FIRST DIVISION[G.R. No. L-48315. February 27, 1979.]ATTY. DOMINADOR B. BORJE, petitioner, vs. HON. COURT OF FIRST INSTANCE OF MISAMIS OCCIDENTAL, BRANCH II, VIOLETA GALICINAO; MISAMIS OCCIDENTAL WATER DISTRICT, and THE CHAIRMAN OF THE BOARD, respondents.Dominador B. Borje in his own behalf.SYNOPSISPetitioner sued private defendants for damages for disconnecting his water service, with prayer for preliminary mandatory injunction. Upon order of the trial court the water service was reconnected immediately. Private respondents moved to dismiss alleging: (1) lack of jurisdiction and (2) pendency of another action between the same parties for the same cause.The trial court dismissed the complaint not on the grounds alleged in the motion to dismiss but on the grounds that there was no malice or bad faith in the severance of the water connection of petitioner and that private respondents had already reconnected the same. Petitioner, on petition for certiorari, alleged that the trial court acted with grave abuse of discretion amounting to lack of jurisdiction for dismissing the complaint without conducting any hearing despite the existence of controverted facts that need to be proved. The Supreme Court held that dismissal of actions on grounds not alleged in the motion to dismiss is improper; that the trial court, motu proprio, cannot dismiss an action except where plaintiff fails to appear at the trial or fails to prosecute the case; that dismissal of an action without affording the parties an opportunity to be heard and present evidence in support of their case is violative of due process.Petition granted and the questioned orders set aside.SYLLABUS1.COURT; ACTION; DISMISSAL; GRAVE ABUSE OF DISCRETION; DISMISSAL OF ACTION ON GROUND NOT ALLEGED IN MOTION TO DISMISS. It is a grave abuse of discretion if not in excess of jurisdiction for a court to dismiss an action on grounds not alleged in the motion to dismiss. Such dismissal is improper for in so doing, a court in effect dismisses an action motu proprio without giving the plaintiff a chance to argue the point and without receiving any arguments or evidence on the question.2.ID.; ID.; ID.; ID.; DISMISSAL OF ACTION WITHOUT REQUISITE MOTION. Section 1, Rule 16 of the Rules of Court enumerates the grounds upon which an action may be dismissed and specifically ordains that the motion to this and be filed. In the light of this express requirement the court has no power to dismiss the case without the requisites motion duly presented, hence, dismissal at its own initiative constitutes a grave abuse of its discretion if not in excess of jurisdiction.3.ID.; ID.; DISMISSAL UPON COURT'S OWN MOTION. The only instance in which, according to said Rules, the Court may dismiss upon the court's own motion an action is, when the "plaintiff fails to appear at the time of the trial or to prosecute his action for an unreasonable length of time or to comply with the Rules or any order of the court." 4.ID.; ID.; DUE PROCESS; DISMISSAL OF CASE WITHOUT HEARING, DESPITE EXISTENCE OF CONTROVERTED FACTS, VIOLATIVE OF DUE PROCESS. Where the respective allegations of the parties requires presentation of proof, it would be violative of due process for the trial court to make a summary finding, from the controverted facts, of lack of malice or bad faith on the part of defendants and then decree the dismissal of the case. When doubtful question of facts exists, the trial court in the exercise of sound discretion should refuse to consider and decide the case in a summary manner, but should allow the parties to present proof in support of their respective stand. This is because the right to a hearing, which is the right of the parties interested or affected to present their respective cases and submit evidence in support thereof, is one of the primary cardinal rights of litigants. 5.ID.; ID.; ID.; DISMISSAL OF ACTIONS HEARING VIOLATIVE TO DUE PROCESS. The dismissal of an action upon a motion to dismiss constitutes a denial of due process, if, from a consideration of the pleadings, it appears that there are issues of fact which cannot be decided without a trial of the case on the merits. Summary or outright dismissals of actions are not proper where there are factual matters in dispute which need presentation and appreciation of evidence. The demands of a fair, impartial and wise administration of justice call for a faithful adherence to legal precepts on procedure which ensure to litigants the opportunity to present their evidence and secure a ruling on all the issues presented in their respective pleadings. "Shorts cuts" in judicial processes are to be avoided where they impede rather than promote a judicious dispensation of justice.D E C I S I O NGUERRERO, J p:The cause for certiorari and/or mandamus brought to the attention of this Court in this case is the alleged grave abuse of discretion amounting to lack of jurisdiction of respondent Court of First Instance of Misamis Occidental, Branch II, for dismissing the complaint for damages of petitioner in Civil Case No. OZ 686, entitled "Atty. Dominador B. Borje vs. Violeta Galicinao, et al." without conducting any hearing despite the existence of controverted facts that needed to be proved.Petitioner alleged that he is the counsel of the water consuming public of Ozamiz City who were indignant against the increase of water rates imposed by respondent Misamis Occidental Water District and who thereby resorted to court action for redress and/or remedy. After acceptance of the retainer as counsel plus the consequent representation of the consumers also in debates and discussions in the air, he allegedly received water bills from the Water District without indication of the meter readings, the number of cubic meters consumed and the amounts to be paid. So he refused to pay the "blank bills." For such failure, petitioner's water service was cut on February 6, 1978.By reason of these acts of "harassment" of private respondents resulting in his "humiliation" as well as unlawful deprivation of a life's necessity, petitioner brought Special Civil Case No. OZ 686, an action for damages with preliminary mandatory injunction, before respondent Court. cdrepActing on the prayer incorporated therein for preliminary mandatory injunction, respondent Court issued an order dated February 8, 1978 enjoining respondents from disconnecting the water service of petitioner. Upon learning that the same was already cut, the Court issued another order reconnect it immediately.On February 15, 1978, private respondents filed a motion to dismiss the complaint on two grounds, namely: a lack of jurisdiction of respondent Court allegedly because the "main thrust the subject and nature of the action or suit appearing in the complaint is clearly within the field of special civil action or suit action or special proceeding" 1 and (b) there is another action pending between the same parties for the same cause, referring to Special Civil Case No. 0390.On February 27, 1978, petitioner filed an opposition thereto stating that the issues raised are justiciable and a court of general jurisdiction has the authority to try the case. He further contended that Special Civil Case No. 0390, which questioned the increased water rates unilaterally imposed by the Misamis Occidental Water District, the constitutionality of Presidential Decree No. 198 and the selection of the members of the Board of Directors, is entirely different from Civil Case No. OZ-686, which is an action for damages due to the harassment committed by private respondents on petitioner.Surprisingly though, respondent Court, through Hon. Melecio A. Genato, a temporary judge assigned thereat, issued an order dated March 9, 1978 dismissing the case not on the basis of the grounds alleged by private respondents in their motion to dismiss but on the grounds that there was no malice or bad faith in the severance of the water connection of petitioner and that private respondent had already reconnected the same. The dispositive portion thereof states:"WHEREFORE, the above entitled case is hereby dismissed for being moot and academic without pronouncement as to costs.SO ORDERED." 2 A motion for reconsideration was thus filed by petitioner where he assailed the said order of dismissal for having been rendered in violation of Section 1, Rule 36, Revised Rules of Court and for not being correct because although his water service has been reconnected, he has suffered damages which could be proved by him in an impartial proceeding. He also assailed the said order, denominating it as a "midnight order" because on March 9, 1978, "the Clerk of Court officially showed Hon. Melecio A. Genato the telegram of Hon. Bienvenido A. Ebarle to schedule trials from March 10, 1978 to March 17, 1978 indicating that he has already and previously taken his oath." 3 An opposition thereto was filed by private respondents disputing only the claim of petitioner that the order dated March 9, 1978 was a midnight order. Petitioner filed a "rejoinder" reiterating that the order of dismissal is a midnight order citing the cases of Siazon vs. Hon. Judge of CFI of Cotabato, Branch II, L-29354, January 27, 1969, 26 SCRA 664 and Li Siu Liat vs. Republic of the Philippines, L-25356, November 25, 1967, 21 SCRA 1039. By reason of the number of arguments on the issue of whether the order dated March 9, 1978 is a midnight order or not, the respondent Court, through Hon. Bienvenido A. Ebarle, considered the motion for reconsideration as mainly anchored on the lack of authority of Judge Genato. In denying the said motion, the Court held in an order dated April 18, 1978, as follows: prcd"While it may be true that Judge Genato might not have the authority anymore to issue the said order in view of the pertinent citations made by plaintiff, the more important thing to consider is the intrinsic merit of the complaint in relation to the order of dismissal. The Court has gone over the pleadings of both parties, closely studied the issues involved, and weighed the preponderance of their implication carefully."The cause of action as admitted by plaintiff is the alleged arbitrary disconnection by defendants of plaintiff's water pipes. However, it appears that plaintiff was not singled out in the matter of water pipes disconnection, for aside from him, there were three other consumers whose connections were ordered cut and in fact disconnected about the same time and/or occasion, an official act of defendants indicating absence of malice." 