Allied Banking Corporation vs. Spouses Rodolfo and Gloria Madriaga

A complaint may be dismissed for failure to prosecute when the plaintiff, without justifiable cause, fails to comply with court orders, fails to proceed with reasonable promptitude, or neglects the duty to set the case for pre-trial under Rule 18; the trial court’s determination of what constitutes unreasonable delay will not be disturbed absent patent abuse of discretion.

Respondent spouses Rodolfo and Gloria Madriaga obtained a P750,000.00 loan from Allied Banking Corporation secured by a real estate mortgage on their property. They claimed to have made payments through the bank’s Creditor Investigator/Appraiser, Leo Nolasco, and later converted the remaining balance into a term loan. In May 2001, the bank demanded payment of nearly P400,000.00 representing alleged unpaid obligations; the spouses maintained those amounts had already been paid and requested their loan ledger, which the bank did not furnish. On 1 January 2002, the bank initiated extrajudicial foreclosure of the mortgage. The spouses then sued to enjoin the foreclosure and compel disclosure of their loan records.

• The Loan and Alleged Payments: Respondent spouses Rodolfo and Gloria Madriaga obtained a P750,000.00 loan from petitioner Allied Banking Corporation, secured by a real estate mortgage on their property. They claimed to have made payments from June 1996 to August 1999 totaling P628,953.96 through Leo Nolasco, the bank’s Creditor Investigator/Appraiser. In July 1999, they converted the remaining balance, including interest, into a term loan of P380,000.00, continuing to remit payments through Nolasco.
• Demand and Foreclosure: On 25 May 2001, the bank sent a demand letter for P399,898.56, representing unpaid obligations from June 2000 to May 2001. The spouses asserted those amounts had already been paid and requested copies of their loan ledger and records, which the bank ignored. The bank filed a petition for extrajudicial foreclosure of the mortgage on 1 January 2002.
• Complaint and Initial Procedural Posture: Through counsel Atty. Wilfredo Santos, the spouses filed a Complaint for Specific Performance with prayer for a Writ of Preliminary Injunction in the RTC of Bangued, Abra, to enjoin the foreclosure and compel the bank to allow examination of loan records. The bank answered with a compulsory counterclaim. On 22 April 2002, new counsel Atty. Eliseo Cruz entered his appearance and sought leave to amend the Complaint; the trial court ordered the Amended Complaint filed within 15 days, or until 21 May 2002. Instead, Atty. Cruz filed a Reply and Answer to the Counterclaim. The bank filed a Rejoinder.
• Successive Extensions and Changes of Counsel: During the 24 June 2002 hearing, Atty. Cruz explained that he had only recently received receipts from the original counsel and requested an extension to file the Amended Complaint; the case was reset to 5 August 2002. On that date, another new counsel, Atty. Meliton Balagtey, appeared and sought additional time to study the case. By agreement, the case was reset to 21 October 2002. No Amended Complaint was ever filed. The bank moved to dismiss on 8 October 2002 on the ground of failure to comply with court orders. Atty. Balagtey later filed a motion to withdraw and to compel the bank to produce loan documents. On 24 March 2003, the trial court granted his withdrawal and gave the spouses 45 days to secure new counsel.
• Dismissal and Reconsideration: At the 28 July 2003 hearing, the spouses announced Atty. Narciso Bolislis of the Public Attorney’s Office (PAO) as new counsel, but no formal appearance was entered. The trial court dismissed the case on 7 August 2003 under Section 3, Rule 17, citing failure to prosecute and failure to comply with court orders. The PAO moved for reconsideration, arguing that the delays were caused by successive counsel withdrawals and that the PAO’s belated appearance was due to the spouses’ failure to meet the indigency test. The trial court denied the motion on 15 April 2004, ruling that the failure to prosecute was unjustified and that the spouses had abused judicial leniency.
• Appellate Reversal: The Court of Appeals reversed, finding the dismissal precipitate and too harsh. It noted that the previous resettings were granted without objection from the bank, that the delay of five or eight months before pre-trial was not unreasonable, and that the trial court should have, at most, waived the right to amend the complaint rather than dismiss the action outright. The appellate court remanded the case for continuance.

• Failure to Prosecute: Petitioner argued that respondents failed to exercise utmost diligence and reasonable promptitude; they did not promptly set the case for pre-trial as required by Rule 18, did not file the Amended Complaint despite repeated opportunities, and did not promptly engage new counsel. Petitioner maintained that respondents’ dilatory tactics were calculated to thwart the foreclosure of their property.
• Non-Compliance with Court Orders: Petitioner emphasized that respondents disobeyed three specific orders: the 22 April 2002 order to file an Amended Complaint within 15 days, the 24 June 2002 order directing the same, and the 24 March 2003 order to secure new counsel within 45 days.

• Delay Beyond Control: Respondents contended that the delay in the proceedings stemmed from the successive withdrawals and changes of counsel, circumstances beyond their control.
• Desire to Prosecute: Respondents asserted that their engagement of the PAO demonstrated a genuine intention to pursue the action, and that succeeding counsels were not obligated to amend the complaint.

