Ching and Powing Properties, Inc. vs. Cheng, Cheng, Igne and Santos

The "two-dismissal rule" under Rule 17, Section 1 of the Rules of Civil Procedure applies only to dismissals effected at the instance of the plaintiff, and not to dismissals granted upon a defendant's motion to dismiss under Rule 16; therefore, a prior dismissal for lack of jurisdiction upon a defendant's motion does not bar a subsequent dismissal without prejudice when the plaintiff voluntarily dismisses the re-filed action before the defendant files an answer.

Antonio Ching owned businesses and properties valued at over ₱380 million, including Po Wing Properties, Incorporated. While unmarried, he had children with two women: Ramon Ching (with Lucina Santos) and Joseph Cheng and Jaime Cheng (with Mercedes Igne). Following Antonio Ching's murder on July 18, 1996, disputes arose regarding the distribution of his estate. Ramon Ching allegedly induced Mercedes Igne and her children to sign a waiver of their rights to the estate in exchange for ₱22.5 million, which they claimed was never paid. On October 29, 1996, Ramon Ching allegedly executed an affidavit of settlement of estate naming himself as sole heir. Ramon Ching became the primary suspect in Antonio Ching's murder, with an information filed and a warrant of arrest issued against him.

• The First Case (Civil Case No. 98-91046): On October 7, 1998, Joseph Cheng, Jaime Cheng, and Mercedes Igne filed a complaint for declaration of nullity of titles against Ramon Ching before the RTC of Manila, Branch 6. On March 22, 1999, the complaint was amended to implead Po Wing Properties, Inc. as defendant and to include additional causes of action for annulment of agreement, waiver, extra-judicial settlement of estate, and receivership. Lucina Santos was allowed to intervene. Po Wing Properties filed a motion to dismiss on the ground of lack of jurisdiction over the subject matter. On November 13, 2001, the trial court granted the motion, dismissing the amended complaint and giving plaintiffs 15 days to file an appropriate pleading. Plaintiffs failed to file the required pleading within the prescribed period.

• The Second Case (Civil Case No. 02-103319): On April 19, 2002, the Chengs and Lucina Santos filed a complaint for the same causes of action against Ramon Ching and Po Wing Properties before the RTC of Manila, Branch 20, docketed as Civil Case No. 02-103319. Upon learning of the first case, Branch 20 transferred the case to Branch 6. On November 11, 2002, plaintiffs filed a motion to dismiss the second case without prejudice. On November 22, 2002, Branch 6 issued an order granting the motion to dismiss without prejudice, noting that summons had not yet been served on Ramon Ching and Po Wing Properties and they had not yet filed any responsive pleading.

• The Motion for Reconsideration and Third Case: On December 9, 2002, Ramon Ching and Po Wing Properties filed a motion for reconsideration of the November 22, 2002 order, arguing that the dismissal should have been with prejudice under the "two-dismissal rule" in view of the prior dismissal of the first case. While this motion was pending, plaintiffs filed a third complaint for "Disinheritance and Declaration of Nullity of Agreement and Waiver, Affidavit of Extrajudicial Agreement, Deed of Absolute Sale, and Transfer Certificates of Title" against the same defendants, docketed as Civil Case No. 02-105251 (the third case), which was raffled to Branch 6. Defendants filed a motion to dismiss the third case on the grounds of res judicata, litis pendencia, forum-shopping, and failure to state a cause of action.

• The Omnibus Order: On July 30, 2004, the trial court issued an omnibus order denying the motion for reconsideration in the second case and the motion to dismiss in the third case, holding that the dismissal of the second case was without prejudice and, hence, would not bar the filing of the third case.

• Proceedings in the Court of Appeals: On October 8, 2004, petitioners filed a petition for certiorari with the Court of Appeals assailing the November 22, 2002 order and the July 30, 2004 omnibus order. On March 23, 2006, the Court of Appeals dismissed the petition, ruling that the "two-dismissal rule" did not apply because the first dismissal was upon the motion of the defendants, while the second dismissal was at the instance of the plaintiffs. The motion for reconsideration was denied on November 16, 2006.

• Application of the Two-Dismissal Rule: Petitioners argued that the dismissal of the second case should have been with prejudice under Rule 17, Section 1 of the Rules of Civil Procedure. They maintained that the non-filing of an amended complaint in the first case within the 15-day period granted by the court operated as a dismissal upon the merits under Rule 17, Section 3 (dismissal due to fault of plaintiff), constituting the first dismissal. Consequently, the voluntary dismissal of the second case by the plaintiffs became the second dismissal, operating as an adjudication upon the merits with prejudice to the re-filing of the same claim.

• Res Judicata: Petitioners contended that the second case should have been dismissed on the ground of res judicata, asserting that the dismissal of the first case constituted a final judgment involving the same parties, subject matter, and cause of action.

• Forum Shopping by Respondents: Petitioners argued that respondents committed forum shopping by filing the third case while the motion for reconsideration of the second case was still pending, effectively seeking relief simultaneously in two forums.