4 In assailing the order of dismissal dated March 9, 1978 which was affirmed in the order dated April 18, 1978, petitioner contends in this instant petition for certiorari and/or mandamus with this Court that said dismissal cannot be on lack of cause of action because the complaint alleged sufficient facts to show that his rights have been seriously violated by private respondents. He also argues that it cannot be a judgment on the pleadings because the facts are controverted. He thereby concludes that respondent Court has gravely abused its discretion amounting to lack or excess of jurisdiction when it dismissed the case without any evidence presented by both parties in support of their respective positions considering that the allegations of that he has no appeal nor any plain, speedy and adequate remedy in the ordinary course of law, except this present petition.Indeed, respondent Court acted with grave abuse of discretion if not in excess of its jurisdiction in dismissing the case. Firstly, the said order of dismissal dated March 9, 1978 is not premises on lack of jurisdiction or on the pendency of another case between the same parties for the same cause - the grounds alleged by private respondents in their motion to dismiss. On this score, it has been held in the case of Malig, et al. vs. Bush, 5 that dismissal of actions on grounds not alleged in the motion to dismiss is improper for in so doing, a court in effect dismisses an action motu proprio without giving the plaintiffs a chance to argue the point and without receiving any arguments or evidence on the question.But while in the aforecited Malig case, the order of dismissal is based on one of the grounds enumerated in Section 1 of Rule 16, Revised Rules of Court, namely: prescription, the order herein brought to Us for review is not based on any of them. In a rather summary fashion, respondent Court made a finding on the basis merely of the pleadings filed and without conducting any hearing, that there is no malice or bad faith on the part of private respondents in their act of severing petitioner's water supply. Respondent court also noted the fact that private respondents bad reconnected the water pipes or water service of petitioner and erroneously concluded that the case has become moot and academic. LLprTo all intents and purposes, respondent Court decreed the dismissal on its own initiative as in the case of Manila Herald Publishing Co., Inc. vs. Ramos, et al. 6 where neither a motion to dismiss nor an answer had been made when the decision was handed down. In granting the writ of certiorari, this Court ruled therein that: "Section 1 of Rule 8 (now Section 1 of Rule 16) enumerates the grounds upon which an action may be dismissed, and it specifically ordains that a motion to this end be filed. In the light of this express requirement we do not believe that the court had power to dismiss the case without the requisite motion duly presented. . . . The only instance in which. according to said Rules, the court may dismiss upon the court's own motion on action is, when the "plaintiff fails to appear at the time of the trial or to the prosecute his action for an unreasonable length of time or to comply with the Rules or any order of the court."The real cause for concern, though, is not so much the dismissal of the case for lack of presentation of the requisite motion but rather the dismissal thereof without affording petitioner an opportunity to be heard despite the presence of factual issues that needed to be proved.In the case at bar, respondents premised their right to cut off the water service connection on the violation of petitioner's water service contract 7 which is the contract signed by petitioner with the National Waterworks and Sewerage Authority on September 16, 1958 to which private respondent Misamis Occidental Water District claims it has been subrogated. The said contract provides the following:"3.To pay monthly the NWSA for the water service furnished upon presentation of the bill or within thirty (30) days from its presentation.""6.That the NWSA may disconnect the service upon violation of the term of the contract."In addition to the said contract, private respondents also presented their "Notice to the Public" 8 where the water consumers were likewise informed that upon failure to settle their bills within the connection period, their water service will be shut off. Thirdly, they annexed to their comment on this petition a facsimile copy of the monthly bill 9 furnished each water consumer wherein it is stated that "service may be disconnected immediately if payment of the bill is not made to the field collector after due date."Indeed, all these empower the private respondents to disconnect the water service of the consumers upon failure to pay. But the question posed by petitioner is whether or not there is really failure to pay on his part. It is his contention that there is no failure as he was sent water bills that did not indicate the meter readings, the number of cubic meters consumed and the amount to be paid.Inasmuch as private respondents deny these allegations of petitioner, an issue of fact exists that requires presentation of proof. If the allegations of petitioner are true private respondents are not at an authorized to cut off his water service as the collection period as to him would not have even started yet. For an obligation to become due there must be a demand. 10 Default generally begins from the moment the creditor demands the performance of the obligation. Without such demand, judicial or extra-judicial, the effects of default will not arise. prcdIt is to be noted that private respondents attached to their comment on this petition only a facsimile copy of the water bill issued to consumers while they presented to this Court a xerox copy of the contract between NWSA and the petitioner, and a xerox copy of the final notice, not just facsimiles thereof. Although the issue of the effectivity of the denial of private respondents as to the alleged sending of blank bills is not for this Court to determine, it would not be amiss to state that private respondents could have easily annexed also a xerox copy of the water bill sent to petitioner, if only to belie the latter's claims.At any rate, private respondents also argue that petitioner could have paid his account when the final notice 11 to pay was sent him since he was then already certain of the amount of the bill. This final notice is the notice of disconnection, served on the day the service was cut off.Petitioner, however, contends that this was the first time he ever came to know of the sum due from him and besides, he claims that only the total amount due for the months of November and December, 1977 was stated. There is no specification of the amount due for each month, the meter readings and the number of cubic meters consumed, thus, leaving him uncertain as to how the amount was arrived at. Assuming the truth of these allegations, private respondents would not have been entitled still to cut off petitioner's water supply at the time they cut if off as the demand did not contain the requisite details and hence, improper. And even if the sufficiency of the demand is conceded, petitioner has still thirty days from date of such knowledge within which to pay the same in accordance with the contract and the avowed policy of the water district.Verily, the above discussion shows the need of presentation of proof for the respective allegations of the parties. For the respondent Court to make a summary finding of lack of malice or bad faith on the part of private respondents from those controverted facts and then decree the dismissal of the case is, therefore, violative of due process. In view of the doubtful question of facts presented herein, respondent court, in the exercise of sound discretion, should have refused to consider and decide in a summary manner and should have allowed the parties to present proof in support of their respective stand. This is because the right to a hearing, which is the right of the parties interested or affected to present their respective cases and submit evidence in support thereof, is one of the primary cardinal rights of litigants.The importance of this right has been underscored in several cases of this nature decided by this Court. In one of such cases, De Leon vs. Henson, 12 this Court ruled that the dismissal of an action upon a motion to dismiss constitutes a denial of due process, if, from a consideration of the pleadings, it appears that there are issues of fact which cannot be decided without a trial of the case on the merits. Similarly, in Constantino vs. Estenzo, 13 citing Garanciang, et al. vs. Garanciang, et al. 14 and Boaga vs. Soler, 15 this Court held as follows:". . . Summary or outright dismissals of actions are not proper where there are factual matters in dispute which need presentation and appreciation of evidence. The demands of a fair, impartial and wise administration of justice call for faithful adherence to legal precepts on procedure which ensure to litigants the opportunity to present their evidence and secure a ruling on all the issues presented in their respective pleadings. `Short cuts' in judicial processes are to be avoided where they impede rather than promote a judicious dispensation of justice."WHEREFORE, the petition for certiorari and/or mandamus is hereby GRANTED, the Orders dated March 9, 1978 and April 18, 1978 dismissing the complaint of petitioner for damages and denying the motion for reconsideration thereof, respectively, are set aside for being null and void, and respondent Court of First Instance of Misamis Occidental, Branch II is hereby ordered to try the case on the merits after conducting a pre-trial conference.Teehankee (Chairman), Makasiar, Fernandez, De Castro and Melencio- Herrera, JJ., concur.FIRST DIVISION[G.R. No. 58986. April 17, 1989.]DANTE Y. GO, petitioner, vs. HON. FERNANDO CRUZ, Judge, etc., CITY SHERIFF OF CALOOCAN CITY, and CALIFORNIA MANUFACTURING CO., INC., respondents.De Santos, Balgos & Perez for petitioner.Francisco N. Carreon, Jr. for respondents.SYLLABUS1.REMEDIAL LAW; DISMISSAL OF ACTIONS; ADDRESSED TO THE SOUND JUDGMENT AND DISCRETION OF THE COURT; EXCEPTION. The dismissal of civil actions is always addressed to the sound judgment and discretion of the court, whether dismissal is sought after a trial has been completed or otherwise, or whether it is prayed for by a defending party, or by a plaintiff or claimant. There is one instance however where the dismissal of an action rests exclusively on the will of a plaintiff or claimant, to prevent which the defending party and even the court itself is powerless, requiring in fact no action whatever on the part of the court except the acceptance and recording of the causative document. This is dealt with in Section 1, Rule 17 of the Rules of Court, which reads as follows: "SECTION 1. Dismissal by the plaintiff . An action may be dismissed by the plaintiff without order of court by filing a notice of dismissal at any time before service of the answer or of a motion for summary judgment. Unless otherwise stated in the notice, the dismissal is without prejudice, except that a notice operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in a competent court an action based on or including the same claim. A class suit shall not be dismissed or compromised without approval of the court."2.ID.; ACTIONS; PLAINTIFF'S ABSOLUTE RIGHT TO DISMISS LOST UPON SERVICE OF DEFENDANT'S ANSWER OR OF A MOTION FOR SUMMARY JUDGMENT. What marks the loss by a plaintiff of the right to cause dismissal of the action by mere notice is not the filing of the defendant's answer with the Court (either personally or by mail) but the service on the plaintiff of said answer or of a motion for summary judgment. This is the plain and explicit message of the Rules. "The filing of pleadings, appearances, motions, notices, orders and other papers with the court," according to Section 1, Rule 13 of the Rules of Court, means the delivery thereof to the clerk of the court either personally or by registered mail. Service, on the other hand, signifies delivery of the pleading or other paper to the parties affected thereby through their counsel of record, unless delivery to the party himself is ordered by the court, by any of the modes set forth in the Rules, i.e., by personal service, service by mail, or substituted service.D E C I S I O NNARVASA, J p:The dismissal of civil actions is always addressed to the sound judgment and discretion of the court; this, whether the dismissal is sought after a trial has been completed or otherwise, 1 or whether it is prayed for by a defending party, 2 or by a plaintiff or claimant. 