Supreme Investment Corporation v. Engineering Equipment
REITERATIONFacts
The Antecedents: Supreme Investment Corporation (appellant) and Engineering Equipment, Inc. (appellee) entered into a contract for the installation of an air-conditioning system for P222,000.00. Appellant paid P22,200.00 upon signing and an additional P20,000.00 towards the second installment. Appellee claimed it fully complied with its obligations by November 1964, but appellant stopped construction of its building, preventing the testing of the system. Appellee removed some equipment for safekeeping. Appellant alleged that appellee demanded P203,476.89 as a condition for rescission or resumption of work, and that appellee failed to perform its contractual obligations. Appellant proposed rescission if undelivered items were not delivered within ten days. Procedural History: On December 17, 1965, appellee filed a complaint against appellant for specific performance and damages (Civil Case No. 63670). On December 23, 1965, appellant filed a complaint against appellee for rescission of contract and damages (Civil Case No. 63718). Appellee moved to dismiss appellant's complaint in Civil Case No. 63718 on the ground of pendency of another action. The trial court granted the motion on January 8, 1966, and denied reconsideration on January 28, 1966. Appellant appealed. The Petition: Appellant alleged that the lower court erred in (1) proceeding with the motion to dismiss on shorter notice, (2) dismissing the complaint on the ground of pendency of another action, and (3) refusing to order consolidation of the cases.
Issue(s)
Whether the lower court erred in hearing the motion to dismiss on shorter notice. Whether the lower court erred in dismissing the complaint on the ground of pendency of another action between the same parties for the same cause. Whether the lower court erred in refusing to order the consolidation of the two cases.
Ruling
The Supreme Court affirmed the orders of the lower court dismissing the complaint and denying the motion for reconsideration. The Court held that the dismissal was proper due to the pendency of another action between the same parties for the same cause, and that the claim for rescission and damages in the second case was barred by Section 4 of Rule 9 of the Revised Rules of Court as it could have been set up as a counterclaim or cross-claim in the first case.
Ratio Decidendi
On the issue of hearing the motion to dismiss on shorter notice: The Court ruled that the lower court did not commit a reversible error in hearing the motion to dismiss on shorter notice. Section 4 of Rule 15 of the Revised Rules of Court allows the court, for good cause, to hear a motion on shorter notice. In this instance, the pendency of Civil Case No. 63670 and its contents were clear and undisputed. The trial judge was satisfied that the rights of the adverse party were not affected, and counsel for the appellant was present in court during the hearing. Therefore, the court's discretion to hear the motion on shorter notice was not abused. On the issue of pendency of another action: The Court found the appellant's pretense that the causes of action in the two cases were different to be manifestly devoid of merit. In both cases, the core issue was whether the appellant or the appellee had violated the contract. In Civil Case No. 63718, appellant sought rescission due to appellee's alleged breach, while in Civil Case No. 63670, appellee sought specific performance and damages, with appellant raising the same breach as an affirmative defense. The Court held that a judgment in Civil Case No. 63670 would constitute res judicata in Civil Case No. 63718 because the issue of who breached the contract was the same. Furthermore, the Court emphasized that any claim for rescission and damages arising from the alleged breach, as prayed for in appellant's complaint in Civil Case No. 63718, could and should have been raised as a counterclaim or cross-claim in Civil Case No. 63670, as per Section 4 of Rule 9 of the Revised Rules of Court. Failure to do so bars such claims in a subsequent action. On the issue of consolidation: While the Court acknowledged that the lower court, in its discretion, could have ordered the consolidation of the two cases, it held that the dismissal was not an abuse of discretion. The Court noted that discretion involves choosing between alternatives, and the court was right in choosing dismissal. It also pointed out that the appellee could not be blamed for filing its complaint before the appellant's demand letter expired, nor could the appellant be blamed for sending the letter after receiving the appellee's demand. The dismissal was deemed appropriate given the circumstances and the rules on lis pendens and compulsory counterclaims.
Main Doctrine
A motion to dismiss based on the pendency of another action between the same parties for the same cause may be heard on shorter notice than three days if the court finds good cause, especially when the pendency and the contents of the other complaint are clear and undisputed. Furthermore, a claim for rescission and damages arising from a breach of contract, if not set up as a counterclaim or cross-claim in a prior action between the same parties concerning the same transaction, is barred under Section 4 of Rule 9 of the Revised Rules of Court.