G.R. No. 234999 - Heirs of Sanchez vs. Abrantes

Two separate complaints were filed concerning the same disputed property located in Poblacion, Butuan City, Agusan del Norte.
The first complaint was filed on March 19, 2002 (Civil Case No. 5204, RTC Branch 5) by Horacio C. Abrantes against the heirs of Bartolome J. Sanchez, Jr., seeking the declaration of nullity of a deed executing an absolute sale, among other reliefs.
Shortly thereafter, Horacio’s heirs sought dismissal because of a change in interest following Horacio’s death on April 27, 2003.
Horacio’s counsel, Atty. Patrick Battad, moved for the dismissal of the first complaint on the ground that Horacio’s heirs were no longer interested in pursuing the case.
On August 13, 2004, RTC Branch 5 issued a First Dismissal Order dismissing the first complaint on the basis that the plaintiffs were no longer interested—that is, a dismissal reflecting lack of prosecution.

More than four years after Horacio’s death, his heirs, along with Mae Abrantes Rhoades and Maria Louella Abrantes Torres, filed a second complaint in Civil Case No. 5806 before RTC Branch 3.
The second complaint reiterated the same subject matter—the nullification of the sale executed by the now-deceased Horacio in favor of Bartolome—and involved substantially the same parties and causes of action as in the first complaint.
RTC Branch 3 dismissed the second complaint through a Second Dismissal Order dated October 20, 2014, relying on the doctrine of res judicata by equating the dismissal to a failure to prosecute (analogous to Section 3, Rule 17).

On April 21, 2017, the CA rendered a decision affirming the Second Dismissal Order, but on the ground of litis pendentia rather than res judicata.
In its reasoning, the CA found that:

The dismissal of the first complaint was based on hearsay information provided by Atty. Battad—who no longer had authority after Horacio’s death—and his failure to comply with the substitution rule under Section 16, Rule 3.
The RTC Branch 5 should have insisted on the proper substitution of parties following Horacio’s demise, and its failure to do so rendered the dismissal void, converting it into a case of litis pendentia.

Petitioners contended that the first dismissal was an adjudication on the merits due to failure to prosecute, which would bar the second complaint on the grounds of res judicata.

Petitioners (heirs of Bartolome J. Sanchez, represented by Edna N. Vda. de Sanchez) elevated the issue to the Supreme Court via a petition for review on certiorari under Rule 45.
They argued that:

The CA erred in declaring the first dismissal order null due to the alleged violation of procedural due process.
The dismissals should be characterized as adjudications on the merits because of failure to prosecute, which would bar the subsequent filing of the second complaint.

Respondents, the Abrantes parties, maintained that proper due process was observed by their implicit ratification of prior counsel’s actions by filing the second complaint.

The controversy centered on the application of the substitution rule upon the death of a party and the impact of hearsay evidence in effecting a motion to dismiss.
The case raised important questions regarding:

The finality and nature (merits versus without prejudice) of the dismissal order rendered by RTC Branch 5.
Whether the dismissal amounted to an adjudication on the merits that would preclude subsequent litigation on the same subject matter.

Whether the Court of Appeals committed reversible error by declaring the First Dismissal Order as a patent nullity based on the alleged violation of the substitution rule and due process requirements.

Did Atty. Battad’s unauthorized motion for dismissal after Horacio’s death, and the ensuing failure to formally substitute a legal representative, warrant nullification of the dismissal order?
Was there a violation of the due process rights of Horacio’s heirs with regard to proper notification and substitution?

Whether the CA gravely erred in dismissing the Second Complaint on the ground of litis pendentia.

Given that the First Dismissal Order was rendered valid and final, does the doctrine of litis pendentia properly bar the second action?
Did the characterization of the First Dismissal Order as a nullity (and the consequent pendency of the first complaint) improperly apply the doctrines of res judicata and litis pendentia?