Parañaque Kings Enterprises, Inc. vs. Santos and Raymundo

A trial court has sound discretion to deny a motion to cancel or postpone pre-trial, and a plaintiff's unjustified refusal to proceed with pre-trial despite the court's order warrants dismissal of the complaint under Section 3, Rule 17 of the Rules of Court. The mere filing of a petition for certiorari does not interrupt the course of the principal case unless a temporary restraining order or writ of preliminary injunction has been issued.

Petitioner Parañaque Kings Enterprises, Inc. was the assignee of leasehold rights over eight parcels of land in Parañaque City under a Contract of Lease originally entered into between respondent Catalina L. Santos and Frederick O. Chua. The lease contract contained a clause granting the lessee the "first option or priority to buy" the leased premises in case of sale. The dispute arose from Santos's alleged sales of the subject properties to respondent David R. Raymundo without first offering them to petitioner at the final sale price, which petitioner claimed violated its contractual right of first refusal.

Respondent Catalina L. Santos entered into a Contract of Lease dated November 28, 1977 with Frederick O. Chua over eight parcels of land located in Parañaque City, covered by Transfer Certificates of Title Nos. S-19637, S-19638, S-19643, S-19644, S-19645, S-19646, S-19647, and S-19648. The lease contract specifically granted Chua the "first option or priority to buy" the leased premises in case of sale. Chua constructed a 6-door commercial complex on the leased premises but, due to business reverses, assigned his rights to Lee Ching Bing, who assumed all obligations under the lease contract. Lee, in turn, executed a Deed of Assignment dated April 6, 1979 over the leased premises, including all improvements thereon, in favor of petitioner Parañaque Kings Enterprises, Inc.

On March 19, 1991, petitioner filed a Complaint before the RTC against Santos and respondent David R. Raymundo, to whom Santos allegedly sold the leased premises on September 21, 1988 for ₱5,000,000.00 without giving petitioner the opportunity to exercise its priority to buy. Petitioner claimed that when it objected to the sale, Santos repurchased the subject properties for the same price and offered them to petitioner for ₱15,000,000.00. Petitioner made a counter-offer of ₱5,000,000.00 but, before replying, Santos sold the subject properties again to Raymundo on May 15, 1989 for ₱9,000,000.00. Petitioner argued that the sale was simulated and that there was collusion between Santos and Raymundo.

Respondents moved for dismissal of the Complaint on the ground that it stated no cause of action. Raymundo alleged that there were previous offers made to petitioner that the latter ignored. Santos maintained that petitioner had already recognized Raymundo's status as the new owner-lessor by paying lease rentals to him and was estopped from challenging his title. Santos also claimed that the deed of assignment in favor of petitioner did not include the "first option" clause. The RTC dismissed the Complaint on September 2, 1991, and the CA affirmed on March 29, 1993. The Supreme Court, however, reversed in a Decision dated February 26, 1997, finding that the Complaint sufficiently alleged an actionable contractual breach, and remanded the case for further proceedings.

When respondents filed their Answer with Compulsory Counterclaims, they claimed that the first offer of ₱5,000,000.00 was declined by petitioner because it could not afford the price, and that the reduced price of ₱9,000,000.00 was also offered to petitioner, which refused. Petitioner filed a Motion to Strike Out certain allegations, arguing that respondents were bound by the conclusive findings of the Supreme Court. The RTC denied the motion on May 18, 1998, and denied petitioner's motion for reconsideration and voluntary inhibition on June 11, 1998, setting pre-trial for July 7, 1998.

