INDIANA AEROSPACE UNIVERSITY, petitioner, vs.

COMMISSION
ON HIGHER EDUCATION (CHED), respondent.
DECISION
PANGANIBAN, J.:
When the delayed filing of an answer causes no prejudice to the
plaintiff, default orders should be avoided. Inasmuch as herein
respondent was improvidently declared in default, its Petition for
Certiorari to annul its default may be given due course. The act of the
Commission on Higher Education enjoining petitioner from using the
word university in it corporate name and ordering it to revert to its
authorized name does not violate its proprietary rights or constitute
irreparable damage to the school. Indeed, petitioner has no vested right
to misrepresent itself to the public. An injunction is a remedy in equity
and should not be used to perpetuate a falsehood.
The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the

Rules of Court, challenging the July 21, 1999 Decision [1] of the Court of
Appeals (CA) in CA-GR SP No. 51346. The appellate court directed the
Regional Trial Court (RTC) of Makati City, Branch 136, to cease and desist
from proceeding with Civil Case No. 98-811 and to dismiss the Complaint
for Damages filed by the Indiana Aerospace University against the
Commission on Higher Education (CHED). The dispositive portion of the
CA Decision reads as follows:
WHEREFORE, in the light of the foregoing consideration, and pursuant to
pertinent existing laws and jurisprudence on the matter, [the trial court]
is hereby DIRECTED to cease and desist from proceeding with Civil case
No. 98-811 and to order the dismissal of [petitioners] Petition dated
March 31, 1999 in Civil Case No. 98-911 for lack of merit and valid cause
of action.[2]
The Facts

The facts of this case we are summarized by the CA, as follows:

Sometime in October 1996, Dr. Reynaldo B. Vera, Chairman, Technical

Panel for Engineering, Architecture, and Maritime Education (TPRAM) of
[CHED], received a letter dated October 18, 1998 (Annex C) from
Douglas R. Macias, Chairman, Board of Aeronautical Engineering,
Professional Regulat[ory] Commission (PRC) and Chairman, Technical
Committee for Aeronautical Engineering (TPRAME) inquiring whether
[petitioner] had already acquired [u]niversity status in view of the latters
advertisement in [the] Manila Bulletin.
In a letter dated October 24, 1996, Dr. Vera formally referred the
aforesaid letter to Chairman Alcala with a request that the concerned
Regional Office of [CHED] be directed to conduct appropriate
investigation
on
the
alleged
misrepresentation
by
[petitioner]. Thereafter, [CHED] referred the matter to its Regional
Director in Cebu City, requesting said office to conduct an investigation
and submit its report. The [R]eport submitted in January 1997, stated in
substance:
xxx xxx xxx
To recall it was in the month of May 1996, [that] Director Ma. Lilia
Gaduyon met the school [p]resident in the regional office and verbally
talked[with] and advised them not to use University when it first came
out in an advertisement column of a local daily newspaper in Cebu
City. It was explained that there was a violation [committed by] his
institution [when it used] the term university unless the school ha[d]
complied [with] the basic requirement of being a university as prescribed
in CHED Memorandum Order No. 48, s. 1996.
x x x x x x x x x.
As a consequence of said Report, [respondents] Legal Affairs Service was
requested to take legal action against [petitioner]. Subsequently, on
February 3, 1997, [respondent] directed [petitioner] to desist from using
the term University, including the use of the same in any of its alleged
branches. In the course of it investigation, [respondent] was able to
verify from the Securities and Exchange Commission (SEC) that
[petitioner had] filed a proposal to amend its corporate name from
Indiana School of Aeronautics to Indiana Aerospace University, which
was supposedly favorably recommended by the Department of
Education, Culture and Sports (DECS) per its Indorsement dated 17 July
1995, and on [that] basis, SEC issued to [petitioner] Certificate of

Registration No. AS-083-002689 dated August 7, 1995. Surprisingly,

however, it ought to be noted, that SEC Chairman Perfecto R. Yasay, Jr.
wrote the following letter to the [c]hairman of [respondent]:
Hon. Angel C. Alcala
Chairman
Commission on Higher Education
DAP Bldg., San Miguel Avenue
Ortigas Center, Pasig City
Dear Chairman Alcala:

On 07 August 1995, in line with the call of the government to go for

global competitiveness and our vision to help in the development of
aerospace technology, the Board of Directors applied with the SEC for
the amendment of Article I of the Articles of Incorporation to read as
Indiana Aerospace University instead of Indiana School of Aeronautics,
Inc.
xxxxxxxxx
In view thereof, we would like to appeal to you Fr. Delagoza to please
reconsider your order of February 3, 1997, otherwise the school will
encounter financial difficulties and suffer damages which will eventually
result in the mass dislocation of xxx thousand[s] of students. The
undersigned, being the [c]hairman and [f]ounder, will try our very best
to follow the provisions of CHED MEMO No. 48, series of 1996 that took
effect last June 18, 1996.

This refers to your letter dated September 18, 1997 requesting this
Commission to make appropriate changes in the Articles of Incorporation
of Indiana School of aeronautics, Inc. due to its unauthorized use of the
term University in its corporate name.

xxxxxxxxx

Relative thereto, please be informed that our records show that the
above-mentioned corporation has not filed any amended articles of
incorporation that changed its corporate name to include the term
University.

x x x x x x x x x.

In the case the corporation submit[s] an application for change of name,

your Cease and Desist Order shall be considered accordingly.
Very truly yours,
(SGD.) PERFECTO R. YASAY, JR.
Chairman
In reaction to [respondents] order for [petitioner] to desist from using
the word University, Jovenal Toring, [c]hairman and [f]ounder of
[petitioner] wrote a letter dated February 24, 1997 (Annex G) appealing
for reconsideration of [respondents] Order, with a promise to follow the
provisions of CMO No. 48, pertinent portions of which have been quoted
in the Petition, to wit:

Thank you very much for giving me a copy of said CHED MEMO order No.
48. More power and God Bless You.