• Nature of the First Dismissal: Respondents countered that the "two-dismissal rule" and res judicata did not apply because the first case was dismissed not by the plaintiffs but upon the motion of the defendants on the ground of lack of jurisdiction. They argued that the failure to amend a complaint is not equivalent to a dismissal by the plaintiff.

• Finality of the Second Dismissal: Respondents maintained that the trial court's order dismissing the second case without prejudice became final and executory when petitioners failed to file a motion for reconsideration within the reglementary period.

• Forum Shopping by Petitioners: Respondents argued that the petition for review should be dismissed on the ground of forum shopping and litis pendencia, alleging that petitioners were seeking relief simultaneously in two forums by filing two petitions for certiorari involving the same omnibus order of the trial court.

• Applicability of the Two-Dismissal Rule: Whether the trial court's dismissal of the second case operated as a bar to the filing of a third case under the "two-dismissal rule" under Rule 17, Section 1 of the Rules of Civil Procedure.

• Forum Shopping: Whether respondents committed forum shopping when they filed the third case while the motion for reconsideration of the second case was still pending.

• The Two-Dismissal Rule: The "two-dismissal rule" did not apply to bar the filing of the third case. Rule 17 governs dismissals at the instance of the plaintiff, not dismissals granted upon a defendant's motion under Rule 16. The first case was dismissed upon the defendants' motion to dismiss based on lack of jurisdiction over the subject matter, not upon the plaintiffs' notice of dismissal or motion. Consequently, the dismissal of the first case did not count as a dismissal by the plaintiff for purposes of Rule 17, Section 1. The voluntary dismissal of the second case by the plaintiffs before the service of answer constituted the first dismissal at the plaintiffs' instance, which the trial court properly designated as without prejudice. The requisites for the "two-dismissal rule" to operate as an adjudication upon the merits are: (1) a previous case dismissed by a competent court; (2) both cases based on or including the same claim; (3) both notices for dismissal filed by the plaintiff; and (4) the motion to dismiss filed by the plaintiff was consented to by the defendant on the ground that the latter paid and satisfied all the claims of the former. Here, the first dismissal was not at the plaintiffs' instance.

• Forum Shopping and the Twin-Dismissal Rule: Respondents technically engaged in forum shopping by filing the third case while the motion for reconsideration of the second case was still pending, rendering the second case still pending when the third was filed. The identity of parties, rights, and reliefs existed between the second and third cases. However, the Court declined to apply the "twin-dismissal rule" (which mandates the summary dismissal of both the pending action and the petition before the Court) because the filing of the third case was motivated by valid procedural reasons—specifically, the plaintiffs' suspicion that their counsel was not adequately protecting their interests and the desire to avoid the three-year delay in the proceedings—rather than by a vexatious intent to obtain a favorable result. The Court emphasized that rules of procedure should be liberally construed to promote the just, speedy, and inexpensive disposition of actions, and that substantial justice warranted allowing the third case to proceed rather than dismissing it on technicalities.

• Two-Dismissal Rule (Rule 17, Section 1): For a dismissal to operate as an adjudication upon the merits (with prejudice) under the "two-dismissal rule," the following requisites must be present: (1) there was a previous case that was dismissed by a competent court; (2) both cases were based on or include the same claim; (3) both notices for dismissal were filed by the plaintiff; and (4) when the motion to dismiss filed by the plaintiff was consented to by the defendant on the ground that the latter paid and satisfied all the claims of the former. The purpose of the rule is to avoid vexatious litigation. The rule applies only to dismissals at the instance of the plaintiff under Rule 17, not to dismissals granted upon a defendant's motion to dismiss under Rule 16.

• Dismissals Under Rule 17 vs. Rule 16: Rule 17 governs dismissals at the instance of the plaintiff, which are generally without prejudice unless otherwise declared or unless it is the second dismissal by the plaintiff. Dismissals upon the instance of the defendant are governed by Rule 16, and under Section 5 thereof, the grant of a motion to dismiss does not bar the re-filing of the complaint except when based on res judicata, prescription, extinguishment of the claim, or the statute of frauds.

• Forum Shopping: Forum shopping is the institution of two or more actions or proceedings involving the same parties for the same cause of action, either simultaneously or successively, on the supposition that one or the other court would make a favorable disposition. The test is whether the elements of litis pendentia are present, or whether a final judgment in one case will amount to res judicata in another—specifically, whether there is identity of parties, rights or causes of action, and reliefs sought.

• Twin-Dismissal Rule: Once there is a finding of forum shopping, the penalty is summary dismissal not only of the petition pending before the Supreme Court but also of the other case that is pending in a lower court. This is a punitive measure against those who trifle with the orderly administration of justice. However, the rule may be relaxed when the original case was dismissed for valid procedural reasons, the only pending matter is a motion for reconsideration, and valid procedural reasons serve the goal of substantial justice for the fresh case to proceed.

• Liberal Construction of Rules: Section 6 of Rule 1 provides that the Rules shall be liberally construed in order to promote their objective of ensuring the just, speedy, and inexpensive disposition of every action and proceeding. Courts must endeavor to resolve cases on their merits rather than summarily dismiss them on technicalities.