3 There is one instance however where the dismissal of an action rests exclusively on the will of a plaintiff or claimant, to prevent which the defending party and even the court itself is powerless, requiring in fact no action whatever on the part of the court except the acceptance and recording of the causative document. This is dealt with in Section 1, Rule 17 of the Rules of Court, which reads as follows:SECTION 1.Dismissal by the plaintiff. An action may be dismissed by the plaintiff without order of court by filing a notice of dismissal at any time before service of the answer or of a motion for summary judgment. Unless otherwise stated in the notice, the dismissal is without prejudice, except that a notice operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in a competent court an action based on or including the same claim. A class suit shall not be dismissed or compromised without approval of the court.It is this provision with which the proceedings at bar are chiefly concerned.On October 26, 1981, California Manufacturing Co., Inc. (hereinafter, simply, California) brought an action in the Court of First Instance of Manila against Dante Go, accusing him of unfair competition. 4 The gravamen of California's complaint was that Dante Go, doing business under the name and style of "Sugarland International Products," and engaged like California in the manufacture of spaghetti, macaroni, and other pasta, was selling his products in the open market under the brand name, "Great Italian," in packages which were in colorable and deceitful imitation of California's containers bearing its own brand, "Royal." Its complaint contained an application for preliminary injunction commanding Dante Go to immediately cease and desist from the further manufacture, sale and distribution of said products, and to retrieve those already being offered for sale. 5 About two weeks later, however, or on November 12, 1981, California filed a notice of dismissal with the Court reading as follows: 6 COMES NOW the plaintiff in the above-entitled case, through undersigned counsel, and unto this Honorable Court most respectfully gives notice of dismissal without prejudice pursuant to Sec. 1, Rule 17 of the Rules of Court.WHEREFORE, it is respectfully prayed that the above-entitled case be considered dismissed without prejudice conformably with Sec. 1, Rule 17 of the Rules of Court.Four days afterwards, or on November 16, 1981, California received by registered mail a copy of Dante Go's answer with counterclaim dated November 6, 1981, which had been filed with the Court on November 9, 1981. 7 On November 19, 1981 a fire broke out at the Manila City Hall destroying among others the sala of Judge Tengco and the records of cases therein kept, including that filed by California against Dante Go. 8 On December 1, 1981, California filed another complaint asserting the same cause of action against Dante Go, this time with the Court of First Instance at Caloocan City. 9 This second suit was docketed as Civil Case No. C-9702 and was assigned to the branch presided over by Judge Fernando A. Cruz. cdllOn December 3, 1981, Judge Cruz issued an ex parte restraining order directing "the defendant . . . to immediately cease and desist from the further manufacture, sale, promotion and distribution of spaghetti, macaroni and other pasta products contained in packaging boxes and labels under the name `GREAT ITALIAN,' which are similar to or copies of those of the plaintiff, and . . . recall . . . all his spaghetti, macaroni and other pasta products using the brand, `GREAT ITALIAN.'" 10 On the day following the rendition of the restraining order, Dante Go filed the present petition for certiorari, etc. with this Court praying for its nullification and perpetual inhibition. On December 11, 1981, this Court, in turn, issued a writ of preliminary injunction restraining California, Judge Cruz and the City Sheriff from enforcing or implementing the restraining order of December 3, 1981, and from continuing with the hearing on the application for preliminary injunction in said Civil Case No. C-9702. The scope of the injunction was subsequently enlarged by this Court's Resolution of April 14, 1982 to include the City Fiscal of Manila, who was thereby restrained from proceeding with the case of unfair competition filed in his office by California against Dante Go. 11 Dante Go's thesis is that the case filed against him by California in the Manila Court remained pending despite California's notice of dismissal. According to him, since he had already filed his answer to the complaint before California sought dismissal of the action three (3) days afterwards, such dismissal was no longer a matter of right and could no longer be effected by mere notice in accordance with Section 1, Rule 17 of the Rules of Court, but only on plaintiff's motion, and by order of the Court; hence, the Caloocan Court acted without jurisdiction over the second action based on the same cause. He also accused California of forum shopping, of selecting a sympathetic court for a relief which it had failed to obtain from another. 12 The petitioner is in error. What marks the loss by a plaintiff of the right to cause dismissal of the action by mere notice is not the filing of the defendant's answer with the Court (either personally or by mail) but the service on the plaintiff of said answer or of a motion for summary judgment. This is the plain and explicit message of the Rules. 13 "The filing of pleadings, appearances, motions, notices, orders and other papers with the court," according to Section 1, Rule 13 of the Rules of Court, means the delivery thereof to the clerk of the court either personally or by registered mail. Service, on the other hand, signifies delivery of the pleading or other paper to the parties affected thereby through their counsel of record, unless delivery to the party himself is ordered by the court, 14 by any of the modes set forth in the Rules, i.e., by personal service, 15 service by mail, 16 or substituted service. 17 Here, California filed its notice of dismissal of its action in the Manila Court after the filing of Dante Go's answer but before service thereof. Thus having acted well within the letter and contemplation of the afore-quoted Section 1 of Rule 17 of the Rules of Court, its notice ipso facto brought about the dismissal of the action then pending in the Manila Court, without need of any order or other action by the Presiding Judge. The dismissal was effected without regard to whatever reasons or motives California might have had for bringing it about, and was, as the same Section 1, Rule 17 points out, "without prejudice," the contrary not being otherwise "stated in the notice" and it being the first time the action was being so dismissed. LLphilThere was therefore no legal obstacle to the institution of the second action in the Caloocan Court of First Instance based on the same claim. The filing of the complaint invested it with jurisdiction of the subject matter or nature of the action. In truth, and contrary to what petitioner Dante Go obviously believes, even if the first action were still pending in the Manila Court, this circumstance would not affect the jurisdiction of the Caloocan Court over the second suit. The pendency of the first action would merely give the defendant the right to move to dismiss the second action on the ground of auter action pendant, or litis pendentia. 18 WHEREFORE, the petition is DISMISSED, with costs against petitioner. The temporary restraining order of December 11, 1981, and the amendatory Resolution of April 14, 1982 are SET ASIDE.Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.THIRD DIVISION[G.R. No. L-43236. December 20, 1989.]OLYMPIA INTERNATIONAL, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, ALPHA INSURANCE & SURETY CO., INC., and JUDGE JOSE C. CAMPOS, JR., respondents.Gonzales & Chua Law Offices for petitioner.L.L. Reyes for respondents.SYLLABUS1.REMEDIAL LAW; CIVIL PROCEDURE; DISMISSAL OF ACTION WITHOUT PREJUDICE; DOES NOT HAVE THE EFFECT OF AN ADJUDICATION ON THE MERITS. It has been held that the dismissal of a case on motion of both parties as in the case at bar is a dismissal contemplated under Section 2, Rule 30 (now Rule 17) of the Rules of Court, which is a dismissal without prejudice and not a dismissal governed by Section 4 thereof, which operates as an adjudication on the merits. Similarly, it has been ruled that under certain attendant facts and circumstances, and the added fact that the trial on the merits had not as yet commenced, dismissal of the complaint is without prejudice and does not have the effect of adjudication on the merits. Precisely, the previous dismissal without prejudice was removed from the general rule that it should have the effect of an adjudication on the merits, since the lower court had provided otherwise and declared the dismissal to be without prejudice.2.ID.; ID.; ID.; IF COMPLETE IN DETAILS, HAS THE EFFECT OF A FINAL DISPOSITION OF THE COMPLAINT. The dismissal without prejudice of a complaint does not however mean that said dismissal order was any less final. Such Order of dismissal is complete in all details, and though without prejudice, nonetheless finally disposed of the matter. It was not merely an interlocutory order but a final disposition of the complaint.3.ID.; ID.; ID.; JURISDICTION OF THE TRIAL COURT LOST AFTER DISMISSAL ORDER HAS BECOME FINAL AND EXECUTORY. Upon the dismissal order attaining finality for failure of either party to appeal therefrom, the jurisdiction which the court had acquired thereon was finally discharged and terminated, and any subsequent action filed in accordance with the reservation cannot be considered a continuation of the first action which was dismissed. From the foregoing, it becomes apparent that the lower court -acted in excess of its jurisdiction when it granted the motion to revive the case filed by petitioner as plaintiff therein. By then (December 7, 1973), the dismissal order of December 15, 1972 had long become final and executory, thereby beyond the power of the court to amend, modify, reverse or set aside. And certainly, for the court to entertain and grant said motion to revive the case would result in the setting aside of the subject dismissal order.4.ID.; ID.; JUDGMENTS; MAY BE EXECUTED ON MOTION WITHIN FIVE (5) YEARS FROM THE DEATH OF ITS ENTRY OR DATE IT BECOME FINAL AND EXECUTORY. That the lower court retained jurisdiction to carry into effect its final and executory order of December 15, 1972 is beyond cavil for while Alpha's motion was filed three (3) years after the issuance of said dismissal order, the same may still be taken cognizance of by the lower court in accordance with Section 6, Rule 39 of the Rules of Court which states: Sec. 6. Execution by motion or by independent action. A judgment may be executed on motion within five (5) years from the date of its entry or from the date it becomes final and executory. