Bank of the Philippine Islands vs. Domingo R. Dando

A court may relax compliance with the mandatory requirement in Rule 18, Sections 5 and 6, that pre-trial briefs be filed and served at least three days before pre-trial, where the party seeking relaxation has committed only a first and isolated procedural lapse, has not shown a pattern or scheme of delay, the case involves property and substantive merits, and the opposing party will not be unjustly prejudiced.

Petitioner Bank of the Philippine Islands is the surviving entity in the 2000 merger with Far East Bank and Trust Company, whose rights and obligations it absorbed. Respondent Domingo R. Dando had obtained credit from FEBTC under a Privilege Cheque Credit Line Agreement. The Rules of Court then in force governed pre-trial procedure under Rule 18, which required the parties to file and serve pre-trial briefs at least three days before the scheduled pre-trial conference.

Petitioner Bank of the Philippine Islands (BPI) is the surviving entity in the 2000 merger with Far East Bank and Trust Company (FEBTC), whose rights and obligations it absorbed. On or about 12 August 1994, respondent Domingo R. Dando availed of a loan in the amount of ₱750,000.00 from FEBTC under a Privilege Cheque Credit Line Agreement. The parties agreed that Dando would pay the principal in lump sum at the end of 90 days and interest every 30 days, reckoned from availment. Dando defaulted in the payment of the principal, interest, and penalties; despite repeated demands, he refused and/or failed to pay.

In 2000, BPI and FEBTC merged, with BPI as the surviving entity. On 13 March 2003, BPI filed a Complaint for Sum of Money and Damages against Dando before the Regional Trial Court (RTC) of Makati City, Branch 149, docketed as Civil Case No. 03-281. Dando filed an Answer with Counterclaim. In his Answer, Dando admitted that he availed himself of the credit line extended by FEBTC but claimed he was not able to avail himself of the full credit line amount of ₱750,000.00; he agreed that he had drawn no more than ₱375,000.00 but denied agreeing to pay 19% interest per annum and late payment charges at the rate of 3%.

After Dando filed his Answer, BPI filed a Motion to Set Case for Pre-Trial. Acting Presiding Judge Oscar B. Pimentel issued an Order on 11 June 2003 setting Civil Case No. 03-281 for pre-trial conference on 18 August 2003. On 16 June 2003, Judge Pimentel issued a Notice of Pre-Trial Conference directing the parties to submit their respective pre-trial briefs at least three days before the scheduled date of pre-trial. Dando submitted his Pre-trial Brief to the RTC on 11 August 2003. BPI filed its Pre-trial Brief with the RTC, and furnished Dando with a copy thereof, only on 18 August 2003, the very day of the scheduled Pre-Trial Conference.

When the parties appeared before the RTC on 18 August 2003, Dando orally moved for dismissal of Civil Case No. 03-281, citing Sections 5 and 6, Rule 18 of the Rules of Court. The RTC required Dando to file a written motion within five days and BPI to file its comment and/or opposition; no pre-trial conference was to be held until the motion was resolved. On 25 August 2003, Dando filed his written Motion to Dismiss for violation of the mandatory rule on filing of pre-trial briefs. BPI opposed the motion, arguing that its filing of the Pre-Trial Brief on 18 August 2003 should be considered compliance with the rules because the Pre-Trial Conference did not proceed as scheduled on that date.

In an Order dated 10 October 2003, the RTC granted Dando’s Motion to Dismiss and dismissed Civil Case No. 03-281 with prejudice, citing the mandatory character of Section 6, Rule 18 and the purpose of pre-trial briefs to clarify and narrow the issues. BPI moved for reconsideration, praying for liberal interpretation of the rules; Dando filed his Comment/Opposition. On 13 January 2004, the RTC, now presided by Judge Cesar O. Untalan, granted BPI’s Motion for Reconsideration, set aside the 10 October 2003 Order, and set the case for pre-trial anew on 13 February 2004. Dando moved for reconsideration, but the RTC denied it in its Order dated 3 March 2004, setting the pre-trial for 19 March 2004.

• Compliance with Pre-Trial Brief Requirement: BPI argued that its filing of the Pre-Trial Brief with the RTC on 18 August 2003 should be considered compliance with the rules because the Pre-Trial Conference did not proceed as scheduled on that date.
• Relaxation of Procedural Rules: BPI maintained that the RTC had the discretion or power to relax compliance with the Rules of Procedure, and that the Court of Appeals erred in strictly applying the rules.
• Liberal Interpretation and Substantial Justice: BPI prayed for liberal interpretation of the rules, invoking jurisprudence allowing relaxation of procedural rules in the interest of substantial justice and without giving premium to technicalities.
• Heavy Pressures of Work: BPI’s counsel invoked “heavy pressures of work” to explain the failure to file and serve the Pre-Trial Brief on time.
• Strict Application Error: BPI raised as an issue whether the Court of Appeals was correct in strictly applying the Rules of Procedure.