On July 2, 1998, petitioner filed a Motion to Cancel Pre-Trial, claiming it was preparing a petition for certiorari and prohibition to be filed with the CA before the scheduled pre-trial. The petition for certiorari and prohibition was actually filed at 2:17 in the afternoon of July 7, 1998. On the day of the pre-trial, the RTC denied petitioner's Motion to Cancel Pre-Trial and directed the parties to proceed. When the trial court required petitioner's counsel to start the pre-trial with the statement of its cause, counsel refused, saying he would furnish the court the following day with a copy of the petition filed with the CA. Consequently, upon motion of opposing counsel, the RTC declared petitioner non-suited and dismissed the Complaint. Petitioner's motion for reconsideration was denied on September 21, 1998, and its Notice of Appeal was denied due course for being filed out of time. After a series of procedural battles, the CA eventually gave due course to petitioner's appeal, which was docketed as CA-G.R. CV No. 92522, and on September 22, 2010, affirmed the dismissal orders.

• Abuse of Discretion in Denying Cancellation of Pre-Trial: Petitioner argued that the RTC erred in denying its Motion to Cancel Pre-Trial, as it was preparing a petition for certiorari and prohibition challenging the validity of the RTC's Orders dated May 18, 1998 and June 11, 1998, which raised prejudicial questions that should have been resolved before pre-trial could proceed.
• Prejudicial Questions Must Be Resolved First: Petitioner maintained that the alleged "sham, contemptuous lies" contained in respondents' Answer should have been stricken off from the records before pre-trial could proceed.
• Motion for Reconsideration Substantially Complied with Rules: Petitioner insisted that its motion for reconsideration substantially complied with the rules and effectively tolled the reglementary period to appeal, contrary to the RTC's finding that it was pro forma.

• No Cause of Action: Respondents moved for dismissal of the Complaint on the main ground that it stated no cause of action. Raymundo alleged that there were previous offers made to petitioner that the latter simply ignored.
• Estoppel: Santos maintained that petitioner had already recognized and respected Raymundo's status as the new owner-lessor due to its payment of lease rentals to Raymundo, and was estopped from challenging Raymundo's title.
• Assignment Did Not Include First Option Clause: Santos claimed that the deed of assignment executed in favor of petitioner did not include the "first option" clause provided in the lease contract.
• Offers Were Made and Declined: In their Answer, respondents claimed that the first offer of ₱5,000,000.00 was declined by petitioner because it could not afford the price, and that the reduced price of ₱9,000,000.00 was also offered to petitioner, which refused and maintained its stance on the value of the properties.

• Denial of Motion to Cancel Pre-Trial: Whether the Court of Appeals correctly upheld the RTC's denial of petitioner's Motion to Cancel Pre-Trial.
• Dismissal for Failure to Proceed to Pre-Trial: Whether the Court of Appeals correctly upheld the dismissal of the Complaint for petitioner's failure to proceed to pre-trial as directed by the trial court.

• Denial of Motion to Cancel Pre-Trial: Yes. The trial court has discretion on whether to grant or deny a motion to postpone or reschedule pre-trial, and the denial was proper because the postponement was a dilatory tactic, there was no proof at the time of the hearing that the petition for certiorari was in fact filed, and no restraining order was issued by the CA.
• Dismissal for Failure to Proceed to Pre-Trial: Yes. The dismissal was proper under Section 3, Rule 17 of the Rules of Court, which authorizes dismissal for the plaintiff's failure to comply with any order of the court, and petitioner's refusal to proceed with pre-trial constituted a "clear, firm and open defiance" of the court's directive.

• Denial of Motion to Cancel Pre-Trial: The trial court has discretion on whether to grant or deny a motion to postpone or reschedule pre-trial, as it is the trial court which is able to witness firsthand the events as they unfold during trial. Postponements must not be countenanced except for clearly meritorious grounds. The RTC explained that the postponement was dilatory, noting that pre-trial had been reset multiple times at petitioner's instance: on March 26, 1998, petitioner's counsel asked for time and was given 10 days to file a motion for contempt and to strike out averments; on May 21, 1998, pre-trial was reset to June 11, 1998 because petitioner's counsel was not ready; and on June 11, 1998, pre-trial was reset to July 7, 1998 after the court denied the motion for inhibition and reconsideration. The pattern to delay pre-trial was evident. The cancellation of pre-trial on the ground of the impending filing of a petition for certiorari and prohibition was obviously a dilatory tactic, as there was no proof at the time of the hearing that said petition was in fact filed. Even with the actual filing of the petition at 2:17 in the afternoon of July 7, 1998, no restraining order was issued by the CA enjoining the trial court from proceeding with the pre-trial. The mere elevation of an interlocutory matter through a petition for certiorari does not by itself merit a suspension of the proceedings before the trial court, unless a temporary restraining order or a writ of preliminary injunction has been issued, consistent with Section 7, Rule 65 of the Rules of Court as applied in Republic of the Phils. vs. Sandiganbayan.