The appeal of [petitioner] was however rejected by [respondent] in its

decision dated July 30, 1998 and the [the latter] ordered the former to
cease and desist from using the word University. However, prior to said
date, on April 2, 1998, [petitioner] filed a Complaint for Damages with
prayer for Writ of preliminary and Mandatory Injunction and Temporary
Restraining Order against [respondent], docketed as Civil Case No. 98811 before public respondent judge.
On April 7, 1998, [respondent] filed a Special Appearance with Motion to
Dismiss, based on 1) improper venue; 2) lack of authority of the person
instituting the action; and 3) lack of cause of action. On April 17, 1998,
[petitioner] filed its Opposition to the Motion to Dismiss [on] grounds
stated therein, to which [respondent] filed a Reply on April 21, 1998,
reiterating the same arguments in its Motion to Dismiss. After due
hearing, [petitioner] formally offered its evidence on July 23, 1998 while
[respondent] made a formal offer of evidence on July 28, 1998 to which
[petitioner] filed its Comments/Objections and finally, [respondent]
submitted its Memorandum relative thereto on October 1, 1998.

Public respondent judge, in an Order dated August 14, 1998, denied

[respondents] Motion to Dismiss and at the same time, issued a Writ of
preliminary Injunction in favor of [petitioner]. [Respondent], in the same
Order, was directed to file its Answer within fifteen (15)days from receipt
of said Order, which was August 15, 1998.

WHEREFORE, and in consideration of all the foregoing [respondents]

Motion to Dismiss is hereby denied, and the [respondent] is directed to
file its [A]nswer to the [C]omplaint within fifteen (15) days from receipt
of this Order.

[Petitioner], on November 11, 1998 filed its Opposition to the Motion for
Extension of Time to File [Respondents] Answer and on November 9,
1998, a Motion to Expunge [Respondents] answer and at the same time
praying that its [M]otion be heard on November 27, 1998 at 9:00
a.m. On even date, public respondent judge issued an Order directing
the Office of the Solicitor General to file within a period of ten (10) days
from date its written Opposition to the Motion to Expunge [Respondents]
answer and within the same period to file a written [N]otice of
[A]ppearance in the case. Unable to file their written Opposition to the
Motion to Expunge within the period given by public respondent, the
OSG filed a Motion to Admit Written Opposition stating the reasons for
the same, attaching thereto the Opposition with [F]ormal [E]ntry of
[A]ppearance.

In the meantime, [respondent], its officials, employees and all parties

acting under its authority are hereby enjoined to observe the following
during the pendency of this case.

In an Order dated December 9, 1998, (Annex A), public respondent

judge ruled on [Petitioners ] Motion to Declare [Respondent in Default],
to wit:

1. Not to publish or circulate any announcement in the newspaper, radio

or television regarding its Cease and Desist Order against xxx
[petitioner];

WHEREFORE, and in view of all the foregoing, the present motion is

granted. [Petitioner] is hereby directed to present its evidence ex-parte
before the [b]ranch [c]lerk of [c]ourt, who is designated as
[c]ommissioner for the purpose, within ten (10) days from receipt of this
[O]rder, and for the latter to submit his report within twenty (20) days
from the date the case is submitted for decision.

xxxxxxxxx

2. Not to enforce the Cease and Desist Order issued against xxx
[petitioner];
3. To maintain the status quo by not withholding the issuance of yearly
school permits and special order to all graduates.
Let a writ of preliminary Injunction to that effect issue upon posting by
[petitioner] of an injunction bond in the amount of One Hundred
Thousand Pesos (P100,000.00), and subject to the approval of the Court.

SO ORDERED.[3]
On February 23, 1999, respondent filed with the CA a Petition for
certiorari, arguing that the RTC had committed grave abuse of discretion
(a) in denying the formers Motion to Dismiss, (b) in issuing a Writ of
Preliminary Injunction, and (c) in declaring respondent in default despite
its filing an Answer.

SO ORDERED.
Ruling of the Court of Appeals

On September 22, 1998, [petitioner] filed before public respondent a

Motion To Declare [Respondent] in [D]efault pursuant to Section 3, Rule 9
in relation to Section 4, Rule 16 of the Rules of Court, as amended, and
at the same time praying [for] the Motion to [S]et for [H]earing on
October 30, 1998 at 8:30 a.m. On the same date, [respondent] filed a
Motion For Extension of Time to File its Answer, x x x until November 18,
1998. On November 17, 1998, [respondent] filed its [A]nswer.

The CA ruled that petitioner had no cause of action against

respondent. Petitioner failed to show any evidence that it had been
granted university status by respondent as required under existing law
and CHED rules and regulations. A certificate of incorporation under an
Unauthorized name does not confer upon petitioner the right to use the
word university in its name. The evidence submitted by respondent
showed that the Securities and Exchange Commission (SEC) had denied
that petitioner had ever amended its Articles of Incorporation to include

university in its corporate name. For its part, the Department of

Education, Culture and Sports (DECS) denied having issued the alleged
Certification dated May 18, 1998, indorsing the change in petitioners
corporate name. Besides, neither the Corporation Code nor the SEC
Charter vests the latter with the authority to confer university status on
a corporation that it regulates.
For the same reason, the appellate court also ruled that the Writ of
Preliminary Injunction had improvidently been issued. The doubtful right
claimed by petitioner is subordinate to the public interest to protect
unsuspecting students and their parents from the unauthorized
operation and misrepresentation of an educational institution.
Respondent should not have been declared in default, because its
answer had been filed long before the RTC ruled upon petitioners Motion
to declare respondent in default. Thus, respondent had not obstinately
refused to file an Answer; on the contrary, its failure to do so on time
was due to excusable negligence. Declaring it in default did not serve
the ends of justice, but only prevented it from pursuing the merits of its
case.
Hence, this Petition.[4]
Issues

