Jan-Dec Construction v. Food Terminal
REITERATIONFacts
The Antecedents: Jan-Dec Construction Corporation (petitioner) entered into a contract with Metro-South Intermodal Transport Terminal Corporation (Intermodal) for the construction of a bus terminal for P27,097,990.00. Intermodal allegedly failed to pay the balance of P23,720,000.00. Petitioner filed a complaint against Intermodal and Food Terminal, Inc. (respondent), alleging that respondent, as the lessor of the property, should assume Intermodal's unpaid obligations, particularly in light of petitioner's preferential lien under Article 2242 of the Civil Code, should respondent take over the bus terminal. Procedural History: The Regional Trial Court (RTC) dismissed petitioner's complaint against respondent, finding no privity of contract and no basis for respondent's liability. Petitioner's motion for reconsideration was denied. Petitioner then filed a petition for certiorari with the Court of Appeals (CA), arguing grave abuse of discretion by the RTC. The CA dismissed the certiorari petition, deeming it an improper remedy and stating that appeal under Rule 41 was the appropriate recourse. Petitioner's motion for reconsideration of the CA's dismissal was also denied. The Petition: Petitioner seeks a review of the CA's dismissal of its certiorari petition. Petitioner argues that the CA gravely abused its discretion by holding that appeal, rather than certiorari, was the proper remedy, especially since the RTC's dismissal order only pertained to one of two defendants, leaving the main case pending. Petitioner also contends that the CA erred in not voiding the RTC's dismissal order, asserting that respondent should be liable for Intermodal's obligations under Articles 1312 and 2242 of the Civil Code. Petitioner invokes Rule 65 of the Rules of Civil Procedure for its petition.
Issue(s)
Whether the Court of Appeals gravely abused its discretion amounting to lack of jurisdiction in holding that appeal under Rule 41, not certiorari under Rule 65, is the appropriate remedy against an order of dismissal against one defendant while the case is pending against another; and whether certiorari is available as a substitute for a lost appeal. Whether the Court of Appeals gravely abused its discretion amounting to lack of jurisdiction in not voiding the erroneous order of dismissal of the complaint by the trial court, specifically regarding the failure to state a cause of action against FTI.
Ruling
The petition is DISMISSED. The Supreme Court held that the Court of Appeals erred in dismissing the petition for certiorari, as the RTC's order of dismissal against one of two defendants, while the case remains pending against the other, falls under an exception to the general rule that appeal is the proper remedy, making certiorari under Rule 65 the appropriate recourse. However, the Court found that the CA's resolution dismissing the petition for certiorari was merely an error of judgment, not an error of jurisdiction, and thus not correctible by certiorari. Furthermore, the Court affirmed the RTC's dismissal of the complaint against FTI for failure to state a cause of action, as the contractor's lien under Article 2242 of the Civil Code applies only in cases of concurrence of credits against an insolvent debtor, which was not alleged.
Ratio Decidendi
On the propriety of certiorari vs. appeal and its availability as a substitute for lost appeal: The Court clarified that while appeal under Rule 41 is generally the remedy from a final order of the RTC, an exception exists when the order dismisses the complaint against one of several parties, leaving the main case pending. In such instances, a special civil action for certiorari under Rule 65 is the appropriate remedy, as provided by Section 1, Rule 41 of the 1997 Rules of Civil Procedure. The CA erred in dismissing Jan-Dec's petition for certiorari on the ground that appeal was the proper remedy, as the RTC's order fell under exception (g) of Rule 41, which allows for a special civil action when a judgment or final order is rendered for or against one or more of several parties while the main case is pending. Therefore, the CA's dismissal of the petition for certiorari was an error of judgment, not an error of jurisdiction. The Court reiterated that a special civil action for certiorari under Rule 65 is an extraordinary remedy and cannot be used as a substitute for a lost ordinary appeal. The petition was filed 41 days after receipt of the CA Resolution denying the motion for reconsideration, exceeding the 15-day period for filing a petition for review under Rule 45. While exceptions exist for certiorari, such as when public welfare or the broader interests of justice dictate, or when the order amounts to an oppressive exercise of judicial authority, Jan-Dec failed to provide any cogent explanation for its failure to abide by the Rules. The Court emphasized that procedural rules must be faithfully followed, and a liberal application requires an adequate explanation for non-compliance. Thus, by availing of the wrong remedy after the appeal period had lapsed, the petition should be dismissed. On the failure to state a cause of action against FTI: The Court affirmed the RTC's dismissal of the complaint against FTI for failure to state a cause of action. The elementary test for failure to state a cause of action is whether the complaint alleges facts which, if true, would justify the relief demanded. Jan-Dec anchored its claim against FTI on Article 2242, paragraphs 3 and 4 of the Civil Code, which enumerates preferred claims, including contractor's liens. However, the Court, citing J.L. Bernardo Construction vs. Court of Appeals, explained that Article 2242 applies only in cases of concurrence of credits against an insolvent debtor, where the property is insufficient to pay all creditors. In such situations, the lien must be enforced in a proceeding where all preferred creditors' claims can be adjudicated, such as insolvency proceedings. Here, FTI was not alleged to be a debtor of Jan-Dec, nor was there an insolvency proceeding or a concurrence of credits. Therefore, the contractor's lien under Article 2242 was not applicable, and the complaint against FTI failed to state a cause of action.
Main Doctrine
A special civil action for certiorari under Rule 65 is not a substitute for the lost remedy of ordinary appeal under Rule 45. Errors of judgment are not proper subjects of certiorari, which is an extraordinary remedy for errors of jurisdiction.