Rule 2-3

Remedial Law Review (September 15)

1. Sante v. Hon. Claravall, G.R. No. 173915, February 22, 2010

Topic: Main Cause of Action; Totality of Claim Rule

Short facts: Before this Court is a petition for certiorari under Rule 65 filed by
petitioners assailing the Decision of CA. The assailed decision affirmed the orders of the
RTC denying their motion to dismiss the complaint for damages filed by RESP. CA
affirmed RTC wherein it was held that the total or aggregate amount demanded in the
complaint constitutes the basis of jurisdiction. CA did not find merit in petitioners’
posture that the claims for exemplary damages and attorney’s fees are merely
incidental to the main cause and should not be included in the computation of the total
claim.
Facts:
RESP filed before the RTC a complaint for damages against PET Sante. RESP alleged
that while she was inside the Police Station in the presence of other persons and police
officers, PET Sante uttered words, which when translated in English are as follows,
"How many rounds of sex did you have last night with your boss, Bert? You fuckin’
bitch!" Bert refers to Albert Gacusan, respondent’s friend and one (1) of her hired
personal security guards detained at the said station and who is a suspect in the killing
of petitioners’ close relative.
RESP prayed that PET be held liable to pay moral damages in the amount of ₱300k;
₱50,000.00 as exemplary damages; ₱50,000.00 attorney’s fees; ₱20,000.00 litigation
expenses; and costs of suit.
PET filed a Motion to Dismiss on the ground that it was the MTCC and not the RTC, that
had jurisdiction over the case. They argued that the amount of the claim for moral
damages was not more than the jurisdictional amount of ₱300k, because the claim for
exemplary damages should be excluded in computing the total claim.
The trial court denied the motion to dismiss on the ground that the amount of demand
P420k was above the jurisdictional amount for MTCC’s outside Metro Manila.
PET filed for Petition for Certiorari and Prohibition before the CA. Meanwhile RESP filed
an Amended Complaint increasing the claim for moral damages to from 300k to
₱1million. PET filed a Motion to Dismiss which was denied.
PET again filed a Petition for Certiorari and Prohibition before the CA, raising that RTC
committed grave abuse of discretion in allowing the amendment complaint.
CA ruled in favor of PET stating that MTCC had jurisdiction as the allegations show that
plaintiff was seeking to recover moral damages in the amount of ₱300k, which amount
was well within the jurisdictional amount of the MTCC. Moreover, the totality of claim
rule used for determining which court had jurisdiction could not be applied to the instant
case because plaintiff’s claim for exemplary damages was not a separate and distinct
cause of action from her claim of moral damages, but merely incidental to it. Thus, the
prayer for exemplary damages should be excluded in computing the total amount of the
claim.
CA affirmed RTC wherein it was held that the total or aggregate amount demanded in
the complaint constitutes the basis of jurisdiction. CA did not find merit in petitioners’
posture that the claims for exemplary damages and attorney’s fees are merely
incidental to the main cause and should not be included in the computation of the total
claim.
CA additionally ruled that RESP can amend her complaint by increasing the amount of
moral damages from ₱300kto ₱1M on the ground that the trial court has jurisdiction
over the original complaint and respondent is entitled to amend her complaint as a
matter of right under the Rules.

Hence this petition for certiorari.

Issues:

1) Did the RTC acquire jurisdiction over the case?

2) Did the RTC commit grave abuse of discretion in allowing the amendment of the
complaint?

 Held:

PET’s contention: The claim for moral damages P300k in the original complaint is the
main action. The exemplary damages being discretionary should not be included in the
computation of the jurisdictional amount. And having no jurisdiction over the subject
matter of the case, the RTC acted with grave abuse of discretion when it allowed the
amendment of the complaint to increase the claim for moral damages in order to confer
jurisdiction.

RESP’s contention: the nature of her complaint is for recovery of damages. As such,
the totality of the claim for damages, including the exemplary damages as well as the
other damages such as attorney's fees and litigation expenses, should be included in
determining jurisdiction. The total claim being P420,000.00, the RTC has jurisdiction
over the complaint.

Court denied the petition, which although denominated as a petition for certiorari, it
treated as a petition for review on certiorari under Rule 45 in view of the issues raised.