Petitioner alleges that the appellate court committed the following

reversible errors:
A. In giving due course to respondent CHEDs Petition for
Certiorari filed way beyond the 60-day reglementary period
prescribed by Section 4, Rule 65 of the Rules of Court;
B. In not requiring Respondent CHED to first file a motion to Set
Aside the Order of Default dated December 9, 1998; and
C. In ordering the dismissal of Civil Case No. 98-811. [5]
In its Memorandum, petitioner adds that the CA erred in dissolving
the Writ of Preliminary Injunction issued by the RTC. We shall take up
these issues in the following order: (1) timeliness of the certiorari
petition, (2) validity of the default order, (3) validity of the preliminary
injunction, and (4) dismissal of the Complaint.

This Courts Ruling

The Petition is partly meritorious.

First Issue: Timeliness of Certiorari

Petitioner claims that the Petition for certiorari of respondent should

have been dismissed by the CA, because it was filed out of time and was
not preceded by a motion for reconsideration in the RTC.The copy of the
Order of August 14, 1998 had been served at respondents office on
August 15, 1998, but its Answer was filed only after 180 days which,
according to petitioner, could not be considered a reasonable period. On
the other hand, the Office of the Solicitor General (OSG) argues that the
Order is null and void and, hence, may be assailed at any time.
We hold that respondents Petition for Certiorari was seasonably
filed. In computing its timeliness, what should have been considered was
not the Order of August 14, 1998, but the date when respondent
received the December 9, 1998 Order declaring it in default. Since it
received this Order only on January 13, 1999, and filed its Petition for
Certiorari on February 23, 1999, it obviously complied with the sixty-day
reglementary period stated in Section 4, Rule 65 of the 1997 Rules of
Court. Moreover, the August 14, 1998 Order was not a proper subject of
certiorari or appeal, since it was merely an interlocutory order.
Exhaustion of Available Remedies

Petitioner also contends that certiorari cannot prosper in this case,

because respondent did not file a motion for reconsideration before filing
its Petition for Certiorari with the CA. Respondent counters that
reconsideration should be dispensed with, because the December 9,
1998 Order is a patent nullity.
The general rule is that, in order to give the lower court the
opportunity to correct itself, a motion for reconsideration is a
prerequisite to certiorari. It also basic that petitioner must exhaust all
other available remedies before resorting to certiorari. This rule,
however, is subject to certain exceptions such as any of the
following: (1) the issues raised are purely legal in nature, (2) public
interest is involved, (3) extreme urgency is obvious or (4) special
circumstances warrant immediate or more direct action. [6] It is patently
clear that the regulation or administration of educational institutions,
especially on the tertiary level, is invested with public interest. Hence,

the haste with which the solicitor general raised these issues before the
appellate court is understandable. For the reason mentioned, we rule
that respondents Petition for Certiorari did not require prior resort to a
motion for reconsideration.
Second Issue: Validity of the Default Order

Petitioner avers the RTC was justified in declaring respondent in

default, because the August 14, 1998 Order directing the filing of an
answer had been served on August 25, 1998. And as late as October 30,
1998, respondent could only file a Motion for Extension of Time, which
the trial court denied because of the expiry of the fifteen-day
period. Petitioner adds that respondents proper remedy would have
been a Motion to Set Aside the Order of Default, pursuant to Section
3(b), Rule 9 of the Rules of Court.
Respondent, in turn, avers that certiorari was the only plain, speedy
and adequate remedy in the ordinary course of law, because the default
Order had improvidently been issued.
We agree with respondent. Lina v. Court of Appeals[7] discussed the
remedies available to a defendant declared in default, as follows: (1) a
motion to set aside the order of default under Section 3(b), Rule 9 of the
Rules of Court, if the default was discovered before judgment could be
rendered; (2) a motion for new trial under Section 1(a) of Rule 37, if the
default was discovered after judgment but while appeal is still available;
(3) a petition for relief under Rule 38, if judgment has become final and
executory; and (4) an appeal from the judgment under Section 1, Rule
41, even if no petition to set aside the order of default has been resorted
to.
These remedies, however, are available only to a defendant who
has been validly declared in default. Such defendant irreparably loses
the right to participate in the trial. On the other hand, a defendant
improvidently declared in default may retain and exercise such right
after the order of default and the subsequent judgment by default are
annulled, and the case remanded to the court of origin.The former is
limited to the remedy set forth in section 2, paragraph 3 of Rule 41 of
the pre 1997 Rules of Court, and can therefore contest only the
judgment by default on the designated ground that it is contrary to
evidence or law. The latter, however, has the following options: to resort
to this same remedy; to interpose a petition for certiorari seeking the
nullification of the order of default, even before the promulgation of a

judgment by default; or in the event that judgment has been rendered,

to have such order and judgment declared void.
In prohibiting appeals from interlocutory orders, the law does not
intend to accord executory force to such writs, particularly when the
effect would be to cause irreparable damage. If in the course of trial, a
judge proceeds without or in excess of jurisdiction, this rule prohibiting
an appeal does not leave the aggrieved party without any remedy. [8] In a
case like this, a special civil action of certiorari is the plain, speedy and
adequate remedy.
Herein respondent controverts the judgment by default, not on the
ground that it is unsubstantiated by evidence or that it is contrary to
law, but on the ground that it is intrinsically void for having been
rendered pursuant to a patently invalid order of default.[9]
Grave Abuse of Discretion

