G.R. No. 175677 & 177133; July 31, 2009
SPOUSES AZUCENA B. CORPUZ AND RENATO S. CORPUZ vs. CITIBANK, N.A. AND HON. RAUL B. VILLANUEVA; CITIBANK, N.A. vs. SPOUSES AZUCENA B. CORPUZ AND RENATO S. CORPUZ

FACTS

Petitioner Azucena Corpuz, a Citibank cardholder, made advance payments on her credit cards before a business trip to Europe. While in Italy, her cards were dishonored at establishments, causing her embarrassment and forcing her to pay in cash. Upon her return, she demanded an explanation and a refund for her call expenses, later cancelling her cards. Citibank continued to send billing statements with penalties. The spouses filed a complaint for damages. During pre-trial, the spouses and their counsel failed to appear. The trial court dismissed their complaint and allowed Citibank to present evidence on its compulsory counterclaim. The spouses filed a petition for certiorari with the Court of Appeals (CA) assailing the dismissal. The CA upheld the dismissal, ruling that the spouses should have appealed, as the order was a final judgment on the merits, and that their counsel’s negligence was not a compelling reason to relax procedural rules.
Separately, Citibank failed to present evidence on its counterclaim within the period set by the trial court, leading to the dismissal of said counterclaim. Citibank also filed a petition for certiorari with the CA. The CA, in a subsequent resolution, granted Citibank’s motion for partial reconsideration, ultimately allowing it to prosecute its counterclaim. Both parties elevated the matters to the Supreme Court via consolidated petitions.

ISSUE

The primary issues were: (1) whether the CA erred in upholding the dismissal of the spouses’ complaint for failure to attend the pre-trial; and (2) whether the CA erred in reinstating Citibank’s compulsory counterclaim after it had been dismissed for failure to prosecute.

RULING

The Supreme Court denied the spouses’ petition and granted Citibank’s petition. On the first issue, the Court affirmed the CA. The dismissal of the complaint for failure to appear at pre-trial was a final order that disposed of the case on the merits; thus, the proper remedy was an ordinary appeal, not a petition for certiorari. The excuses proffered by the spouses’ counsel—heavy workload, failure to calendar the date, and the spouses’ own busy schedules as lawyers—constituted simple negligence, not a compelling reason to justify relaxation of procedural rules. Pre-trial is mandatory, and dismissal for non-appearance is a sanction under Rule 17, Section 5 of the Rules of Court.
On the second issue, the Court reversed the CA and reinstated the trial court’s order dismissing Citibank’s counterclaim. A compulsory counterclaim is auxiliary to the main proceeding and cannot remain pending for independent adjudication after the main action is terminated. Since the main complaint was dismissed with prejudice, the compulsory counterclaim was necessarily dismissed along with it. Citibank’s failure to present its evidence ex parte within the granted period, despite having moved to defer, constituted a failure to prosecute. The trial court correctly dismissed the counterclaim, and the CA erred in reinstating it. The compulsory counterclaim, being inseparable, fell with the dismissal of the principal action.