G.R. No.

209295 February 11, 2015

DIANA YAP-CO, Petitioner, vs. SPOUSES WILLIAM T. UY and ESTER GO-UY, Respondents.

Assailed in this petition for review on certiorari1 are the Decision2 dated January 23, 2013 and the
Resolution3 dated September 27, 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 124674,
setting aside the dismissal of Civil Case No. 09-122374 and, consequently, directing the conduct of
a full-blown trial of the case.

The Facts

Respondents-spouses Uy had secured a favorable Decision rendered by the RTC Roxas, Isabela for
collection of sum of money and damages against one Joseph Chung. With the said Decision
becoming final and executory, respondents filed a motion for the issuance of a writ of execution
thereof, which the said court granted. Subsequently, respondents were the sole bidders of Chung’s
property sold at public auction in order to satisfy the judgment.

After the lapse of the allowable period for redemption, respondents were issued a Final Deed of
Sale, which they registered with the Registry of Deeds of Manila. Respondents, however, were
unable to secure their new title after being informed that one had already been issued in favor of
herein petitioner Diana Yap-Co who supposedly acquired the property through an execution sale
conducted in implementation of a judgment rendered in “Spouses Henry Hatol and Isabelita Hatol v.
Joseph Chung."

Respondents filed a Complaint for annulment of title and damages with prayer for the issuance of a
writ of preliminary injunction and/or temporary restraining order against petitioner before the RTC
Manila, alleging that the latter’s title over the subject property was procured through fraud. Petitioner
filed a Motion to Dismiss on the ground that the complaint allegedly stated no cause of action.

After the hearing on the application for a writ of preliminary injunction, the RTC issued the writ
prayed for against the sale or transfer of the property subject of the complaint, conditioned upon
respondents’ posting of an injunction bond. Petitioner sought to set aside the injunctive writ through
a petition for certiorari before the CA. The petition was denied by the appellate court. The trial
proceeded in due course. However, at the initial presentation of their evidence, respondents, as well
as their counsel, failed to appear in court. The presiding judge gave them another chance to present
evidence with a warning that failure to appear at the next hearing would result in the dismissal of the
case. Respondent Ester Go-Uy was able to present her testimony but respondents repeatedly asked
the court for continuance and, thereafter, failed to appear at the third setting of their direct testimony
on March 1, 2012. Respondents likewise did not attend the next scheduled hearing but instead filed
a motion to pre-mark their documentary exhibits.

The RTC Proceedings

The RTC issued the first assailed Order directing that Ester Go-Uy’s testimony be stricken off the
record of the case. In view thereof, and there being no other evidence adduced by the plaintiff,
considering further the continued absence of the plaintiffs despite notice, this Court hereby grants
the standing motion of the defendants to dismiss this case.
Respondents sought to set aside the dismissal of their case which the RTC eventually denied in an
Order dated April 30, 2012. Thereafter, they elevated the matter to the CA through a petition for
certiorari with a prayer for an injunctive writ, docketed as CAG.R. SP No. 124674.

The CA Ruling

In a Decision30 dated January 23, 2013, the CA granted respondents’ petition and annulled the RTC’s
dismissal of Civil Case No. 09-122374. It further directed that the testimony of Ester Go-Uy be
reinstated into the records and a full-blown trial of the case be conducted.

It held that the failure of respondents’ counsel to attend the court hearings scheduled on March 1
and 22, 2012, as well as to notify his clients of said hearing dates to enable them to travel all the way
from Aurora, Isabela to Manila in order to attend the same, should not bind respondents because
they appear to have legitimate grievances in the action for annulment of title filed with the RTC. To
this end, the CA set aside the rules of technicalities and ruled that the ends of justice will be better
served through the conduct of a full blown trial in the main case to resolve the conflicting claims of
the parties over the subject property.31

Dissatisfied, petitioner filed a motion for reconsideration, which the CA denied in a Resolution32 dated
September 27, 2013,hence, this petition.

The Issue Before The Court

The issue for the Court’s resolution is whether or not the CA erred in reinstating Civil Case No. 09-
122374 on considerations of equity, notwithstanding the rule on failure to prosecute a case diligently
under Section 3, Rule 17 of the Rules of Court.

The Court’s Ruling

The petition lacks merit.