Petitioner claims that in issuing the default Order, the RTC did not
act with grave abuse of discretion, because respondent had failed to file
its answer within fifteen days after receiving the August 14, 1998 Order.
We disagree. Quite the contrary, the trial court gravely abused its
discretion when it declared respondent in default despite the latters
filing of an Answer.[10] Placing respondent in default thereafter served no
practical purpose.
Petitioner was lax in calling the attention of the Court to the fifteenday period for filing an answer. It moved to declare respondent in default
only on September 20, 1998, when the filing period had expired on
August 30, 1998. The only conclusion in this case is that petitioner has
not been prejudiced by the delay. The same leniency can also be
accorded to the RTC, which declared respondent in default only on
December 9, 1998, or twenty-two days after the latter had filed its
Answer on November 17, 1998. Defendants Answer should be admitted,
because it had been filed before it was declared in default, and no
prejudice was caused to plaintiff. The hornbook rule is that default
judgments are generally disfavored.[11]
While there are instances when a party may be properly declared in
default, these cases should be deemed exceptions to the rule and should
be resorted to only in clear cases of obstinate refusal or inordinate

neglect in complying with the orders of the court. [12] In the present case,
however, no such refusal or neglect can be attributed to respondent.
It appears that respondent failed to file its Answer because of
excusable negligence. Atty. Joel Voltaire Mayo, director of the Legal
Affairs Services of CHED, had to relinquish his position in accordance
with the Memorandum dated July 7, 1998, requiring all non-CESO
eligibles holding non-career positions to vacate their respective offices. It
was only on September 25, 1998, after CHED Special Order No. 63 had
been issued, when he resumed his former position. Respondent also
presented a meritorious defense in its Answer -- that it was duty-bound
to pursue that state policy of protecting, fostering and promoting the
right of all citizens to affordable quality education at all levels. In stark
contrast, petitioner neither qualified for nor was ever conferred
university status by respondent.
Judges, as a rule, should avoid issuing default orders that deny
litigants the chance to be heard. Instead, the former should give the
latter every opportunity to present their conflicting claims on the merits
of the controversy, as much as possible avoiding any resort to
procedural technicalities.[13]
Third Issue: Preliminary Injunction

Petitioner contends that the RTC validly issued the Writ of

Preliminary Injunction. According to the trial court, respondents actions
adversely affected petitioners interests, faculty and students. In fact, the
very existence of petitioner as a business concern would have been
jeopardized had its proprietary rights not been protected.
We disagree. We concur with the CA that the trial court acted with
grave abuse of discretion in issuing the Writ of Preliminary Injunction
against respondent. Petitioner failed to establish a clear right to continue
representing itself to the public as a university. Indeed, it has no vested
right to misrepresent itself. Before an injunction can be issued, it is
essential that (1) there must be a right in esse to be protected, and (2)
the act against which the injunction is to be directed must have violated
such right.[14] The establishment and the operation of schools are subject
to prior authorization from the government. No school may claim to be a
university unless it has first complied with the prerequisites provided in
Section 34 of the Manual of Regulations for Private Schools. Section 3,
Rule 58 of the Rules of Court, limits the grant of preliminary injunction to
cases in which the plaintiff is clearly entitled to the relief prayed for.

We also agree with the finding of the CA that the act sought to be
enjoined by petitioner is not violative of the latters rights. Respondents
Cease and Desist Order of July 30, 1997 merely restrained petitioner
from using the term university in its name. It was not ordered to close,
but merely to revert to its authorized name; hence, its proprietary rights
were not violated.
Fourth Issue: Dismissal of the Complaint

Petitioner claims that the CA went beyond its limited jurisdiction

under Rule 65 when it reversed the trial court and dismissed the
Complaint on the ground that petitioner had failed to state a cause of
action. The RTC had yet to conduct trial, but the CA already determined
the factual issue regarding petitioners acquisition of university status, a
determination that is not permitted in certiorari proceedings.
The CA ruled that the trial court gravely abused its discretion in
denying respondents Motion to dismiss on the ground of lack of cause of
action because of petitioners lack of legal authority or right to use the
word university. Said appellate court:
x x x. No matter how we interpret the Corporation Code and the law
granting the Securities and Exchange Commission its powers and duties,
there is nothing there which grants it the power or authority to confer
University Status to an educational institution. Fundamental is the rule
that when there is no power granted, none exist[s], not even implied
ones for there is none from where to infer. The mere fact of securing an
alleged Certificate of Incorporation under an unauthorized name does
not confer the right to use such name.
But what makes the conclusion of [the trial court] even anomalous, to
say the least, is that no less than the Chairman of the SEC in his letter to
the [respondent] (Exh. J) expressly said that [petitioner] never filed any
Amended Articles of Incorporation so as to have a change of corporate
name to include the term university. Worse, the records officer of DECS
issued a Certification dated May 18, 1998 (Annex AA) to the effect that
there was no Indorsement made by that office addressed to the SEC or
the Proposed Amended Article of Incorporation of Indiana Aeronautics. x
x x.
Under such clear pattern of deceitful maneuvering to circumvent the
requirement for acquiring University Status, it is [a] patently reversible
error for [the trial court] to hold that [petitioner] has a right to use the

word University which must be protected. Dismissal of [petitioners]

