G.R. No. L-40307 April 15, 1988
FILOIL MARKETING CORPORATION (now Petrophil Corporation), plaintiff-appellee, vs. DY PAC & CO., INC., defendant-appellant.

FACTS

Filoil Marketing Corporation filed a collection suit against Dy Pac & Co., Inc. in the City Court of Manila for an unpaid account of P2,123.69. After Dy Pac failed to appear at the hearing, the City Court rendered an ex parte decision in favor of Filoil. Dy Pac appealed to the Court of First Instance (CFI). During pre-trial, the CFI issued an order directing the parties to prepare and submit a stipulation of facts within thirty days, defining the issues for resolution. The order contained an explicit warning that failure to submit the stipulation would result in the dismissal of the appeal.
The parties did not submit the required stipulation of facts. Consequently, the CFI dismissed Dy Pac’s appeal for this failure and ordered the remand of the case to the City Court for execution. Dy Pac’s motion for reconsideration was denied, prompting an appeal to the Court of Appeals, which later certified the case to the Supreme Court as it involved purely questions of law.

ISSUE

Whether the trial court committed reversible error in dismissing the defendant’s appeal solely for the parties’ failure to submit a court-ordered stipulation of facts.

RULING

Yes, the trial court committed a reversible error. The Supreme Court set aside the CFI’s dismissal order. The Court held that while courts may urge parties during pre-trial to stipulate facts for efficiency and to simplify proceedings, such stipulations are essentially voluntary in nature. A stipulation of facts operates as a binding agreement between the parties, and courts cannot compel litigants to enter into such an agreement against their will. The legal logic is clear: the failure to reach a voluntary stipulation does not constitute a ground for dismissal. Where parties cannot agree on stipulated facts, the court’s duty is to terminate the pre-trial and proceed to trial on the merits.
The dismissal deprived Dy Pac of its statutory right to a trial de novo on appeal from the inferior court, a right provided under the applicable law ( Republic Act No. 6031 amending the Judiciary Act). The defendant had never received a full trial, as the City Court’s judgment was rendered ex parte. The CFI’s order, therefore, effectively denied Dy Pac its right to due process. The case was remanded to the Regional Trial Court (the successor to the CFI) for a proper trial on the merits, as it was pending prior to the effectivity of the Judiciary Reorganization Act (B.P. Blg. 129), which allowed it to remain with the higher court despite a subsequent change in jurisdictional amounts.