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action.5.ID.; ID.; ID.; WRIT OF REPLEVIN; PROVISIONAL IN CHARACTER ITS EXISTENCE DEPENDS ON THE OUTCOME OF THE MAIN ACTION. Logic and equity demand that the writ of replevin be cancelled. Being provisional and ancillary in character, its existence and efficacy depended on the outcome of the case. The case having been dismissed, so must the writ's existence and efficacy be dissolved. To let the writ stand even after the dismissal of the case would be adjudging Olympia as the prevailing party, when precisely, no decision on the merits had been rendered. The case having been dismissed, it is as if no case was filed at all and the parties must revert to their status before the litigation.6.CIVIL LAW; PRESCRIPTION OF ACTIONS; PERIOD BEGINS TO RUN FROM THE DISMISSAL OF ACTION OR VOLUNTARY ABANDONMENT BY THE PLAINTIFF. It is important to note that the right to file a new action in this case has long prescribed, for while the commencement of a civil action stops the running of the statute of prescription or limitations, its dismissal or voluntary abandonment by the plaintiff leaves the parties in exactly the same position as though no action had been commenced at all. The commencement of an action, by reason of its dismissal or abandonment, takes no time out of the period of prescription.D E C I S I O NFERNAN, C.J p:Petitioner Olympia International, Inc. seeks a review of the Resolution dated January 22, 1976 of the Court of Appeals 1 dismissing its petition for certiorari as well as the Resolution dated February 19, 1976 denying its motion for reconsideration. prcdThe antecedent facts are undisputed:On various dates from November 1965 to March 1966, petitioner Olympia International, Inc. (hereinafter Olympia) sold several typewriters to private respondent Alpha Insurance & Surety, Co., Inc. (Alpha, for brevity). For alleged non-payment of the purchase price, Olympia instituted on July 7, 1966 two (2) actions against Alpha: Civil Case No. 15053 of the City Court of Manila and Civil Case No. 2757-P of the Court of First Instance of Pasay City, both replevin with damages but referring to different typewriters. LLphilIn Civil Case No. 2757-P, which is the root case of the petition at bar, Olympia alleged that of the total purchase price of P24,430.80 of the typewriters involved therein, only P5,500.00 had been paid by Alpha. It therefore prayed that the court issue an order for the seizure of the typewriters and their delivery to Olympia to protect its interest thereon and to confirm its ownership over said personal properties; that should delivery thereof be unavailing, that Alpha be ordered to pay Olympia the typewriters' actual value in the sum of P18,930.80; that the amounts deposited by Alpha be forfeited and considered as rents for the typewriters; and that Alpha be ordered to pay 12% interest per annum commencing from the date of payment indicated on each invoice until the unpaid amount is fully paid, plus attorney's fees of P4,425.20 and damages of P4,000.00.After Olympia had posted a bond in an amount twice the value of the typewriters involved and its assistant manager for credit and collection had filed an affidavit showing that Olympia was entitled to the ownership of the said typewriters, the lower court ordered on July 15, 1966 the issuance of a writ of replevin and directed the deputy sheriff of Pasay City to seize the personal properties involved and to retain the same in his custody "to be dealt with as prescribed in Rule 60 of the Rules of Court until further orders" from the court. 2 Consequently, the typewriters enumerated in said order were seized from Alpha and delivered to Olympia.In its answer to the complaint, Alpha alleged that since the invoices presented by Olympia in its application for a writ of replevin had not been signed by its authorized corporate officers, they were not reflective of the real terms and conditions of the sales. It prayed for the redelivery of the 24 typewriters seized and in addition, asked for the delivery of six (6) more units which Olympia had allegedly failed to deliver to it pursuant to the sale agreement embodied in its confirmatory letter dated October 29, 1965. As counterclaim, Alpha prayed for moral damages of P75,000.00, actual damages of P10,000.00 and attorney's fees of P5,000.00. Olympia thereafter filed its reply to said answer and its answer to the counterclaim. cdllUpon failure of the parties to reach an amicable settlement, the lower court set the case for trial on the merits. Olympia began presenting its evidence, and on May 17, 1971, it moved for the consolidation of Civil Case No. 2757-P with Civil Case No. 15053 of the City Court of Manila. The record is not clear as to whether the consolidation of said cases materialized.It appears on record, however, that on December 15, 1972, the lower court issued the following order:"On joint motion of both parties in the above-entitled case, that they will settle the case amicably out of court, this case is hereby dismissed without prejudice." 3 As negotiations for an amicable settlement again failed, Olympia filed a motion to revive the case for trial on the merits, acting upon which, the lower court in its order of December 7, 1973 provided:"On December 1, 1973, plaintiff through counsel filed a 'Motion to Revive Case.' It appearing from the records that the case was dismissed without prejudice on December 15, 1972 (almost a year ago) on joint motion of the parties and that the defendant has failed to comply with its commitment to arrive at an amicable settlement of the case, the motion is granted."Let the case be set for hearing on January 11, 1974 at 8:30 o'clock in the morning."SO ORDERED." 4 However, on January 16, 1974, the lower court issued another order stating:"On January 14, 1974, counsel for the defendant filed a 'Manifestation and Motion Ex-Parte' asking that this Court reconsider its previous order, dated December 7, 1973 reopening this case on the ground that the parties have previously filed a joint motion to dismiss the case and that the subject matter of this case is presently before the military authorities. It appearing that the plaintiff, in filing its motion for reopening the case, failed to mention this fact and that at the hearing in chambers on January 7, counsel for the plaintiff admitted the allegations of the defendant that the matter is now in the hands of the military."Wherefore, the previous Order, dated December 7, 1973 is lifted and set aside and that the Order of December 15, 1972 which dismissed the case is hereby reinstated and reiterated. As far as this Court is concerned, this case is dismissed with prejudice."SO ORDERED." 5 For more than one and a half years thereafter, neither of the parties filed a motion for reconsideration nor questioned the legality of said order in a higher court. Sometime in October, 1975, Alpha filed a motion in the lower court praying, on equitable grounds, for the cancellation of the "preliminary provisional writs of replevin" previously issued by the court "inasmuch as no judgment was even rendered in this case affirming plaintiffs right to its possession of the typewriters involved in this suit conformably to the provisions of Sec. 9, Rule 60 of the Rules of Court." It averred that the return of the typewriters was necessary "to afford the military administration of a freer hand in settling the controversy between the parties." 6 On November 7, 1975, the lower court issued an order reading:"At today's hearing, both parties were represented by counsel, who requested that the case be discussed in chambers. It appearing that there is no opposition to the motion and finding the reason for the motion to be well taken, the motion is granted."Wherefore, the preliminary provisional writs of replevin previously issued by this Court to enable plaintiff to obtain possession of defendant's personal property, subject matter of this suit, is (sic) hereby cancelled and set aside in view of the dismissal of this case, as per Order of January 16, 1974 which dismissal is with prejudice. The plaintiff is further ordered to return the aforesaid personal property belonging to the defendant, to the Military Management of Alpha Insurance & Surety Co."SO ORDERED." 7 Olympia moved for a reconsideration of said order on the grounds that the lower court had lost jurisdiction over the case and that the return of the typewriters to Alpha was tantamount to tolerance of its wrong-doing which the writ of replevin sought precisely to avoid. This was denied in an order dated December 5, 1975.Consequently, Olympia filed a petition for certiorari with the Court of Appeals, charging the lower court with lack of jurisdiction and abuse of discretion in issuing the order of November 7, 1975. In its resolution of January 22, 1976, the Court of Appeals dismissed the petition on the ground that manual delivery of personal property or replevin under Rule 60 being a provisional or ancillary remedy to the main action of recovery of personal property, the writ issued against Alpha was provisional and temporary. The appellate court opined that since Olympia allowed the dismissal with prejudice of the case, "its right to replevin died with the dismissal." And, as said dismissal was allowed by Olympia to become final, the trial judge could do no less than to order the redelivery of the typewriters otherwise he could be accused of "inconsistency and extralimitation of authority." 8 Its motion for reconsideration of said resolution having been denied, Olympia filed the instant petition for review on certiorari, alleging that:RESPONDENT JUDGE OF THE COURT OF FIRST INSTANCE OF RIZAL, SEVENTH JUDICIAL DISTRICT, PASAY CITY, BRANCH . . ., COMMITTED GRAVE ERROR OF JURISDICTION IN DISMISSING ON JANUARY 16, 1974 THE CIVIL SUITS FOR REPLEVIN WITH DAMAGES FILED BY PETITIONER AGAINST PRIVATE RESPONDENT, AND IN ISSUING THE SUBSEQUENT ORDER DATED NOVEMBER 7, 1975.RESPONDENT COURT OF APPEALS ERRED IN DENYING THE ORIGINAL PETITION FOR CERTIORARI FILED BY PETITIONER THRU COUNSEL ON JANUARY 15, 1976.BOTH THE RESPONDENT JUDGE AND THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ERROR IN OVERESPOUSING LEGAL TECHNICALITIES TO THE PREJUDICE AND IMPAIRMENT OF SUBSTANTIAL JUSTICE AND EQUITY. 