Complaint for lack of a valid cause of action should have been the proper
action taken by [the trial court] judge.[15]
An order denying a motion to dismiss is interlocutory, and so the
proper remedy in such a case is to appeal after a decision has been
rendered. A writ of certiorari is not intended to correct every
controversial interlocutory ruling; it is resorted to only to correct a grave
abuse of discretion or a whimsical exercise of judgment equivalent to
lack of jurisdiction. Its function is limited to keeping an inferior court
within its jurisdiction and to relieve persons from arbitrary acts -- acts
which courts or judges have no power or authority in law to perform. It is
not designed to correct erroneous findings and conclusions made by the
court.[16]
In the case at bar, we find no grave abuse of discretion in the RTCs
denial of the Motion to Dismiss, as contained in the August 14, 1998
Order. The CA erred in ruling other wise. The trial court stated in its
Decision that petitioner was an educational institution, originally
registered with the Securities and Exchange Commission as the Indiana
School of Aeronautics, Inc. That name was subsequently changed to
Indiana Aerospace University after the Department of Education, Culture
and Sports had interposed no objection to such change. [17]
Respondent issued a formal Cease and Desist Order directing
petitioner to stop using the word university in its corporate name. The
former also published an announcement in the March 21, 1998 issue
of Freeman, a local newspaper in Cebu City, that there was no institution
of learning by that name. The counsel of respondent was quoted as
saying in the March 28, 1998 issue of the newspaperToday that
petitioner had been ordered closed by the respondent for illegal
advertisement, fraud and misrepresentation of itself as a
university. Such acts, according to the RTC undermined the publics
confidence in petitioner as an educational institution. [18] This was a clear
statement of a sufficient cause of action.
When a motion to dismiss is grounded on the failure to state a
cause of action, a ruling thereon should be based only on the facts
alleged in the complaint.[19] The court must pass upon this issue based
solely on such allegations, assuming them to be true. For it to do
otherwise would be a procedural error and a denial of plaintiffs right to
due process.[20]

WHEREFORE, the Petition is hereby GRANTED IN PART, and the

assailed
Decision MODIFIED. The
trial
court
is DIRECTED to SET
ASIDE the Order of default of December 9, 1998; to ADMITthe Answer
dated November 5, 1998; to LIFT the preliminary injunction; and
to CONTINUE, with all deliberate speed, the proceedings in Civil Case No.
98-811.
SO ORDERED.

BANGKO SILANGAN DEVELOPMENT BANK, petitioner, vs. COURT

OF APPEALS, JUDGE PABLO D. ATIENZA, in his capacity as
Presiding Judge of Branch 14, Regional Trial Court, Fourth
Judicial Region, Nasugbu, Batangas and LEONIDA
UMANDAL-BAUSAS, respondents.
DECISION
DE LEON, JR., J.:
Challenged in this petition for review on certiorari is the
Decision[1] dated February 26,1993 of the Court of Appeals in CA-G.R. No.
SP-29659 which affirmed the Resolution[2] dated September 10, 1992 of
the Regional Trial Court of Batangas, Branch 14, Nasugbu, Batangas in
Civil Case No. 221. The said Regional Trial Court (RTC) denied the motion
to dismiss filed by petitioner Bangko Silangan Development Bank
(BSDB), Nasugbu Branch, Batangas.
The motion to dismiss was based on the ground of litis pendentia
allegedly arising from the same controversy, subject of Civil Case No.9156185, then pending before the Regional Trial Court of Manila.
The antecedent facts are as follows:

Private respondent Leonida Umandal-Bausas had been maintaining

Savings Account No.04-3652 as depositor of petitioner BSDB, Nasugbu
Branch, Batangas since 1985. As of April 1990, she had Fifteen Thousand
Pesos (P15,000.00) deposited under her Savings Account No. 043652. On April 23, 1990, respondent Leonida Umandal-Bausas
attempted to withdraw Five Thousand Pesos (P5,000.00) from that
savings account but, to her surprise, the bank teller told her that the
withdrawal could not be done because her brother, Antonio Umandal,
had already withdrawn on April 16, 1990 the amount of Fifteen Thousand
Pesos (P15,000.00) allegedly with her written authorization and that her
remaining balance was only Eight Hundred Pesos (P800.00). Respondent
Bausas then inquired about the withdrawal slip and found that the
signatures appearing thereon were not hers and neither that of her
brother.[3]
Dismayed by the turn of events, respondent Bausas sought the
assistance of a family friend, Edmundo Villadolid, who was then the
President-Manager of the Rural Bank of Nasugbu, Batangas. On the
following day, Villadolid sent petitioner BSDB a letter, dated April 24,
1990, together with an affidavit executed by respondent Bausas. In
substance, Villadolid in his letter, informed petitioner BSDB of the "sad
experience" of respondent Bausas, a daughter of his kumadre, whose
savings passbook had since been withheld by the petitioner bank which
allowed the withdrawal of the amount of Fifteen Thousand Pesos
(P15,000.00) from her savings account without verifying whether the
withdrawal was duly authorized by respondent Bausas. Claiming that the
withdrawal smacked of "foul play" and "dubious exercise of unwarranted
banking operation", Villadolid warned the petitioner bank that he would
be constrained to elevate the matter to "higher authorities" should there
be no "reasonable and convincing results at the earliest (sic) possible". [4]
Upon receipt of the letter, petitioner BSDB caused an investigation
on the matter through its auditor, Benedicto I. Ramirez. On May 4, 1990,
Ramirez submitted a report, a portion of which reads:

"Savings ledger No. 3652 under the name Leonida B. Umandal shows a
FIFTEEN THOUSAND PESO (P15,000.00) withdrawal made last April
16. Said withdrawal is evidenced by a withdrawal slip bearing the
signatures of both the depositor, Leonida B. Umandal and her
representative, Antonio Umandal, which are genuine. Both Leonida B.
Umandal and her brother Antonio Umandal, who dropped by to
complaint (sic) sometime after April 22, 1990, denied having signed said
withdrawal slip as per statements gathered from the officers and staff of
Nasugbu Branch. Said withdrawal was processed in accordance with the
standard operating procedure.[5]
Subsequently, on May 15, 1990, Villadolid requested the Central
Bank of the Philippines to intervene and conduct an investigation on
petitioner BSDB's banking operations on account of the petitioner bank's
"indifference" in the conduct of its investigation on the unauthorized
withdrawal from respondent Bausas' savings account. This was
subsequently referred by the Central Bank to petitioner BSDB's Head
Office in Batangas City.
On May 31, 1990, Villadolid wrote petitioner BSDB another letter, a
copy of which was furnished the Central Bank. He reminded the
petitioner bank that it had been forty-five (45) days since the failed
withdrawal and that, notwithstanding the attempt of respondent Bausas'
father to thresh out the matter with Sofronio Comia, petitioner bank's
officer-in-charge, no concrete results and/or remedies" has been arrived
at. He warned that if, within five (5) days, the petitioner bank would
continue its "insulting treatment" on the matter, respondent Bausas
would be constrained to hire the services of a lawyer in order that the
proper charges would be filed against the petitioner bank. [6]
In a letter dated June 6, 1990, petitioner BSDB, through Alberto
Buquid, informed respondent Bausas that the investigation it had
conducted on the matter revealed that on April 16, 1990, her brother,
Antonio Umandal, bearing her passbook under Savings Account No. 043652 and the withdrawal slip to which her signature was affixed,
withdrew the amount of Fifteen Thousand Pesos (P15,000.00).The
petitioner bank asserted that it observed the usual procedure in bank
transactions - it made the proper verification, posted the withdrawal on
the passbook and the bank ledger, and approved the withdrawal. [7]
As a result of that information, respondent Bausas sought the help
of the National Bureau of Investigation (NBI) in Region IV, Batangas
City. After an investigation, a case was filed with the Office of the

Provincial Prosecutor of Batangas on February 21, 1993 and docketed

therein as Investigation Slip (I.S.) No. 91-37.[8]
It appears that respondent Bausas sought another venue for airing
her complaint - the press. Thus, in the September 17, 1990 issue of
the People's Journal Tonight, the following headline appeared: "Bank
Money Withdrawn w/o Depositor's Knowledge".[9] Aside from that
publication, respondent Bausas and Villadolid reproduced by xerox
machine the said news item and posted the xerox copies in conspicuous
places within the municipal hall of Nasugbu.
Aggrieved, on February 22, 1991, petitioner BSDB filed in the RTC of
Manila a complaint for damages [10] against respondent Bausas, Villadolid,
the Philippine Journalists, Inc., Zacarias Nuguid, Jr. (publisher), Alfredo M.
Marquez (managing editor), Franklin Cabaluna (news editor), Benjamin
Ayllon (city editor) and Raul S. Beltran (reporter). Docketed as Civil Case
No. 91-56185 in the RTC of Manila, Branch 24, the complaint alleged that
the "series of publications" were "clearly defamatory and libelous", and
that the publication constituted the crime defined and penalized under
Article 353 of the Revised Penal Code that damaged the "goodwill,
integrity and good reputation" of the 21-year old bank. [11] Petitioner
BSDB prayed for compensatory damages of One Hundred Thousand
Pesos (P100,000.00), moral damages of One Million Five Hundred
Thousand Pesos (P1,500,000.00), exemplary damages of Seven Hundred
Thousand Pesos (P700,000.00), and attorney's fees of Two Hundred
Thousand Pesos (P200,000.00).
In their answer with compulsory counterclaim,
In Civil Case No.
91-56185 respondent Bausas and Villadolid alleged that the withdrawal
slip was a forgery and that Villadolid's actions were moved by a "sense
of moral duty" to respondent Bausas and her family. They raised lack of
actual malice as a defense and interposed a compulsory counterclaim
for One Million Pesos (P1,000,000.00) in moral damages, Two Hundred
Fifty Thousand Pesos (P250,000.00) in litigation expenses and other
damages, Five Hundred Thousand Pesos (P500,000.00) in exemplary
damages, and Fifty Thousand Pesos (P50,000.00) plus Two Thousand
Pesos (P2,000.00) per appearance as attorney's fees.
[12]

While Civil Case No.91-56185 was pending in the RTC of Manila, or

on February 13, 1992, respondent Bausas, joined by her husband
Ricardo, filed Civil Case No. 221, a complaint for a sum of money, with
damages, against petitioner BSDB before the RTC of Batangas, Branch
14 in Nasugbu, Batangas. The complaint specifically prayed that
petitioner BSDB be ordered to pay them (a) Fifteen Thousand Pesos

(P15,000.00) "plus whatever balance" remained of her deposit, including

accrued interests thereon; (b) Twenty Thousand Pesos (P20,000.00) as
litigation expenses and/or damages; and (c) Ten Thousand Pesos
(P10,000.00) as attorney's fees plus One Thousand Pesos (P1,000.00)
per hearing attended by their lawyer.[13]
Instead of filing a responsive pleading to the complaint, petitioner
BSDB filed a motion to dismiss, [14] alleging that (a) there was another
action pending between the same parties for the same case (sic); (b) the
action caused the splitting of the cause of action raised in the answer
and counterclaim in Civil Case No. 91-56185; (c) the action violated the
principle of multiplicity of suits, and; (d) the filing of the complaint
constituted forum-shopping.
On September 10, 1982, the RTC
Resolution[16] denying the motion to dismiss.