• Dismissal for Failure to Prosecute: Whether the trial court correctly dismissed the complaint for failure to prosecute under Section 3, Rule 17 of the Rules of Court, and consequently, whether the Court of Appeals erred in reversing that dismissal and remanding the case.

• Dismissal for Failure to Prosecute: The dismissal was proper, and the appellate court’s reinstatement of the case was erroneous. The trial court’s authority under Section 3, Rule 17 allowed dismissal motu proprio where the plaintiff failed to prosecute for an unreasonable length of time or failed to comply with court orders. The spouses’ conduct—requesting leave to amend but never filing the Amended Complaint, repeatedly resetting hearings on the pretext of preparing the amendment, and shifting to a strategy of compelling document production before withdrawing counsel—gave rise to the presumption that they were no longer interested in obtaining relief. Their failure to comply with the 24 March 2003 order to secure new counsel within 45 days independently warranted dismissal. Additionally, under Section 1, Rule 18, it was the plaintiffs’ duty to promptly move ex parte to set the case for pre-trial after the last pleading had been served; instead of doing so, they prolonged the proceedings by declaring an intention to amend. The excuse of financial hardship was undercut by the PAO’s admission that the spouses failed the indigency test. Because the determination of unreasonable delay rests in the trial court’s sound discretion, and no patent abuse was shown, the dismissal was correctly imposed. The maxim vigilantibus, sed non dormientibus jura subveniunt applied: the law aids the vigilant, not those who slumber on their rights.

• Dismissal for Failure to Prosecute (Section 3, Rule 17) — A trial court may, on its own motion or on motion of the defendant, dismiss a complaint where the plaintiff fails to appear at trial, fails to prosecute the action for an unreasonable length of time without justifiable cause, or fails to comply with the Rules or any court order. Such failure creates a rebuttable presumption that the plaintiff has lost interest in the relief sought. The question of what constitutes “unreasonable length of time” is addressed to the sound discretion of the trial court, which will not be disturbed on appeal absent patent abuse. The true test is whether, under the prevailing circumstances, the plaintiff is culpable for want of due diligence in proceeding with reasonable promptitude.
• Plaintiff’s Duty to Set Pre-Trial (Section 1, Rule 18) — After the last pleading has been served and filed, it is the duty of the plaintiff to promptly move ex parte that the case be set for pre-trial. Failure to discharge this duty without justifiable reason is tantamount to failure to prosecute and may support dismissal under Rule 17.
• Vigilantibus, sed non dormientibus jura subveniunt — The law aids the vigilant, not those who slumber on their rights. A party facing imminent loss of property to foreclosure is expected to pursue the case with heightened diligence, not to contribute to its delay.

• “The failure of a plaintiff to prosecute the action without any justifiable cause within a reasonable period of time will give rise to the presumption that he is no longer interested to obtain from the court the relief prayed for in his complaint; hence, the court is authorized to order the dismissal of the complaint on its own motion or on motion of the defendants.”
• “The true test for the exercise of such power is whether, under the prevailing circumstances, the plaintiff is culpable for want of due diligence in failing to proceed with reasonable promptitude.”
• “The law aids the vigilant, not those who slumber on their rights. Vigilantibus, sed non dormientibus Jura subverniunt.”

• Goldloop Properties, Inc. v. Court of Appeals, G.R. No. 99431, 11 August 1992, 212 SCRA 498 — Cited as authority for the three instances when a trial court may dismiss an action motu proprio under Rule 17.
• Malayan Insurance Co. Inc. v. Ipil International Inc., 532 Phil. 70 (2006) — Relied on for the principle that failure to prosecute gives rise to a presumption of loss of interest, which the plaintiff may rebut on a motion for reconsideration.
• Pangasinan v. Disonglo-Almazora, G.R. No. 200558, 1 July 2015, 761 SCRA 220 — Quoted for the maxim vigilantibus, sed non dormientibus jura subveniunt.
• Soliman v. Fernandez, G.R. No. 176652, 4 June 2014, 724 SCRA 525 — Cited for the rule that the trial court’s determination of unreasonable delay will not be disturbed absent patent abuse of discretion.

• Section 3, Rule 17, 1997 Rules of Civil Procedure (as amended) — Dismissal due to failure of the plaintiff to prosecute without justifiable cause, to appear at trial, or to comply with court orders or the Rules. Applied to sustain the trial court’s dismissal of the complaint because the spouses failed to file the Amended Complaint, failed to secure new counsel within the fixed period, and failed to set the case for pre-trial.
• Section 1, Rule 18, 1997 Rules of Civil Procedure (as amended) — Mandates that the plaintiff promptly move ex parte to set the case for pre-trial after joinder of issues. Applied to treat the spouses’ failure to do so as an additional ground constituting failure to prosecute.

Velasco, Jr. (Chairperson), Peralta, Reyes, and Jardeleza, JJ., concurred.