9 Undoubtedly, this impasse is the result of the unorthodox proceedings in this case. The management by the military of the Fernando Jacinto group of companies, including Alpha, during the martial law years, deterred the lower court from judicially determining which of the contending companies was entitled to the ownership or possession of the typewriters. It allowed the military to take over the task of helping the parties settle their controversy extrajudicially. However, belatedly realizing that its military manager could not facilitate the redelivery of the typewriters seized from it through the writ of replevin, Alpha went back to court which issued the orders in question. CdprThe decisive factor in this controversy is the effect of the first dismissal of Civil Case No. 2757-P on December 15, 1972.Aside from the fact that the aforesaid dismissal was expressly reserved by the trial court to be without prejudice, it has been held that the dismissal of a case on motion of both parties as in the case at bar is a dismissal contemplated under Section 2, Rule 30 (now Rule 17) of the Rules of Court, which is a dismissal without prejudice and not a dismissal governed by Section 4 thereof, which operates as an adjudication on the merits. 10 Similarly, it has been ruled that under certain attendant facts and circumstances, and the added fact that the trial on the merits had not as yet commenced, dismissal of the complaint is without prejudice and does not have the effect of adjudication on the merits. 11 Precisely, the previous dismissal without prejudice was removed from the general rule that it should have the effect of an adjudication on the merits, since the lower court had provided otherwise and declared the dismissal to be without prejudice. 12 The dismissal without prejudice of a complaint does not however mean that said dismissal order was any less final. Such Order of dismissal is complete in all details, and though without prejudice, nonetheless finally disposed of the matter. 13 It was not merely an interlocutory order but a final disposition of the complaint. 14 Thus, upon said dismissal order attaining finality for failure of either party to appeal therefrom, the jurisdiction which the court had acquired thereon was finally discharged and terminated, and any subsequent action filed in accordance with the reservation cannot be considered a continuation of the first action which was dismissed. 15 From the foregoing, it becomes apparent that the lower court -acted in excess of its jurisdiction when it granted the motion to revive the case filed by petitioner as plaintiff therein. By then (December 7, 1973), the dismissal order of December 15, 1972 had long become final and executory, thereby beyond the power of the court to amend, modify, reverse or set aside. And certainly, for the court to entertain and grant said motion to revive the case would result in the setting aside of the subject dismissal order.Under the circumstances, the step available to petitioner as plaintiff therein if it wanted to pursue its claim against Alpha was to institute a new action in accordance with the reservation contained in the order of dismissal. It could not revive the dismissed case by motion or otherwise, as said dismissal, although without prejudice, had attained finality.By the same token did the lower court act in excess of its jurisdiction when it issued the Order of January 16, 1974 dismissing Civil Case No. 2757-P anew, but this time, with prejudice. The Order of January 16, 1974 had the same effect of reversing and setting aside the dismissal order of December 15, 1972, which as above-stated could no longer be done in view of its having become final and executory.But while the Order of December 7, 1973 which granted petitioner's motion to revive case and that of January 16, 1974 dismissing the case with prejudice are null and void for having been issued in excess of jurisdiction, the same cannot be said of the order dated January 22, 1976 which granted Alpha's motion to cancel the writ of replevin. The crucial difference lies on the fact that while the first two orders of December 7, 1973 and January 16, 1974 had the effect of reversing and setting aside the long final dismissal order of December 15, 1972, the Order of January 22, 1976 enforced and implemented it.In other words, the motion of Alpha to cancel the writ of replevin was in the nature and character of a motion for execution of the dismissal order of December 15, 1972. That the lower court retained jurisdiction to carry into effect its final and executory order of December 15, 1972 is beyond cavil for while Alpha's motion was filed three (3) years after the issuance of said dismissal order, the same may still be taken cognizance of by the lower court in accordance with Section 6, Rule 39 of the Rules of Court which states:Sec. 6.Execution by motion or by independent action. A judgment may be executed on motion within five (5) years from the date of its entry or from the date it becomes final and executory. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action.Indeed, logic and equity demand that the writ of replevin be cancelled. Being provisional and ancillary in character, its existence and efficacy depended on the outcome of the case. The case having been dismissed, so must the writ's existence and efficacy be dissolved. To let the writ stand even after the dismissal of the case would be adjudging Olympia as the prevailing party, when precisely, no decision on the merits had been rendered. The case having been dismissed, it is as if no case was filed at all and the parties must revert to their status before the litigation. llcdThe allegation of Olympia that to cancel the writ of replevin would result in Alpha's unjust enrichment does not persuade. Alpha has consistently denied liability to Olympia, and even assuming Alpha to be liable to Olympia, the latter, having failed to properly exercise its right of action against Alpha, must suffer the consequences thereof.It is equally important to note that the right to file a new action in this case has long prescribed, for while the commencement of a civil action stops the running of the statute of prescription or limitations, its dismissal or voluntary abandonment by the plaintiff leaves the parties in exactly the same position as though no action had been commenced at all. The commencement of an action, by reason of its dismissal or abandonment, takes no time out of the period of prescription. 16 WHEREFORE, the instant petition is hereby DENIED. Costs against petitioner.SO ORDERED.Gutierrez, Jr., Bidin and Corts, JJ., concur.Feliciano, J., is on leave.SECOND DIVISION[G.R. No. 101883. December 11, 1992.]SPOUSES LYDIA and VIRGILIO MELITON, * petitioners, vs. COURT OF APPEALS and NELIA A. ZIGA, represented by her Attorney-in-Fact RAMON A. AREJOLA, ** respondents.Adan Marcelo B. Botor for petitioner.SYLLABUS1.REMEDIAL LAW; COMPULSORY COUNTERCLAIM, TEST OF "COMPULSORINESS". Considering Section 4 of Rule 9 of the Rules of Court, a counterclaim is compulsory if (a) it arises out of, or is necessarily connected with, the transaction or occurrence which is the subject matter of the opposing party's claim; (b) it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and (c) the court has jurisdiction to entertain the claim. It has been postulated that while a number of criteria have been advanced for the determination of whether the counterclaim is compulsory or permissive, the "one compelling test of compulsoriness" is the logical relationship between the claim alleged in the complaint and that in the counterclaim, that is, where conducting separate trials of the respective claims of the parties would entail a substantial duplication of effort and time, as where they involve many of the same factual and/or legal issues.2.ID.; ID.; ID.; PHRASE "LOGICAL RELATIONSHIP," CONSTRUED. The phrase "logical relationship" is given meaning by the purpose of the rule which it was designed to implement. Thus, a counterclaim is logically related to the opposing party's claim where, as already stated, separate trials of each of their respective claims would involve a substantial duplication of effort and time by the parties and the courts. Where multiple claims involve many of the same factual issues, or where they are offshoots of the same basic controversy between the parties, fairness and considerations of convenience and of economy require that the counterclaimant be permitted to maintain his cause of action.3.ID.; ACTION FOR RECOVERY OF POSSESSION OF REAL PROPERTY SUBJECT MATTER OF COUNTERCLAIM IN CASE AT BAR. As we have ruled, in actions for ejectment or for recovery of possession of real property, it is well settled that the defendant's claims for the value of the improvements on the property or necessary expenses for its preservation are required to be interposed in the same action as compulsory counterclaims. In such cases, it is the refusal of the defendant to vacate or surrender possession of the premises that serves as the vital link in the chain of facts and events, and which constitutes the transaction upon which the plaintiff bases his cause of action. It is likewise an "important part of the transaction constituting the subject matter of the counterclaim" of defendant for the value of the improvements or the necessary expenses incurred for the preservation of the property. They are offshoots of the same basic controversy between the parties, that is, the right of either to the possession of the property.4.ID.; ID.; INSTANCES WHEN COUNTERCLAIM NOT SET UP SHALL BE BARRED UNDER SEC. 4, RULE 9, RULES OF COURT. It is indeed the rule, embodied in Section 4, Rule 9 of the Rules of Court, that a counterclaim not set up shall be barred if it arises out of or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.5.ID.; RES JUDICATA; REQUISITES. In order that a prior judgment will constitute a bar to a subsequent case, the following requisites must concur: (1) the judgment must be final; (2) the judgment must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) the judgment must be on the merits; and (4) there must be between the first and second actions, identity of parties, of subject matter, and of causes of action.6.ID.; DISMISSAL OF CASE WITHOUT PREJUDICE; EXPLAINED. The dismissal of the case without prejudice indicates the absence of a decision on the merits and leaves the parties free to litigate the matter in a subsequent action as though the dismissal action had not been commenced. The discontinuance of a case not on the merits does not bar another action on the same subject matter. Evidently, therefore, the prior dismissal of herein petitioners' counterclaims is not res judicata and will not bar the filing of another action based on the same causes of action.7.ID.; DISMISSAL OF ACTIONS AFTER FILING OF ANSWER; GOVERNING