of

Batangas [15] issued

Petitioner BSDB then filed a motion for reconsideration [17] which the
RTC of Batangas, however, denied in an Order [18] dated November 19,
1992.
Petitioner BSDB elevated the matter to the Court of Appeals via a
petition for certiorari, prohibition and mandamus, [19] seeking the reversal
of the said Resolution and Order of the RTC of Batangas.
On February 26, 1993, the Court of Appeals rendered the now
assailed Decision dismissing petitioner BSDB's petition for certiorari,
prohibition and mandamus and upholding the denial of its motion to
dismiss Civil Case No. 221. [20] The appellate court held that an order
denying a motion to dismiss, being interlocutory, cannot be the subject
of a petition for certiorari.
Besides, the principle of litis pendentia invoked by petitioner BSDB
is not applicable to the case at bar. The appellate court correctly found
and declared that:
"In the present case, while concededly, certain pieces of evidence may
be identical (to) both Civil Case No. 91-56185 and Civil Case No. 221, it
cannot be said however, that exactly the same evidence will support the
decisions in both. In Civil Case No. 91-56185 pending before the
Regional Trial Court of Manila, the issues raised are (1) whether the
publication in the September 17, 1990 issue of the People's Journal
Tonight is false and libelous and the action is directed, not only against

private respondent Leonida Umandal-Bausas but also against the

publisher and editorial staff of the publication concerned; and (2)
whether Leonida Umandal-Bausas acted with malice in causing the
posting of xerox copies of said publication at conspicuous places at the
Municipal Building of Nasugbu, Batangas.In Civil Case No. 221, however,
the primary issue, shown (sic) of unessential trimmings, is whether or
not petitioner Bank could be held liable to Leonida Umandal-Bausas for
the withdrawal from her savings account in the amount of P15,000.00.
Private respondent Bausas did not invoke as a permissive counterclaim
in Civil Case No. 91-56185, that petitioner indemnify her of her savings
deposit which she claims to have been withdrawn by someone else
without her authority.
We therefore rule that the court a quo did not commit an abuse of
discretion in denying petitioner's motion to dismiss in Civil Case No. 221
on the ground of litis pendentia."[21]
Petitioner BSDB's motion for reconsideration [22] thereof was denied
in a Resolution,[23] dated June 7, 1993, of the appellate court.
Hence, the instant petition wherein petitioner BSDB raises the
following assignment of errors:

Petitioner argues that respondent RTC of Batangas acted without or

in excess of jurisdiction or was guilty of grave abuse of discretion when it
refused to dismiss Civil Case No. 221 despite the pendency of Civil Case
No. 91-56185 in the RTC of Manila. It insists that litis pendentia barred
the proceedings in Civil Case No. 221 because the special and
affirmative defenses raised by respondent Bausas in Civil Case No. 9156185 are really the same cause of action which she relied upon in Civil
Case No. 221. For that matter, it claimed that respondent trial court
abetted the possibility of conflicting decisions between two (2) co-equal
and coordinate courts that may in the end sow confusion and chaos that
would take years to untangle and settle.[24]
Private respondent, on the other hand, counters that an order
denying a motion to dismiss is interlocutory, and hence, cannot be the
subject of a petition for certiorari. She claims that the remedy of
petitioner bank should be to proceed with the trial and, in the event of
an adverse decision, interpose an appeal to the proper forum.
As regards petitioner's claim of litis pendentia, respondent Bausas
contends that the issue in Civil Case No. 91-56185 is whether or not she
and Villadolid acted with malice in publishing the allegedly libelous
letters so as to warrant their liability for damages whereas the issue in
Civil Case No. 221 which is an action for collection of a sum of money, is
whether or not there was an unauthorized withdrawal of her savings
deposit that would warrant the petitioner's liability therefor.

I
THE RESPONDENT COURT ERRED WHEN IT HELD THAT THE PETITION
FOR CERTIORARI, PROHIBITION AND MANDAMUS SEEKING TO NULLIFY
AND SET ASIDE THE ORDER OF THE RESPONDENT JUDGE DENYING
PETITIONER'S MOTION TO DISMISS "DOES NOT FALL WITHIN THE AMBIT
OF THE EXCEPTION TO THE GENERAL RULE THAT AN ORDER DENYING A
MOTION TO DISMISS IS NOT AN INTERLOCUTORY ORDER AND CANNOT
BE THE SUBJECT OF A PETITION FOR CERTIORARI.
II
THE RESPONDENT COURT COMMITTED AN ERROR REVIEWABLE ON
APPEAL BY CERTIORARI WHEN IT DENIED DUE COURSE TO THE PETITION
AND TO HAVE DISMISSED THE SAME BECAUSE OF ITS FINDING THAT
THERE IS NO LITIS PENDENTIA BETWEEN CIVIL CASE NO. 221 AND CIVIL
CASE NO. 91-56185.

The petition, not being meritorious, the same should be, as it is

hereby, denied.
The petition for certiorari, prohibition and mandamus interposed by
petitioner before the Court of Appeals is not the proper remedy to
question the denial of its motion to dismiss in Civil Case No. 221. The
Resolution and Order of the RTC of Batangas denying the motion to
dismiss are merely interlocutory. An interlocutory order does not
terminate nor finally dispose of the case, but leaves something to be
done by the court before the case is finally decided on the merits. [25] It is
always under the control of the court and may be modified or rescinded
upon sufficient grounds shown at any time before final judgment. This
proceeds from the court's inherent power to control its process and
orders so as to make them conformable to law and justice. The only
limitation is that the judge cannot act with grave abuse of discretion, or
that no injustice results thereby.[26] These limitations were not
transgressed by the trial court in the case at bar when it denied the
petitioner's motion to dismiss. The alleged "chaos and confusion" arising

from conflicting decisions that petitioner purportedly seeks to avert by

the dismissal of Civil Case No. 221 are actually far-fetched and contrived
considering that any adverse decision of the CTA can be made the
subject of a proper appeal.

