G.R. No. L-40247. March 25, 1975.
American Insurance Company, plaintiff-appellant, vs. United States Lines Company, Luzon Stevedoring Corporation, and Philippine Steam Navigation Company, defendants-appellees.

FACTS

This is an action for recovery of a sum of money representing the value of losses sustained by an insured shipment from New York to Cebu. The plaintiff-appellant, as insurer, paid the consignee and was subrogated to its rights, filing suit against the carrier and stevedoring companies as alternative defendants. The procedural complication arose from the dismissal of the third complaint by the lower court.
The lower court dismissed the third complaint on the ground that two prior identical cases between the same parties had been dismissed for failure to prosecute. The court held that these two prior dismissals should operate as an adjudication on the merits with prejudice, barring the third filing. However, the records explicitly showed that the orders dismissing the first case on January 30, 1965, and the second case on May 9, 1966, were both expressly made “without prejudice.” The plaintiff refiled its complaint a third time on May 11, 1966, well within the ten-year prescriptive period for its cause of action.

ISSUE

Whether the lower court correctly dismissed the third complaint on the ground that the two prior dismissals for failure to prosecute constituted dismissals with prejudice, thereby barring the refiling of the action.

RULING

No. The Supreme Court reversed the appealed order and remanded the case for trial. The legal logic is clear. Under Section 3, Rule 17 of the Rules of Court, a dismissal for failure to prosecute has the effect of an adjudication upon the merits unless otherwise provided by the court. The lower court’s own dismissal order for the third complaint explicitly noted that the two prior dismissal orders were entered “without prejudice.” This express qualification removed the dismissals from the general rule and expressly reserved the plaintiff’s right to refile the action.
Consequently, the plaintiff was merely exercising a right expressly granted by the final and unappealed orders in the first two cases. Those orders, having long become final, constituted the law of the case; neither the lower court nor the Supreme Court could modify them to now impart a “with prejudice” effect. The lower court’s concern for ending litigation was misplaced, as it lacked legal basis to override its own prior unambiguous dispositions. The prescriptive period had not lapsed, and the plaintiff’s prompt refiling negated any claim of laches. The dismissal of the third complaint was therefore a grave error.