• Mandatory Pre-Trial Brief Rule: Dando moved to dismiss Civil Case No. 03-281 for violation of the mandatory rule on filing of pre-trial briefs, citing Sections 5 and 6, Rule 18 of the Rules of Court.
• Late Filing and Service: Dando claimed that BPI filed its Pre-Trial Brief only on 18 August 2003, the day of the scheduled Pre-Trial Conference, instead of at least three days before, and that he had not received a copy thereof.
• Dismissal with Prejudice: Dando invoked the rule that failure to file the pre-trial brief has the same effect as failure to appear at pre-trial, and that a plaintiff’s failure to appear is cause for dismissal with prejudice.
• Opposition to Reconsideration: Dando filed his Comment/Opposition to BPI’s Motion for Reconsideration, opposing the relaxation of the rules.

• Strict Application of Procedural Rules: Whether the Court of Appeals was correct in strictly applying the Rules of Procedure.
• Grave Abuse of Discretion / Relaxation of Rules: Whether the Court of Appeals was correct in declaring that the RTC committed grave abuse of discretion when it reconsidered and set aside the Order dismissing the case, despite the RTC’s discretion or power to relax compliance with the Rules of Procedure.

• Strict Application of Procedural Rules: No. The Court of Appeals erred in strictly applying Rule 18; courts may relax compliance with even mandatory procedural rules where the ends of substantial justice require it.
• Grave Abuse of Discretion / Relaxation of Rules: No. The RTC did not commit grave abuse of discretion in reconsidering and setting aside the dismissal; it acted within its prerogative to relax the rules, and the case was remanded for continued hearing.

• Strict Application of Procedural Rules: The Rules of Court use “shall” in Rule 18, Sections 5 and 6, and words of command are generally mandatory. However, procedural rules are not to be belittled or simply disregarded, yet litigation is not merely a game of technicalities. Courts have the prerogative to relax compliance with procedural rules of even the most mandatory character, reconciling speedy litigation with the parties’ right to an opportunity to be heard. Exigencies and situations may demand flexibility. Cases should be decided only after giving all parties the chance to argue their causes and defenses; technicality and procedural imperfection should not serve as basis of decisions. Thus, the Court of Appeals’ strict application was incorrect.
• Grave Abuse of Discretion / Relaxation of Rules: The RTC did not gravely abuse its discretion. The ruling applied the factors in Sanchez vs. Court of Appeals: the case involved property, as BPI sought to recover a loan; the merits were not frivolous because Dando admitted availment but disputed the amount; BPI’s failure was its first and only procedural lapse, not a pattern or scheme to delay, and BPI otherwise exhibited diligence by immediately moving to set pre-trial and filing a motion for reconsideration. Although “heavy pressures of work” was not sufficient in Olave vs. Mistas, Olave involved repeated failures, unlike BPI’s isolated lapse. Dismissal with prejudice would bar BPI from recovering the amount lent and unjustly enrich Dando. Dando would not be prejudiced because he retained his affirmative defenses and due process. Therefore, the RTC properly relaxed the rules and set the case for pre-trial.

• Liberal Construction of Procedural Rules — Procedural rules are not to be belittled or disregarded, but courts may relax compliance with even mandatory rules where exigencies and situations demand flexibility, to afford parties the opportunity to fully ventilate their cases on the merits. The Court applied this doctrine to uphold the RTC’s reconsideration of its dismissal order and to allow BPI’s complaint to proceed to trial.
• Mandatory Character of “Shall” — Words of command such as “shall,” “must,” or “ought” are generally regarded as mandatory. Rule 18, Sections 5 and 6, use “shall,” imposing a mandatory duty on parties to file and serve pre-trial briefs and making failure to file equivalent to failure to appear. The Court recognized this mandatory character but held that it did not preclude relaxation in meritorious cases.
• Failure to File Pre-Trial Brief — Under Rule 18, Section 6, failure to file the pre-trial brief has the same effect as failure to appear at pre-trial; under Section 5, a plaintiff’s failure to appear is cause for dismissal of the action, with prejudice unless otherwise ordered by the court. The Court applied the rule to BPI’s late filing but relaxed the sanction because of the circumstances.
• Sanchez Test for Suspension of Strict Adherence — The reasons that may justify suspending strict adherence to procedural rules include: (a) matters of life, liberty, honor or property; (b) the existence of special or compelling circumstances; (c) the merits of the case; (d) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules; (e) a lack of any showing that the review sought is merely frivolous and dilatory; and (f) the fact that the other party will not be unjustly prejudiced thereby. The Court relied on this test in finding that the RTC did not gravely abuse its discretion.
• Procedure as a Tool for Substantial Justice — The general objective of procedure is to facilitate the application of justice to the rival claims of contending parties, bearing in mind that procedure is not to hinder but to promote the administration of justice. The Court applied this principle to avoid a dismissal with prejudice that would defeat BPI’s substantive claim.

