotia,^[12] We ruled:

“As to what constitutes an ‘unreasonable length of time,’
within the purview of the quoted provision, it has been ruled that it ‘depends
upon the circumstances of each particular case;’ that “the sound
discretion of the court” in the determination of said question ‘will not
be disturbed, in the absence of patent abuse;’ and that ‘the burden of showing
abuse of judicial discretion is upon appellant since every presumption is in
favor of the correctness of the court’s action.’ Thus, this Court refused to
disturb orders of dismissal for failure to prosecute for a period of four (4)
years, about three (3) years, over a year, less than a year, and even less than
three (3) months x x x x”

But in the instances above contemplated when the Court considered
“less than a year” and “even less than three months” as
“unreasonable length of time” to justify dismissal of a complaint,
there was repeated failure of plaintiffs to appear and prosecute their
complaint, or to resist a motion to dismiss by defendant. None of the circumstances therein
contemplated are present in the case before Us.

More importantly, the power of the trial court to dismiss an
action on the ground of non-prosequitor is not unbounded. The real test for the exercise of such power
is whether, under the facts and circumstances, the plaintiff is chargeable with
want of due diligence in failing to proceed with reasonable promptitude.^[13]
With the manifestation of respondent-spouses that they were still in the
process of negotiating, it is indubitable that their failure to submit their
compromise agreement with reasonable dispatch was not brought about by their
want of due diligence. Prudence would
have dictated the trial court to have determined first the cause of the delay
or require the parties to comment whether they were still interested in the
case, particularly respondent-spouses who stand to lose their real property
worth no less than P4,0000,000.00.

Amicable settlements have been encouraged to avoid lawsuits or
put an end to those already
commenced. This is the reason why
courts endeavor to persuade litigants in civil suits to agree upon some fair
compromise. An action should never be
dismissed on a non-suit for want of prosecution when the delay was caused by
the parties looking towards a settlement.^[14] This
finds more meaning in the instant case considering that the action had not yet
reached even the pre-trial
stage. As a matter of fact, the trial court
was still in the midst of evaluating the propriety of the issuance of a writ of
preliminary injunction. Dismissing the
action without even allowing the parties to present evidence in their behalf
and after ordering them to compromise would, therefore, be tantamount to
deprivation of due process. As
appropriately characterized by respondent Court of Appeals, the dismissal was
indeed “precipitate”.

In fine, We hold that the Court of Appeals in its questioned
Decision of 27 November 1990 did not err in annulling the Order of 25 October
1989 of the Regional Trial Court in Civil Case No. 58027 for having been issued
with grave abuse of discretion amounting to lack or want of jurisdiction and in
derogation of the fundamental right of respondent-spouses to due process.

WHEREFORE, for lack of merit, the Petition for Review on Certiorari
is DENIED. Costs
against petitioner.

SO ORDERED.

Cruz, (Chairman), Griño-Aquino, and
Medialdea, JJ., concur.

^[1]
Penned by Justice Pedro A. Ramirez, concurred in by then
Presiding Justice Rodolfo A. Nocon and Justice Fernando A. Santiago.

^[2]
Annex “E”, Petition, Rollo, p. 55.

^[3]
Decision, CA-G.R. SP No. 22893, Rollo,
p. 41.

^[4]
Concepcion v. Payatas
Estate Improvement Company, Inc., 103 Phil 1016 (1958).

^[5]
Traders Royal Bank v. Court of Appeals, G.R. No. 60222, 21 April 1992.

^[6]
See also Villanueva v. Court of Appeals, G.R. No. 99357, 27 January
1992.

^[7]
Legarda v. Court of Appeals, G.R. No. 94457, 18 March 1991; 195 SCRA
418.

^[8]
See Balangcad v. Justices of the Court of Appeals, G.R. No. 84888, 12
February 1992.

^[9]
Ruiz v. Court of Appeals, G.R. No. 93454, 13 September 1991; 201 SCRA
577.

^[10]
Gerardo v. De la Pena, G.R. No. 61527, 26 December 1990; 192 SCRA 691.

^[11]
Ramirez v. Court of Appeals, G.R. No. 76366, 3 July 1990, 187 SCRA 153; see
also Mercado v. Ubay, No. L-35830, 24 July 1990, 187 SCRA 719.

^[12]
No. L-27187, 22 July 1971; 40 SCRA 41,
51-52.

^[13]
Marahay v. Melicor, G.R. No. 44980, 6 February 1990; 181 SCRA 811.

^[14]
Republic v. Villarosa, 103 Phil 631 [1958]).