• Dismissal for Failure to Proceed to Pre-Trial: Pre-trial is mandatory in civil cases, being a procedural device intended to clarify and limit the basic issues raised by the parties and to take the trial of cases out of the realm of surprise and maneuvering. It has been institutionalized as the answer to the clarion call for the speedy disposition of cases. Section 3, Rule 17 of the Rules of Court authorizes the court to dismiss the complaint, upon motion or motu propio, for failure of the plaintiff to comply with any of its orders. Petitioner had the opportunity to present its case, yet chose to unduly forego the same. The CA pointed out that petitioner had already submitted its pre-trial brief and its counsel was armed with a special power of attorney for the pre-trial. There was nothing that could have stopped petitioner from proceeding to pre-trial when its motion for postponement was denied. The trial court correctly opined that it would have been entirely different if petitioner simply objected to the proceeding and made of record its objection, but petitioner's refusal to even start with the statement of its cause was a "clear, firm and open defiance" of the directive of the court. The Court noted that the case was elevated to the CA four times, and this was the third time the Court had to resolve issues between the parties at petitioner's instance. The rules of procedure do not exist for the convenience of the litigants; they are established to provide order to and enhance the efficiency of the judicial system. The expedition of cases is as much the duty of the plaintiff as the court's, and respondents cannot be wearingly denied of their right to the speedy disposition of the case filed against them.

• Discretion of Trial Court in Granting Postponements — The trial court has discretion on whether to grant or deny a motion to postpone or reschedule pre-trial, in accordance with the circumstances obtaining in the case, as it is the trial court which is able to witness firsthand the events as they unfold during trial. Postponements, while permissible, must not be countenanced except for clearly meritorious grounds. In this case, the RTC's denial of the motion to cancel pre-trial was upheld because the postponement was a dilatory tactic, given the pattern of repeated resets at petitioner's instance and the lack of proof that the petition for certiorari had been filed.

• Effect of Filing a Petition for Certiorari on Proceedings Before the Trial Court — The mere elevation of an interlocutory matter through a petition for certiorari under Rule 65 does not by itself merit a suspension of the proceedings before the trial court, unless a temporary restraining order or a writ of preliminary injunction has been issued. Under Section 7, Rule 65 of the Rules of Court, the petition shall not interrupt the course of the principal case unless a temporary restraining order or a writ of preliminary injunction has been issued enjoining the public respondent from further proceeding in the case. The burden is on the petitioner to show a meritorious ground for the issuance of injunctive relief, and essential for granting such relief is the existence of an urgent necessity for the writ in order to prevent serious damage.

• Dismissal for Failure to Comply with Court Orders — Under Section 3, Rule 17 of the Rules of Court, if for no justifiable cause, the plaintiff fails to appear on the date of the presentation of his evidence in chief on the complaint, or to prosecute his action for an unreasonable length of time, or to comply with the Rules or any order of the court, the complaint may be dismissed upon motion of the defendant or upon the court's own motion. Such dismissal has the effect of an adjudication upon the merits, unless otherwise declared by the court. In this case, petitioner's refusal to proceed with pre-trial despite the court's directive constituted a "clear, firm and open defiance" that justified dismissal.

