G.R. No. 174109 , December 24, 2008
Rural Bank of the Seven Lakes (S.P.C.), Inc. vs. Belen A. Dan

FACTS

Respondent Belen A. Dan was employed by petitioner Rural Bank of the Seven Lakes (RBSL), rising to the position of bank manager. In 1998, RBSL discovered Dan had engaged in unsound banking practices, including granting loans to herself and relatives. After investigation, RBSL revoked her appointment as bank manager. On March 4, 1999, Dan filed a petition (SEC Case No. 03-99-6229) before the Securities and Exchange Commission (SEC) seeking nullification of her preventive suspension and termination, and payment of backwages and damages. During the pendency of this SEC case, Dan filed a separate action for damages (Civil Case SP No. 5734-2000) before the Regional Trial Court (RTC) based on the same wrongful termination. The RTC dismissed the civil case on grounds of forum shopping. Meanwhile, in the SEC case, Dan’s counsel failed to appear at scheduled hearings on November 3, 1999, and later moved for cancellation of the November 29, 1999 hearing. The SEC Hearing Officer reset the hearing to December 6, 1999, with a stern warning against further postponement. Dan’s counsel again failed to appear on December 6, 1999, prompting the SEC Hearing Officer to dismiss the case for failure to prosecute. The SEC en banc affirmed the dismissal. Dan appealed to the Court of Appeals, which reversed the SEC en banc, prioritizing substantial justice over technicalities and ordering the SEC to allow Dan to present evidence. RBSL filed this Petition for Review.

ISSUE

1. Whether Dan violated the rule against forum shopping by filing SEC Case No. 03-99-6229 and Civil Case SP No. 5734-2000.
2. Whether the Court of Appeals erred in relaxing the requirement of verification for appeals before the SEC en banc.
3. Whether the Court of Appeals erred in disregarding Dan’s failure to prosecute her case before the SEC.

RULING

1. Yes, Dan violated the rule against forum shopping. The elements of litis pendentia are present: identity of parties (Dan and RBSL); identity of rights asserted and reliefs prayed for (both cases sought relief based on the alleged wrongful termination of Dan’s employment); and identity of facts such that a judgment in one would constitute res judicata in the other. Dan’s filing of two cases based on the same cause of action constitutes forum shopping, a deplorable practice that abuses court processes.
2. The Court of Appeals erred in relaxing the verification requirement. Verification is a mandatory requirement for appeals before the SEC en banc under Section 2, Rule II of the 1999 SEC Rules of Procedure. Non-compliance is a sufficient ground for the dismissal of the appeal. The rules of procedure must be followed except only for the most persuasive of reasons, which Dan failed to show.
3. The Court of Appeals erred in disregarding Dan’s failure to prosecute. Dan’s counsel repeatedly failed to appear at scheduled hearings despite warnings. The SEC Hearing Officer acted within his discretion in dismissing the case for failure to prosecute. Rules of procedure are not to be belittled or dismissed simply because their non-observance may have resulted in prejudice to a party’s substantive rights. The Court of Appeals’ reversal based solely on equity, without finding that the SEC committed grave abuse of discretion, was erroneous.
DISPOSITIVE:
The Petition is GRANTED. The Decision of the Court of Appeals dated October 21, 2002, and its Resolution dated August 7, 2006, are REVERSED and SET ASIDE. The Decision of the Securities and Exchange Commission en banc dated May 9, 2000, affirming the dismissal of SEC Case No. 03-99-6229, is REINSTATED.