• “The Court is fully aware that procedural rules are not to be belittled or simply disregarded for these prescribed procedures insure an orderly and speedy administration of justice. However, it is equally true that litigation is not merely a game of technicalities. Law and jurisprudence grant to courts the prerogative to relax compliance with procedural rules of even the most mandatory character, mindful of the duty to reconcile both the need to put an end to litigation speedily and the parties’ right to an opportunity to be heard.” — This passage states the ratio decidendi: the mandatory character of procedural rules does not strip courts of the power to relax them when substantial justice requires.
• “In Sanchez v. Court of Appeals, the Court restated the reasons that may provide justification for a court to suspend a strict adherence to procedural rules, such as: (a) matters of life, liberty, honor or property; (b) the existence of special or compelling circumstances; (c) the merits of the case; (d) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules; (e) a lack of any showing that the review sought is merely frivolous and dilatory; and (f) the fact that the other party will not be unjustly prejudiced thereby.” — This excerpt provides the canonical multi-factor test applied by the Court in deciding whether to relax procedural rules.
• “To dismiss Civil Case No. 03-281 with prejudice and, thus, bar BPI from recovering the amount it had lent to Dando would be to unjustly enrich Dando at the expense of BPI.” — This passage applies the property and merits factors and explains why the dismissal with prejudice was not warranted.
• “BPI did not manifest an evident pattern or scheme to delay the disposition of the case or a wanton failure to observe a mandatory requirement of the Rules.” — This excerpt distinguishes Olave vs. Mistas and supports the finding that BPI’s late filing was an isolated lapse rather than a deliberate delay.

• Sanchez vs. Court of Appeals, 452 Phil. 665, 674 (2003) — Restated the factors that may justify suspending strict adherence to procedural rules; relied upon by the Court in upholding the RTC’s relaxation of the rules.
• Olave vs. Mistas, G.R. No. 155193, November 26, 2004, 444 SCRA 479, 495 — Distinguished; “heavy pressures of work” was not sufficient justification where the respondents repeatedly failed to comply with the Rules, unlike BPI’s first and only procedural lapse.
• Barranco vs. Commission on the Settlement of Land Problems, G.R. No. 168990, 16 June 2006, 491 SCRA 222, 232 — Cited for the courts’ prerogative to relax compliance with procedural rules of even the most mandatory character.
• Gosiaco vs. Ching, G.R. No. 173807, 16 April 2009 — Cited for the principle that a substantive right cannot be denied or diminished by a rule of procedure.
• Mirasol vs. Court of Appeals, 403 Phil. 760, 772 (2001) — Cited for the mandatory character of the word “shall” in procedural rules.
• Polanco vs. Cruz, G.R. No. 182426, 13 February 2009 — Cited for the principle that exigencies and situations may occasionally demand flexibility in the application of the Rules.
• Asian Spirit Airlines (Airline Employees Cooperative) vs. Bautista, 491 Phil. 476, 484 (2005) — Cited for the general objective of procedure to facilitate the application of justice and not to hinder it.

• Rule 18, Section 6, Rules of Court — Requires parties to file with the court and serve on the adverse party their pre-trial briefs in such manner as to ensure receipt at least three days before the date of pre-trial; failure to file the pre-trial brief has the same effect as failure to appear at pre-trial. Applied: BPI filed its pre-trial brief only on the day of the pre-trial, but the Court allowed relaxation of the rule.
• Rule 18, Section 5, Rules of Court — Provides that the failure of the plaintiff to appear when required is cause for dismissal of the action, with prejudice unless otherwise ordered by the court; a similar failure by the defendant allows the plaintiff to present evidence ex parte. Applied: the Court of Appeals relied on this provision to affirm the dismissal, but the Supreme Court held that the RTC could relax the rule.
• Rule 45, Rules of Court — Basis for BPI’s Petition for Review before the Supreme Court. Applied: the Supreme Court entertained the petition and reversed the Court of Appeals.
• Rule 65, Rules of Court — Basis for Dando’s Petition for Certiorari before the Court of Appeals. Applied: the Court of Appeals granted the petition, but the Supreme Court reversed its ruling.

Consuelo Ynares-Santiago (Chairperson), Presbitero J. Velasco, Jr., Antonio Eduardo B. Nachura, and Diosdado M. Peralta.