Petitioner failed to show that the CA committed reversible error in setting aside the dismissal of Civil
Case No. 09-122374 and directing the RTC to conduct a full-blown trial of the case. Section 3, Rule
17 of the Rules of Court provides that "[i]f 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 the court." However, the application of the foregoing rule is not, to the Court’s mind,
warranted in this case since, as correctly found by the CA, respondents’ counsel acted negligently in
failing to attend the scheduled hearing dates and even notify respondents of the same so as to
enable them to travel all the way from Aurora, Isabela to Manila and attend said hearings. Verily,
relief is accorded to the client who suffered by reason of the lawyer’s palpable mistake or negligence
and where the interest of justice so requires.33 Concurring with the CA, the Court finds that
respondents would be deprived of the opportunity to prove the legitimacy of their claims if the RTC’s
dismissal of the case – on a procedural technicality at that, which was clearly caused by the palpable
negligence of their counsel – is sustained. Considering that respondents appear to have legal and
factual bases for their grievance, it would better serve the higher interest of substantial justice to
allow the parties’ conflicting claims to be resolved on the merits. As the CA aptly observed:

At bench, if We sustain the ruling of the court a quo to strike out from the records the testimony of
Petitioner [hereinafter respondent] ESTER GO-UY and dismiss the case, the Petitioners [hereinafter
respondents] would lose any opportunity to prove the legitimacy of their claims. We rule that the
failure of the [respondents’] former counsel, Atty. AGUINALDO, to attend the court hearings
scheduled on 01 and 22 March 2012 and to notify the [respondents] of said hearing dates for them
to travel all the way from Aurora, Isabela to Manila in order to attend the same should not bind
[respondents] because the latter appear to have legitimate grievances in the action for annulment of
title they filed with the court a quo. From the record, it remains undisputed that a Decision dated 28
February 2007 was rendered in favor of herein [respondents] against one JOSEPH CHUNG
(hereinafter CHUNG) by the RTC, Branch 23 of Roxas, Isabela in Civil Case No. 23-831 for Sum of
Money entitled "Spouses William T. Uy and Ester Uy vs. Joseph Chung." After said decision became
final and executory, [respondents] filed with the said court a motion for the issuance of a Writ of
Execution and was granted through an Order dated 18 January 2008. The implementation of the
said writ was coursed through the Office of the Clerk of Court of RTC, Manila and assigned to Sheriff
AUGUSTO J. FELICIDARIO (hereinafter Sheriff FELICIDARIO). Thereafter, Sheriff FELICIDARIO
caused the auction of the property covered by TCT No. T-267949 registered in the name of CHING.
During the scheduledauction sale on 07 May 2008, [respondents], as the sole bidder, submitted a
bid of Php3,792,760.20, hence, a Certificate of Sale was issued to them by Sheriff
FELICIDARIO. On account of CHUNG’s failure to redeem the property with the period granted by
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law, the Sheriff’s Final Deed of Sale dated 21 May 2009, Certificate Authorizing Registration dated
05 June 2009 and other relevant documents were registered with the Registry of Deeds of Manila on
17 June 2009. It was only on 08 September 2009 that Petitioners discovered that the property
covered by TCT No. T-267949 was transferred in the name of Private Respondent [herein petitioner]
CO under TCT No. 288213.34

Further, it bears pointing out that while the RTC dismissed the case impliedly by reason of
respondents’ repeated failure to appear in court and prosecute their case, it also inaccurately
expressed the view that such dismissal may properly be taken as its favorable action on petitioner’s
standing motion to dismiss. The Court takes note, however, that the cited motion to dismiss was not
premised on the respondents’ failure to prosecute their case but on the alleged failure of the
complaint to state a cause of action.35 Fundamental is the rule that a motion to dismiss grounded on
failure to state a cause of action refers only to the insufficiency of the pleading. A complaint states a
cause of action if it avers the existence of the three essential elements of a cause of action, namely:
(a) the legal right of the plaintiff; (b) the correlative obligation of the defendant; and (c) the act or
omission of the defendant in violation of said right.36 If these elements are present such that the
allegations furnish sufficient basis by which the complaint can be maintained, the same should not
be dismissed.37 In this case, the Court finds that the subject complaint sufficiently averred actual
fraud on the part of petitioner in procuring her title to the subject property to the prejudice of
respondents who claim to have acquired it first. Thus, outright dismissal for failure to state a cause of
action was improper.

In fine, the CA correctly ordered the reinstatement and full blown trial of Civil Case No. 09-122374.

WHEREFORE, the petition is DENIED. The Decision dated January 23, 2013 and the Resolution
dated September 27, 2013 of the Court of Appeals in CA-G.R. SP No. 124674 are hereby
AFFIRMED.