RULE. As laid down in Rule 17 of the Rules of Court, which is summarized as follows: An action shall not be dismissed at the request of the plaintiff after the service of the answer, except by order of the court and upon such terms and conditions as the court deems proper. The trial court has the judicial discretion in ruling on a motion to dismiss at the instance of the plaintiff. It has to decide whether the dismissal of the case should be allowed, and if so, on what terms and conditions.8.CIVIL LAW; ACTION FOR DAMAGES FOR VIOLATION OF LEASE AGREEMENT; CASE AT BAR. Specifically applicable in a lessor-lessee relationship is authorized in Article 1659 of the Civil Code which provides that: "Art. 1659. If the lessor or the lessee should not comply with the obligations set forth in articles 1654 and 1657, the aggrieved party may ask for the rescission of the contract and indemnification for damages, or only the latter, allowing the contract to remain in force." The act of private respondent in demolishing the structures introduced by petitioners on the property leased and the improvements therein during the existence of the lease contract is a clear violation by her, as lessor, of her obligation mandated by paragraph 3, Article 1654 of the Civil Code. The said violation gave rise to a cause of action for damages in favor of herein petitioners.9.REMEDIAL LAW; DISMISSAL OF COUNTERCLAIM FOR NON-PAYMENT OF DOCKET FEES; RULING IN MANCHESTER CASE APPLIES TO PERMISSIVE COUNTERCLAIMS ONLY. The court a quo dismissed petitioners' counterclaims for non-payment of docket fees pursuant to our then ruling in Manchester Development Corporation, et al., vs. Court of Appeals, et al., before its modification. The failure of petitioners to seek reconsideration of or to take an appeal from the order of dismissal of the counterclaim should not prejudice their right to file their claims in a separate action because they were thereby made to understand and believe that their counterclaims were merely permissive and could be the subject of a separate and independent action. Under the Rules, there is no need to pay docket fee for a compulsory counterclaim. The ruling in Manchester applies specifically to permissive counterclaims only, thereby excluding compulsory counterclaims from its purview, and that was the ruling of the court below to which the litigants therein submitted. Had the trial court correctly specified that petitioners' counterclaims were compulsory, petitioners could have objected to the dismissal sought by private respondent on the ground that said counterclaims could not remain pending for independent adjudication.10.ID.; RULES ON PROCEDURE; SHOULD BE LIBERALLY CONSTRUED TO THE END THAT NO PARTY SHOULD BE DEPRIVED OF HIS DAY IN COURT ON TECHNICALITIES. This, is one case where it is necessary to heed the injunction that the rules of procedure are not to be applied in a rigid and technical sense. After all, rules of procedure are used only to help secure substantial justice. They cannot be applied to prevent the achievement of that goal. Form cannot and should not prevail over substance. Absent a specific requirement for stringent application, the Rules of Court are to be liberally construed to the end that no party shall be deprived of his day in court on technicalities. The courts in our jurisdiction are tribunals both of law and equity. Hence, under the antecedents of this case, we are persuaded that even if only to approximate that desirable measure of justice we are sworn to dispense, this controversy should be resolved on the merits.D E C I S I O NREGALADO, J p:In its judgment in CA-G.R. No. 25091 1 promulgated on August 9, 1991, respondent Court of Appeals annulled and set aside the orders dated February 22, 1991 and March 18, 1991 of the Regional Trial Court of Naga City, Branch 27, in Civil Case No. RTC 89-1942 thereof and ordered the dismissal of petitioner's complaint filed therein, hence this appeal by certiorari.On June 22, 1988, private respondent Nelia Ziga, in her own behalf and as attorney-in-fact of Alex A. Ziga and Emma A. Ziga-Siy, filed a complaint, docketed as Civil Case No. RTC 88-1480 of the Regional Trial Court, Branch 27, Naga City, 2 against herein petitioner Lydia Meliton for rescission of a contract of lease over a parcel of land situated at Elias Angeles Street, Naga City. Alleged as grounds therefor were said petitioner's failure, as lessee, to deposit the one month rental and to pay the monthly rentals due; her construction of a concrete wall and roof on the site of a demolished house on the leased premises without the lessor's written consent; and her unauthorized sublease of the leased property to a third party. prLLOn July 29, 1988, petitioner Lydia Meliton filed an answer to the complaint denying the material averments thereof and setting up three counterclaims for recovery of the value of her kitchenette constructed on the leased parcel of land and which was demolished by private respondent, in the amount of P34,000.00; the value of the improvements introduced in the kitchenette to beautify it, in the amount of P10,000.00, plus the value of the furniture and fixtures purchased for use in the kitchenette in the amount of P23,000.00; and moral damages in the amount of P20,000.00 aside from attorney's fees of P50,000.00 and P250.00 per court appearance, with litigation expenses in the amount of P1,000.00. 3On May 29, 1989, the trial court, on motion of private respondent contending that her cause of action had already become moot and academic by the expiration of the lease contract on February 7, 1989, dismissed the complaint. The counterclaims of petitioner Lydia Meliton were also dismissed for non-payment of the docket fees, ergo the trial court's holding that thereby it had not acquired jurisdiction over the same. 4On December 6, 1989, petitioners Lydia Meliton and Virgilio Meliton filed a complaint against private respondent for recovery of the same amounts involved and alleged in their counterclaims in Civil Case No. RTC 88-1480, which complaint was docketed as Civil Case No. RTC 89-1942 5 and likewise assigned to Branch 27 of the same trial court.On February 15, 1991, private respondent filed a motion to dismiss the complaint on the ground that the cause of action therein was barred by prior judgment in Civil Case No. RTC 88-1480, the order of dismissal wherein was rendered on May 29, 1989. 6On February 22, 1991, the court below denied private respondent's motion to dismiss the complaint in Civil Case No. RTC 89-1942 on the ground that the dismissal of the petitioner's counterclaims in Civil Case No. RTC 88-1480 is not an adjudication on the merits as the court did not acquire jurisdiction over the counterclaims for failure of petitioner Lydia Meliton to pay the docket fees, hence the said dismissal does not constitute a bar to the filing of the later complaint. 7Private respondent's motion for reconsideration of the foregoing order was denied by the lower court for lack of merit in its order of March 18, 1991. 8 Dissatisfied therewith, private respondent file a petition for certiorari with this Court. In our resolution dated April 29, 1991, we referred this case to the Court of Appeals for proper determination and disposition pursuant to Section 9, paragraph 1 of B.P. Blg. 129, 9 where it was docketed as CA-G.R. SP No. 25093. In a decision promulgated on August 9, 1991, the Court of Appeals granted the petition, the pertinent part of which reads:xxx xxx xxx"The respondents' counterclaim against the petitioner in Civil Case No. RTC 88-1480 (Annex E, petition) is a compulsory counterclaim, it having (arisen) out of or being necessarily connected with the transaction or occurrence subject matter of the petitioner's complaint. The failure of the respondents to seek a reconsideration of the dismissal of their counterclaim or to take an appeal therefrom rendered the dismissal final. Such dismissal barred the prosecution of their counterclaim by another action (Section 4, Rule 9, Revised Rules of Court; Javier vs. IAC, 171 SCRA 605)."The respondent Court, therefore, in issuing the orders complained of (Annexes G and I, petition), gravely abused its discretion amounting to lack of jurisdiction."WHEREFORE, the petition for certiorari is GRANTED. Accordingly, the orders complained of (Annexes G and I, petition) are annulled and set aside and the respondents' complaint in Civil Case No. RTC 89-1942 before the respondent Court, DISMISSED. Costs against the respondents, except the respondent Court." 10Petitioners are now before us, assailing the said judgment of the Court of Appeals and praying for the annulment thereof.The present petition requires the resolution of two principal issues, to wit: (1) whether or not the counterclaims of petitioners are compulsory in nature; and (2) whether or not petitioners, having failed to seek reconsideration of or to take an appeal from the order of dismissal of their counterclaims, are already barred from asserting the same in another action.1.Considering Section 4 of Rule 9 of the Rules of Court, a counterclaim is compulsory if (a) it arises out of, or is necessarily connected with, the transaction or occurrence which is the subject matter of the opposing party's claim; (b) it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and (c) the court has jurisdiction to entertain the claim.It has been postulated that while a number of criteria have been advanced for the determination of whether the counterclaim is compulsory or permissive, the "one compelling test of compulsoriness" is the logical relationship between the claim alleged in the complaint and that in the counterclaim, that is, where conducting separate trials of the respective claims of the parties would entail a substantial duplication of effort and time, as where they involve many of the same factual and/or legal issues.The phrase "logical relationship" is given meaning by the purpose of the rule which it was designed to implement. Thus, a counterclaim is logically related to the opposing party's claim where, as already stated, separate trials of each of their respective claims would involve a substantial duplication of effort and time by the parties and the courts. Where multiple claims involve many of the same factual issues, or where they are offshoots of the same basic controversy between the parties, fairness and considerations of convenience and of economy require that the counterclaimant be permitted to maintain his cause of action. 