G.R. No. 164798 , November 17, 2005
China Banking Corporation, Petitioner, vs. Mondragon International Philippines, Inc. and Antonio Gonzales, Respondents.

FACTS

Petitioner China Banking Corporation (CBC) extended loans to respondent Mondragon International Philippines, Inc. (MIPI), secured by promissory notes and a surety agreement executed by respondent Antonio Gonzales. Due to the 1997 Asian financial crisis, MIPI defaulted. On December 28, 2000, CBC filed a complaint for sum of money against MIPI and Gonzales with the Regional Trial Court (RTC) of Makati. The attached certification against forum shopping was signed by Mercedes E. German, CBC’s Manager of Loans & Discounts Department, who stated she caused the preparation and filing of the complaint. The certification did not include proof of her authority to sign for CBC. Respondents moved to dismiss the complaint, arguing non-compliance with the forum shopping certification requirement under Section 5, Rule 7 of the 1997 Rules of Civil Procedure and Supreme Court Administrative Circular No. 04-94, specifically due to the lack of authorization for German. The RTC denied the motion to dismiss and the subsequent motion for reconsideration. Respondents then filed a petition for certiorari and prohibition with the Court of Appeals (CA). The CA granted the petition, reversing the RTC orders, ruling that CBC failed to comply with the rules as there was no showing German was authorized to bind the corporation. The CA denied CBC’s motion for reconsideration. Hence, CBC filed the present petition.

ISSUE

Whether the Court of Appeals erred in ruling that the Regional Trial Court committed grave abuse of discretion in denying the respondents’ motion to dismiss based on the alleged defective certification against forum shopping.

RULING

The Supreme Court GRANTED the petition, REVERSED and SET ASIDE the decision and resolution of the Court of Appeals. The Court held that the CA erred in finding grave abuse of discretion by the RTC.
The Court ruled that the denial of the motion to dismiss under the circumstances did not constitute grave abuse of discretion, which requires a capricious, whimsical, or arbitrary exercise of judgment equivalent to lack of jurisdiction. Mere errors of fact or law are not correctable via a Rule 65 petition for certiorari.
On the substantive issue, the Court held that the subsequent submission of proof of authority to sign the certification can rectify the initial omission, applying the principle of substantial compliance and following precedents that relaxed the rule under justifiable circumstances. The Court cited Shipside Incorporated v. Court of Appeals, Ateneo De Naga University v. Manalo, and Pascual & Santos Inc. v. Tramo Wakas Neighborhood Association, which allowed belated submission of such proof or recognized substantial compliance.
CBC subsequently submitted a board resolution dated January 7, 2004, which stated it “approved, confirmed and ratified” German’s authority to file complaints and sign certifications, among other actions. While the resolution’s wording was ambiguous, the Court interpreted it as susceptible to a reading that confirmed German’s pre-existing authority. The Court emphasized that, in the interest of substantive justice, the case should be decided on its merits rather than dismissed on a technicality regarding the certification.