G.R. No. 224511 , September 23, 2019
Exchange Capital Corporation, Petitioner, vs. Bank of Commerce and Bancapital Development Corporation, Respondents.

FACTS

This case originated from a petition for involuntary dissolution, liquidation, and receivership filed by respondent Bank of Commerce (BANCOM) against respondent Bancapital Development Corporation (BANCAP) before the Securities and Exchange Commission (SEC) in 1996, alleging BANCAP defrauded it and transferred assets to petitioner Exchange Capital Corporation (EXCAP). EXCAP intervened. The cases (a Receivership case and a related Certiorari case) were eventually transferred to the Regional Trial Court (RTC) of Makati due to a change in jurisdiction. In a prior Supreme Court ruling ( G.R. No. 172393 , Bank of Commerce v. Hon. Estela Perlas-Bernabe), the Court ordered the consolidation of these cases before RTC Branch 138, which was later redesignated to Branch 149. The Supreme Court’s decision in that prior case became final and executory on January 11, 2011. The records of the consolidated cases were to be returned by the Supreme Court to the RTC. On August 14, 2014, the Acting Presiding Judge of RTC Branch 149 dismissed the consolidated cases for failure to prosecute, citing the parties’ failure to comply with a July 28, 2011 order to follow up on the return of the case records from the Supreme Court. BANCOM appealed this dismissal to the Court of Appeals.

ISSUE

Whether the Regional Trial Court correctly dismissed the consolidated cases on the ground of failure to prosecute.

RULING

No. The Supreme Court denied the petition and affirmed the Court of Appeals’ decision, which had reversed the RTC’s dismissal order. The Court held that the dismissal for failure to prosecute was not justified. The power to dismiss on this ground must be exercised soundly and not abused, requiring a sufficient reason given its extinctive effect. Dismissal should be based on a pattern or scheme to delay or a wanton failure to follow procedural rules, aiming to decide cases on their merits. The Court found that BANCOM had actively prosecuted the cases since 1996 through numerous proceedings before the SEC, RTC, Court of Appeals, and Supreme Court, demonstrating a clear determination to pursue its claims. BANCOM’s inaction regarding the follow-up order was explained by its good faith belief that the directive had been complied with once the records were received by the RTC of Makati City. There was no pattern of delay or wanton disregard of rules. Dismissing the long-pending cases on a technicality would not serve substantial justice.