11In the aforesaid Civil Case No. 88-1480, all the requisites of a compulsory counterclaim are present. The counterclaims, as this term is now broadly defined, are logically related to the complaint. Private respondent's complaint was for rescission of the contract of lease due to petitioner Lydia Meliton's breach of her obligations under the said contract. On the other hand, petitioner's counterclaims were for damages for unlawful demolition of the improvements she introduced pursuant to her leasehold occupancy of the premises, as well as for the filing of that civil suit which is contended to be clearly unfounded. LLphilBoth the claims therein of petitioners and private respondent arose from the same contract of lease. The rights and obligations of the parties, as well as their potential liability for damages, emanated from the same contractual relation. Petitioners' right to claim damages for the unlawful demolition of the improvements they introduced on the land was based on their right of possession under the contract of lease which is precisely the very same contract sought to be rescinded by private respondent in her complaint. The two actions are but the consequences of the reciprocal obligations imposed by law upon and assumed by the parties under their aforesaid lease contract. That contract of lease pleaded by private respondent constitutes the foundation and basis relied on by both parties for recovery of their respective claims.The relationship between petitioners' counterclaims and private respondent's complaint is substantially the same as that which exists between a complaint for recovery of land by the owner and the claim for improvements introduced therein by the possessor. As we have ruled, in actions for ejectment or for recovery of possession of real property, it is well settled that the defendant's claims for the value of the improvements on the property or necessary expenses for its preservation are required to be interposed in the same action as compulsory counterclaims. In such cases, it is the refusal of the defendant to vacate or surrender possession of the premises that serves as the vital link in the chain of facts and events, and which constitutes the transaction upon which the plaintiff bases his cause of action. It is likewise an "important part of the transaction constituting the subject matter of the counterclaim" of defendant for the value of the improvements or the necessary expenses incurred for the preservation of the property. They are offshoots of the same basic controversy between the parties, that is, the right of either to the possession of the property. 12On the foregoing considerations, respondent Court of Appeals correctly held that the counterclaims of petitioners are compulsory in nature.2.Petitioners having alleged compulsory counterclaims, the next point of inquiry is whether or not petitioners are already barred from asserting said claims in a separate suit, the same having being dismissed in the preceding one. The answer is in the negative.It is indeed the rule, embodied in Section 4, Rule 9 of the Rules of Court, that a counterclaim not set up shall be barred if it arises out of or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. However, said rule is not applicable to the case at bar.Contrary to the claim of private respondent, it cannot be said that herein petitioners failed to duly interpose their causes of action as counterclaims in the previous action. Petitioners' claims were duly set up as counterclaims in the prior case but the same were dismissed by reason of non-payment of docket fees. The ruling of respondent Court of Appeals to the effect that the failure of petitioners to appeal or to move for reconsideration of the said order of dismissal bars them from asserting their claims in another action cannot be upheld.Firstly, where a compulsory counterclaim is made the subject of a separate suit, it may be abated upon a plea of auter action pendant or litis pendentia and/or dismissed on the ground of res judicata, 13 depending on the stage or status of the other suit.Both defenses are unavailing to private respondents. The present action cannot be dismissed either on the ground of litis pendentia since there is no other pending action between the same parties and for the same cause, nor on the ground of res judicata.In order that a prior judgment will constitute a bar to a subsequent case, the following requisites must concur: (1) the judgment must be final; (2) the judgment must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) the judgment must be on the merits; and (4) there must be between the first and second actions, identity of parties, of subject matter, and of causes of action. 14The first case, Civil Case No. RTC 88-1480, was dismissed upon motion of private respondent, plaintiff therein, under Section 2 of Rule 17. Dismissal thereunder is without prejudice, except when otherwise stated in the motion to dismiss or when stated to be with prejudice in the order of the court. 15 The order of dismissal of the first case was unqualified, hence without prejudice and, therefore, does not have the effect of an adjudication on the merits. On a parity of rationale, the same rule should apply to a counterclaim duly interposed therein and which is likewise dismissed but not on the merits thereof. llcdMoreover, in the same order of dismissal of the complaint, the counterclaims of herein petitioners were dismissed by reason of the fact that the court a quo had not acquired jurisdiction over the same for non-payment of the docket fees. On that score, the said dismissal was also without prejudice, since a dismissal on the ground of lack of jurisdiction does not constitute res judicata, 16 there having been no consideration and adjudication of the case on the merits.The dismissal of the case without prejudice indicates the absence of a decision on the merits and leaves the parties free to litigate the matter in a subsequent action as though the dismissal action had not been commenced. 17 The discontinuance of a case not on the merits does not bar another action on the same subject matter. 18 Evidently, therefore, the prior dismissal of herein petitioners' counterclaims is not res judicata and will not bar the filing of another action based on the same causes of action.Secondly, a reading of the order of dismissal will show that the trial court, in dismissing the complaint of private respondent, did not intend to prejudice the claims of petitioners by barring the subsequent judicial enforcement thereof. As stated therein, "(t)he court in dismissing the counterclaim(s) has taken into account the fact that a counterclaim partakes of the nature of a complaint and/or a cause of action against the plaintiffs." 19 This is a clear indication, deducible by necessary implication, that the lower court was aware of the fact that petitioners could avail of the causes of action in said counterclaims in a subsequent independent suit based thereon and that there was no legal obstacle thereto. That this was the import and intendment of that statement in its order dismissing petitioners' counterclaims in Civil Case No. RTC 88-1480 was categorically confirmed by the very same court, wherein Civil Case No. RTC 89-1942 was also subsequently filed, in its assailed orders denying private respondent's motion to dismiss the latter case on the ground of res judicata.This is also concordant with the rule governing dismissal of actions by the plaintiff after the answer has been served as laid down in Rule 17 of the Rules of Court, which is summarized as follows: An action shall not be dismissed at the request of the plaintiff after the service of the answer, except by order of the court and upon such terms and conditions as the court deems proper. The trial court has the judicial discretion in ruling on a motion to dismiss at the instance of the plaintiff. It has to decide whether the dismissal of the case should be allowed, and if so, on what terms and conditions. 20In dismissing private respondent's complaint, the trial court could not but have reserved to petitioners, as a condition for such dismissal, the right to maintain a separate action for damages. Petitioners' claims for damages in the three counterclaims interposed in said case, although in the nature of compulsory counterclaims but in light of the aforesaid reservation in the dismissal order, are consequently independent causes of action which can be the subject of a separate action against private respondent.An action for damages specifically applicable in a lessor-lessee relationship is authorized in Article 1659 of the Civil Code which provides that:"ARTICLE 1659.If the lessor or the lessee should not comply with the obligations set forth in articles 1654 and 1657, the aggrieved party may ask for the rescission of the contract and indemnification for damages, or only the latter, allowing the contract to remain in force."Paragraph 3 of Article 1654 of the same Code requires that the lessor must "maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract." 21 The aggrieved party has the alternative remedies, in case of contractual breach, of rescission with damages, or for damages only "allowing the contract to remain in force."The act of private respondent in demolishing the structures introduced by petitioners on the property leased and the improvements therein during the existence of the lease contract is a clear violation by her, as lessor, of her obligation mandated by paragraph 3, Article 1654 of the Civil Code. The said violation gave rise to a cause of action for damages in favor of herein petitioners.Lastly, even assuming arguendo that the bar under the rule on compulsory counterclaims may be invoked, the peculiar circumstances of this case irresistibly and justifiedly warrant the relaxation of such rule.The court a quo dismissed petitioners' counterclaims for non-payment of docket fees pursuant to our then ruling in Manchester Development Corporation, et al., vs. Court of Appeals, et al., 22 before its modification. The failure of petitioners to seek reconsideration of or to take an appeal from the order of dismissal of the counterclaim should not prejudice their right to file their claims in a separate action because they were thereby made to understand and believe that their counterclaims were merely permissive and could be the subject of a separate and independent action. Under the Rules, there is no need to pay docket fee for a compulsory counterclaim. 23 The ruling in Manchester applies specifically to permissive counterclaims only, thereby excluding compulsory counterclaims from its purview, 24 and that was the ruling of the court below to which the litigants therein submitted. Had the trial court correctly specified that petitioners' counterclaims were compulsory, petitioners could have objected to the dismissal sought by private respondent on the ground that said counterclaims could not remain pending for independent adjudication. 25Furthermore, under the Manchester doctrine, the defect cannot be cured by an amendment of the complaint or similar pleadings, much less the payment of the docket fee. Hence, the only remedy left for the petitioners was to file a separate action for their claims and to pay the prescribed docket fees therein within the applicable and reglementary period, which is what they did in the case at bar in obedience and deference to the judicial mandate laid down in their case. At any rate, the ambivalent positions adopted by the lower court can be considered cured by what we have construed as effectively a reservation in its order of dismissal for the filing of a complaint based on the causes of action in the dismissed counterclaims. LLjurThis, then, is one case where it is necessary to heed the injunction that the rules of procedure are not to be applied in a rigid and technical sense. After all, rules of procedure are used only to help secure substantial justice. They cannot be applied to prevent the achievement of that goal. Form cannot and should not prevail over substance. 