• "Rule 17 of the Rules of Civil Procedure governs dismissals of actions at the instance of the plaintiff. Hence, the 'two-dismissal rule' under Rule 17, Section 1 of the Rules of Civil Procedure will not apply if the prior dismissal was done at the instance of the defendant."

• "As a general rule, dismissals under Section 1 of Rule 17 are without prejudice except when it is the second time that the plaintiff caused its dismissal. Accordingly, for a dismissal to operate as an adjudication upon the merits, i.e, with prejudice to the re-filing of the same claim, the following requisites must be present: (1) There was a previous case that was dismissed by a competent court; (2) Both cases were based on or include the same claim; (3) Both notices for dismissal were filed by the plaintiff; and (4) When the motion to dismiss filed by the plaintiff was consented to by the defendant on the ground that the latter paid and satisfied all the claims of the former."

• "In all instances, Rule 17 governs dismissals at the instance of the plaintiff, not of the defendant. Dismissals upon the instance of the defendant are generally governed by Rule 16, which covers motions to dismiss."

• "Forum shopping is the institution of two or more actions or proceedings involving the same parties for the same cause of action, either simultaneously or successively, on the supposition that one or the other court would make a favorable disposition... What is critical is the vexation brought upon the courts and the litigants by a party who asks different courts to rule on the same or related causes and grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different fora upon the same issues."

• "Once there is a finding of forum shopping, the penalty is summary dismissal not only of the petition pending before this Court, but also of the other case that is pending in a lower court. This is so because twin dismissal is a punitive measure to those who trifle with the orderly administration of justice."

• "The rule on forum shopping will not strictly apply when it can be shown that (1) the original case has been dismissed upon request of the plaintiff for valid procedural reasons; (2) the only pending matter is a motion for reconsideration; and (3) there are valid procedural reasons that serve the goal of substantial justice for the fresh new case to proceed."

• "Courts of justice must always endeavor to resolve cases on their merits, rather than summarily dismiss these on technicalities... Rules of procedure are mere tools designed to expedite the decision or resolution of cases and other matters pending in court. A strict and rigid application of rules, resulting in technicalities that tend to frustrate rather than promote substantial justice, must be avoided."

• _Insular Veneer, Inc. v. Hon. Plan, 165 Phil. 1 (1976):_ Cited as the foundational case explaining the "two-dismissal rule" and the effects of filing an amended complaint after a prior dismissal. The Court followed the principle that a dismissal upon the plaintiff's notice under Rule 17 is without prejudice except when it is the second dismissal.

• _O.B. Jovenir Construction and Development Corporation v. Macamir Realty and Development Corporation, 520 Phil. 318 (2006):_ Cited for the principle that dismissal by the plaintiff under Section 1, Rule 17 is guaranteed as a matter of right, and the trial court has no discretion to deny the motion regardless of the ground cited.

• _Gomez v. Alcantara, 598 Phil. 935 (2009):_ Cited for the rule that dismissal for failure to prosecute has the effect of an adjudication on the merits and is with prejudice unless the order expressly states otherwise.

• _Yap v. Chua, G.R. No. 186730, June 13, 2012, 672 SCRA 419:_ Cited for the definition of forum shopping and the test for determining its existence (identity of parties, rights/causes of action, and reliefs sought).

• _Dy v. Mandy Commodities Co., Inc., 611 Phil. 74 (2009):_ Cited for the "twin-dismissal rule" which mandates the summary dismissal of both the petition before the Supreme Court and the other pending case in the lower court as a penalty for forum shopping.

• _Buan v. Lopez, Jr., 229 Phil. 65 (1986):_ Cited as the origin of the twin-dismissal rule, establishing that forum shoppers incur the sanction of dismissal of both actions.

• Rule 17, Section 1, Rules of Civil Procedure: Governs dismissal upon notice by plaintiff; establishes the "two-dismissal rule" where a second dismissal by the plaintiff operates as an adjudication upon the merits.

• Rule 17, Section 2, Rules of Civil Procedure: Governs dismissal upon motion of plaintiff where a counterclaim has been pleaded; requires court approval.

• Rule 17, Section 3, Rules of Civil Procedure: Governs dismissal due to fault of plaintiff (failure to prosecute); provides that such dismissal has the effect of an adjudication upon the merits unless otherwise declared.

• Rule 16, Section 1(b), Rules of Civil Procedure: Provides that a motion to dismiss may be made on the ground that the court has no jurisdiction over the subject matter of the claim.

• Rule 16, Section 5, Rules of Civil Procedure: Provides that an order granting a motion to dismiss does not bar the re-filing of the same action or claim except when based on res judicata, prescription, extinguishment of the claim, or statute of frauds.

• Rule 1, Section 6, Rules of Civil Procedure: Mandates that the Rules shall be liberally construed to ensure the just, speedy, and inexpensive disposition of every action and proceeding.

Antonio T. Carpio (Chairperson), Mariano C. Del Castillo, Jose Catral Mendoza, and Estela M. Perlas-Bernabe (acting member per Special Order No. 1829 dated October 8, 2014).