• "The mere elevation of an interlocutory matter to this Court through a petition for Certiorari under Rule 65 of the Rules of Court, like in the present case, does not by itself merit a suspension of the proceedings before a public respondent, unless a temporary restraining order or a writ of preliminary injunction has been issued against the public respondent." — This passage, quoted from Republic of the Phils. vs. Sandiganbayan, states the controlling rule that the filing of a petition for certiorari does not automatically suspend proceedings before the trial court, which was central to the Court's rejection of petitioner's justification for refusing to proceed with pre-trial.

• "The pattern to delay the pre-trial of the instant case is quite evident from the foregoing. Petitioner clearly trifled with the mandatory character of a pre-trial, which is a procedural device intended to clarify and limit the basic issues raised by the parties and to take the trial of cases out of the realm of surprise and maneuvering." — This passage articulates the Court's finding that petitioner's repeated requests for postponement constituted a dilatory tactic, and emphasizes the mandatory character and purpose of pre-trial in civil cases.

• "It bears stressing that the rules of procedure do not exist for the convenience of the litigants. These rules are established to provide order to and enhance the efficiency of the judicial system. By trifling with the rules and the court processes, and openly defying the order of the trial court to proceed to pre-trial, petitioner only has itself to blame for the dismissal of its Complaint." — This passage states the Court's rationale for affirming the dismissal, emphasizing that procedural rules serve the judicial system and that litigants cannot trifle with court processes without consequence.

• Parañaque Kings Enterprises, Inc. vs. CA, 335 Phil. 1184 (1997) — Prior Supreme Court decision in the same case that reversed the dismissal of the Complaint, finding that it sufficiently alleged an actionable contractual breach, and remanded the case for further proceedings. The Court in the present case referenced this decision to explain the procedural history and the scope of the remand.

• Santos vs. Parañaque Kings Enterprises, Inc., 535 Phil. 776 (2006) — Prior Supreme Court decision dismissing respondents' petition for review on certiorari questioning the CA's December 6, 1999 Decision, which had determined that the Motion to Strike Out was denied prematurely.

• Republic of the Phils. vs. Sandiganbayan (First Div.), 525 Phil. 804 (2006) — Controlling precedent applied by the Court for the proposition that the mere elevation of an interlocutory matter through a petition for certiorari does not by itself merit suspension of proceedings before the trial court, unless a temporary restraining order or writ of preliminary injunction has been issued.

• Alcaraz vs. CA, 529 Phil. 77 (2006) — Cited for the principle that postponements must not be countenanced except for clearly meritorious grounds and in light of the attendant circumstances.

• Anson Trade Center, Inc. vs. Pacific Banking Corporation, 600 Phil. 806 (2009) — Cited for the proposition that pre-trial has been institutionalized as the answer to the clarion call for the speedy disposition of cases and paves the way for a less cluttered trial and resolution of the case.

• Dr. Vera vs. Rigor, 556 Phil. 561 (2007) — Cited for the proposition that it is mandatory for the trial court to conduct pre-trial in civil cases in order to realize the paramount objective of simplifying, abbreviating, and expediting trial.

• Section 3, Rule 17, Rules of Court — Authorizes the court to dismiss the complaint, upon motion of the defendant or upon the court's own motion, if for no justifiable cause, the plaintiff fails to appear on the date of the presentation of his evidence in chief on the complaint, or to prosecute his action for an unreasonable length of time, or to comply with the Rules or any order of the court. The Court applied this provision to uphold the dismissal of petitioner's Complaint for its refusal to proceed with pre-trial despite the court's directive.

• Section 7, Rule 65, Rules of Court — Provides that the court in which a petition for certiorari, prohibition, and mandamus is filed may issue orders expediting the proceedings and may grant a temporary restraining order or a writ of preliminary injunction for the preservation of the rights of the parties pending such proceedings, but the petition shall not interrupt the course of the principal case unless such injunctive relief has been issued. The Court applied this provision to reject petitioner's justification for refusing to proceed with pre-trial based on the filing of its petition for certiorari.

Carpio, J. (Chairperson), Brion, J., Del Castillo, J., and Perez, J., concurred in the decision.