26 Absent a specific requirement for stringent application, the Rules of Court are to be liberally construed to the end that no party shall be deprived of his day in court on technicalities. The courts in our jurisdiction are tribunals both of law and equity. Hence, under the antecedents of this case, we are persuaded that even if only to approximate that desirable measure of justice we are sworn to dispense, this controversy should be resolved on the merits.WHEREFORE, the questioned judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE. Civil Case No. RTC 89-1942 is hereby REINSTATED and the Regional Trial Court of Naga City, Branch 27, or wherever the case has been assigned, is directed to proceed with deliberate dispatch in the adjudication thereof.SO ORDERED.Narvasa, C .J . , Feliciano, Nocon, and Campos, JJ ., concur.EN BANC[G.R. No. 105751. June 30, 1993.]BA FINANCE CORPORATION, petitioner, vs. RUFINO CO, HIGHLINE MERCANTILE, INC., LUCITA VELOSO YAP, CLOVERLEAF SUPERMARKET, INC., SAN ANDRES COMMERCIAL and COURT OF APPEALS, respondents.Agbayani, Leal, Ebarle & Venturanza Law Office for petitioner.Angara, Abello, Concepcion, Regala & Cruz Law Office for respondent.SYLLABUS1.REMEDIAL LAW; CIVIL PROCEDURE; COUNTERCLAIM; "COMPULSORY" IN CASE AT BAR. The counterclaim of private respondents is not merely permissive but compulsory in nature: it arises out of, or is necessarily connected with, the transaction or occurrence that is the subject matter of the opposing party's claim; it does not require the presence of third parties of whom the court cannot acquire jurisdiction; and, the trial court has jurisdiction to entertain the claim. The counterclaim of private respondents is denominated "compulsory" and consists of claims for alleged overpayments and damages. They assert that they are no longer indebted to petitioner and are in fact entitled to reimbursement for overpayments. They ask for damages for expenses incurred and inconveniences suffered by them as a result of the filing of the present action. Clearly, the same evidence needed to sustain the counterclaim of private respondents would also refute the cause of action in petitioner's complaint. For, if private respondents could successfully show that they actually made overpayments on the credit accommodations extended by petitioner, then the complaint must fail. The counterclaim is therefore compulsory.2.ID.; ID.; COMPULSORY COUNTERCLAIM; AUXILIARY TO ORIGINAL SUIT; EFFECT THEREIN. The rule is that a compulsory counterclaim cannot "remain pending for independent adjudication by the court." This is because a compulsory counterclaim is auxiliary to the proceeding in the original suit and merely derives its jurisdictional support therefrom. Thus, it necessarily follows that if the trial court no longer possesses jurisdiction to entertain the main action of the case, as when it dismisses the same, then the compulsory counterclaim being ancillary to the principal controversy, must likewise be similarly dismissed since no jurisdiction remains for the grant of any relief under the counterclaim.3.ID.; ID.; DISMISSAL OF ACTIONS; REMEDY TO RECOVER COUNTERCLAIM. We are not unaware of the seeming unfairness, if not harshness, of the application of the Rule herein enunciated that dismissal of the complaint for failure to prosecute automatically carries with it dismissal of the compulsory counterclaim to a defendant who may be compelled to hire counsel to protect him in a frivolous complaint. Equity and justice dictate that he be accorded adequate relief under the circumstances. Henceforth, for the guidance of Bench and Bar, if any of the grounds to dismiss under Sec. 3, Rule 17, of the Rules of Court arises, the proper recourse for a defendant who desires to pursue his compulsory counterclaim in the same proceeding is not to move for the dismissal of the complaint; instead, he should only move to have plaintiff declared non-suited on the complaint so that the latter can no longer present his evidence thereon, and simultaneously move that he be declared as in default on the compulsory counterclaim, and reserve the right to present evidence ex parte on his counterclaim. This will enable defendant who was unjustly haled to court to prove his compulsory counterclaim, which is intertwined with the complaint, because the trial court retains jurisdiction over the complaint and of the whole case. The non-dismissal of the complaint, the non-suit notwithstanding, provides the basis for the compulsory counterclaim to remain active and subsisting.4.ID.; ID.; ID.; ID.; NOT EXERCISED IN CASE AT BAR. The Rules of Court provides a remedy to recover on defendant's counterclaim if plaintiff moves to dismiss the case. Under Sec. 2, Rule 17, defendant may raise objection to the dismissal of the complaint; in such case, the trial court may not dismiss the main action. In the instant petition, private respondents themselves moved for the dismissal of the complaint. They could have simply asked the trial court to declare petitioners to be "non-suited" on their complaint, and "as in default" on their compulsory counterclaim, for their failure to appear at the pre-trial despite due notice. But private respondents did not. Neither did they reserve their right to maintain their counterclaim. Consequently, the dismissal of the complaint carried with it the dismissal of the compulsory counterclaim.D E C I S I O NBELLOSILLO, J p:Does the dismissal of the complaint for nonappearance of plaintiff at the pre-trial, upon motion of defendants, carry with it the dismissal of their compulsory counterclaim?Petitioner BA Finance Corporation brought this action as plaintiff in the court below to recover a sum of money arising from a credit accommodation in the form of a discounting line which it granted to defendant Rufino Co, and from certain suretyship agreements executed in its favor by his co-defendants Highline Mercantile, Inc., Lucita Veloso Yap, Cloverleaf Supermarket, Inc., and San Andres Commercial.After defendants' Amended Answer to Complaint with Compulsory Counterclaim was admitted, the case was set for Pre-Trial Conference. For various reasons, however, the conference was repeatedly reset. On 19 December 1989, counsel for plaintiff, petitioner herein, failed to attend the Pre-Trial Conference. Consequently, defendants moved for dismissal of the case without prejudice. The motion was granted thus "The plaintiff's representative and counsel having failed to appear for today's setting, Atty. Luis Vera Cruz, Jr., for the defendants moved that the above-entitled case be dismissed, without prejudice. Finding merit in said motion, the same is hereby granted."On 22 January 1990, private respondents moved to set the reception of their evidence in support of their counterclaim. Petitioner opposed the motion.On 2 April 1990, the trial court denied the motion of private respondents, prompting them to elevate the order of denial to the Court of Appeals which, on 18 December 1991, reversed the questioned order and directed the trial court to set the reception of their evidence on their counterclaim. Its motion for reconsideration having on 2 June 1992 been denied, petitioner instituted the instant petition.Petitioner contends that the dismissal of the complaint carries with it the dismissal of the counterclaim. Private respondents, on the other hand, claim that their compulsory counterclaim should not have been included in the dismissal.There is merit in the petition.The counterclaim of private respondents is not merely permissive but compulsory in nature: it arises out of, or is necessarily connected with, the transaction or occurrence that is the subject matter of the opposing party's claim; it does not require the presence of third parties of whom the court cannot acquire jurisdiction; and, the trial court has jurisdiction to entertain the claim. 1 The counterclaim of private respondents is denominated "compulsory" and consists of claims for alleged overpayments and damages. They assert that they are no longer indebted to petitioner and are in fact entitled to reimbursement for overpayments. They ask for damages for expenses incurred and inconveniences suffered by them as a result of the filing of the present action. 2 Clearly, the same evidence needed to sustain the counterclaim of private respondents would also refute the cause of action in petitioner's complaint. For, if private respondents could successfully show that they actually made overpayments on the credit accommodations extended by petitioner, then the complaint must fail. The counterclaim is therefore compulsory. LLphilThe rule is that a compulsory counterclaim cannot "remain pending for independent adjudication by the court." 3 This is because a compulsory counterclaim is auxiliary to the proceeding in the original suit and merely derives its jurisdictional support therefrom. 4 Thus, it necessarily follows that if the trial court no longer possesses jurisdiction to entertain the main action of the case, as when it dismisses the same, then the compulsory counterclaim being ancillary to the principal controversy, must likewise be similarly dismissed since no jurisdiction remains for the grant of any relief under the counterclaim. 5 Indeed, as Justice Vicente Abad Santos succinctly puts it ". . . The petitioner does not object to the dismissal of the civil case but nonetheless wants her counterclaim therein to subsist. Impossible. A person cannot eat his cake and have it at the same time. If the civil case is dismissed, so also is the counterclaim filed therein." 6 More recently, this Court ruled that the dismissal of the complaint on defendant's own motion operated likewise to dismiss the counterclaim questioning the complaint. 7 The Rules of Court provides a remedy to recover on defendant's counterclaim if plaintiff moves to dismiss the case. Under Sec. 2, Rule 17, defendant may raise objection to the dismissal of the complaint; in such case, the trial court may not dismiss the main action.In the instant petition, private respondents themselves moved for the dismissal of the complaint. They could have simply asked the trial court to declare petitioners to be "non-suited" on their complaint, and "as in default" on their compulsory counterclaim, for their failure to appear at the pre-trial despite due notice. But private respondents did not. Neither did they reserve their right to maintain their counterclaim. Consequently, the dismissal of the complaint carried with it the dismissal of the compulsory counterclaim.It may also be stressed that private respondents moved to set for hearing the reception of evidence to support their counte