No. 91-51685 before the Regional Trial Court of Manila is solely for moral
damages, litigation expenses; attorney's fees and exemplary
damages. Nothing about the claim for the reimbursement or release of
the P15,000.00, subject matter of the instant case is ever made therein.

Our recent ruling in Espao, Sr. vs. Court of Appeals[27] applies to the
case at bar, to wit:

Since the instant case is entirely different from the case now pending
before the court of Regional Trial Court of Manila, the court views that
there is no such multiplicity of suits."[30]

"We find occasion here to state the rule, once more, that an order
denying a motion to dismiss is merely interlocutory and therefore not
appealable, nor can it be the subject of a petition for review on
certiorari. Such order may only be reviewed in the ordinary course of law
by an appeal from the judgment after trial. The ordinary procedure to be
followed in that event is to file an answer, go to trial, and if the decision
is adverse, reiterate the issue on appeal from the final judgment. This is
exactly what petitioner should have done in this case after his prayer for
the dismissal of Civil Case No. 21-88 was denied by the trial
court. Although the special civil action for certiorari may be availed of in
case there is grave abuse of discretion or lack of jurisdiction on the part
of the lower court, that vitiating error is indubitably not present in the
instant case."
Moreover, litis pendentia as a ground for the dismissal of a civil
action refers to a situation wherein another action is pending between
the same parties for the same cause of action and that the second
action becomes unnecessary and vexatious. [28] More particularly, it must
conform to the following requisites: (a) identity of parties, or at least
such parties who represent the same interests in both actions; (b)
identity of rights asserted and relief prayed for, the relief being founded
on the same facts; and (c) identity with respect to the two (2) preceding
particulars in the two (2) cases is such that any judgment that may be
rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other case.[29]
The trial court was correct when it opined that "xxx[T]here has never been any allegation in the answer that would tend
to show that the herein plaintiff intended to collect her deposit of
P15,000.00 from the defendant-bank which is the subject matter of the
instant complaint. Even the complaint above-cited filed in the Regional
Trial Court of Manila, the same solely deals on the alleged damages
suffered by the defendant-bank, Bangko Silangan Development Bank in
the alleged publication. On ground No. 2, the court finds that the
counterclaim interposed by the plaintiff in the instant case in Civil Case

Clearly, the issue in Civil Case No. 221 is whether or not petitioner
was negligent in validating the withdrawal slip and the alleged authority
to withdraw of respondent Bausas' brother so that it could be held
responsible for the amount withdrawn. Basically, that case is a collection
suit founded on a contract of bank deposit.
On the other hand, the issue in Civil Case No. 91-56185 is whether
or not the alleged publications of the incident made by respondent
Bausas and Villadolid are defamatory so as to warrant petitioner's
entitlement to damages.
What is essential in litis pendentia is the identity and similarity of
the issues under consideration.[31] There being no similarity of issues in
Civil Cases No. 91-56185 and 221, the filing of the latter case was not
barred by litis pendentia.
There is neither identity of rights asserted and reliefs sought by the
parties in the two (2) cases. Petitioner asserts its right to be
compensated for alleged damage to its goodwill and reputation in Civil
Case No. 91-56185 of the RTC of Manila. Respondent Bausas, on the
other hand, asserts her right to be reimbursed the amount illegally
withdrawn from her savings bank account in Civil Case No. 221 of the
RTC of Batangas. As to the reliefs sought, while both petitioner and
respondent Bausas seek damages, the reasons for such reliefs prayed
for are divergent. Thus, there is no identity of causes of action in the two
(2) cases.
The test to determine identity of causes of action is to ascertain
whether the same evidence necessary to sustain the second cause of
action is sufficient to authorize a recovery in the first, even if the form or
nature of the two (2) actions are different from each other. If the same
facts or evidence would sustain both, the two (2) actions are considered
the same within the rule that the judgment in the former is a bar to the
subsequent action; otherwise, it is not. This method has been considered

the most accurate test as to whether a former judgment is a bar in

subsequent proceedings between the same parties. It has even been
designated as infallible.[32]
While it is true that the two (2) cases are founded on practically the
same set of facts, as correctly observed by the Court of Appeals, it
cannot be said that exactly the same evidence are needed to prove the
causes of action in both cases. Thus, in Civil Case No. 91-56185 of the
RTC of Manila, the evidence needed to prove that petitioner sustained
damage to its reputation and goodwill is not the same evidence needed
in Civil Case No. 221 of the RTC of Batangas to prove the allegation that
a substantial amount of respondent Bausas' bank deposit in petitioner's
bank was illegally withdrawn without her consent or authority. The RTC
of Batangas and the Court of Appeals, therefore, did not abuse their
discretion in denying petitioner's motion to dismiss which was based on
the ground of litis pendentia..
The petitioner's contention that private respondent is guilty of
forum-shopping must likewise fail.
Forum-shopping is "the act of a party against whom an adverse
judgment has been rendered in one forum, of seeking another (and

possibly favorable) opinion in another forum other than by appeal or

special civil action of certiorari, or the institution of two (2) or more
actions or proceedings grounded on the same cause on the supposition
that one or the other court might look with favor upon the
party."[33] Where the elements of litis pendentia are not present or where
a final judgment in one case will not amount to res judicata in the other,
[34]
there is no forum-shopping. In the case at bar, there is no forum
shopping, inasmuch as earlier discussed, the cause of action in Civil
Case No. 91-56185 is separate and distinct from the cause of action in
Civil Case No. 221.
WHEREFORE, the instant petition for review on certiorari is hereby
DENIED for lack of merit. The challenged Decision of the Court of
Appeals is AFFIRMED; and the Regional Trial Court of Batangas, Branch
14, Nasugbu, Batangas, is hereby directed to proceed with dispatch to
resolve Civil Case No. 221.
SO ORDERED.