Section 19(8) of BP 129,  as amended by RA No. 7691, states:

SEC. 19. Jurisdiction in civil cases. - RTC shall exercise exclusive original
jurisdiction:
(8) In all other cases in which the demand, exclusive of interest, damages
of whatever kind, attorney's fees, litigation expenses, and costs or the
value of the property in controversy exceeds One hundred thousand
pesos (P100,000.00) or, in such other cases in Metro Manila, where the
 demand, exclusive of the abovementioned items exceeds Two hundred
thousand pesos (P200,000.00).

But where damages is the main cause of action, should the amount of moral damages
prayed for in the complaint be the sole basis for determining which court has jurisdiction
or should the total amount of all the damages claimed regardless of kind and nature,
such as exemplary damages, nominal damages, and attorney's fees, etc., be used?

The exclusion of the term "damages of whatever kind" in determining the jurisdictional
amount under Section 19 (8) and Section 33 (1) of B.P. Blg. 129, as amended by R.A.
No. 7691, applies to cases where the damages are merely incidental to or a
consequence of the main cause of action. However, in cases where the claim for
damages is the main cause of action, or one of the causes of action, the
amount of such claim shall be considered in determining the jurisdiction of the
court. 

jurisdiction is conferred by law based on the facts alleged in the complaint since the
latter comprises a concise statement of the ultimate facts constituting the plaintiff's
causes of action. It is clear, based on the allegations of the complaint, that
respondent's main action is for damages. Hence, the other forms of damages being
claimed by respondent, e.g., exemplary damages, attorney's fees and litigation
expenses, are not merely incidental to or consequences of the main action but
constitute the primary relief prayed for in the complaint.

claim for damages is the main cause of action, or one of the causes of action, the
amount of such claim shall be considered in determining the jurisdiction of the
court. In the said case, the respondent's claim of P929,000.06 in damages and
P25,000 attorney's fees plus P500 per court appearance was held to represent the
monetary equivalent for compensation of the alleged injury. The Court therein held
that the total amount of monetary claims including the claims for damages was the
basis to determine the jurisdictional amount

Also, in Iniego v. Purganan, the Court has held: The amount of damages claimed is
within the jurisdiction of the RTC, since it is the claim for all kinds of damages that is the
basis of determining the jurisdiction of courts, whether the claims for damages arise
from the same or from different causes of action.
Considering that the total amount of damages claimed was P420k, the Court of Appeals
was correct in ruling that the RTC had jurisdiction over the case.
While it is a basic jurisprudential principle that an amendment cannot be allowed
when the court has no jurisdiction over the original complaint and the purpose of
the amendment is to confer jurisdiction on the court, here, the RTC clearly had
jurisdiction over the original complaint and amendment of the complaint was then still a
matter of right. Petition is DENIED, for lack of merit. CA decision is AFFIRMED. 

2. Samson vs. Spouses Gabor, et al., G.R. No. 182970, July 23, 2014

TOPIC: Identity of cause of action

Facts: Respondent spouses Jose and Guillermina Gabor are the registered owners of a
parcel of land situated at Barrio Mapunso, Tanay, Rizal. Spouses Gabor executed a
Deed of Assignment transferring undivided portion of the parcel of land in favor of
petitioner Emiliano S. Samson as attorney’s fees in payment for the services rendered
by the latter for the former.

Petitioner Samson executed a Deed of Assignment transferring the same undivided

portion in favor of Ma. Remedios P. Ramos. Upon learning of the sale, respondent
spouses filed an action for legal redemption with the RTC of Tanay, Rizal. Immediately
thereafter, petitioner Samson and Ramos executed an Agreement of Rescission
revoking the transfer of the undivided portion. RTC dismissed the suit for legal
redemption. CA reversed the decision of the RTC and upheld that spouses Gabor has
the right of legal redemption.  During the pendency of the case, petitioner Samson filed
an action for Partition of Real Property and Damages against respondent spouses with
the RTC of Morong, Rizal, which dismissed the same on the ground that the finality of
the case effectively barred the action for partition. CA upheld the decision of the RTC.
Petitioner Samson then appealed to this Court via petition for review on certiorari,but
the same was dismissed.
Samson filed a Complaint before the RTC of Pasig City for Recovery of Property or its
Value against respondent spouses, Tanay Rural Bank, Inc., and the Register of Deeds
of Morong, Rizal, claiming that he had been paying his one-third (1/3) share of realty
taxes covering the subject portion of land for the years 2002 to 2004. In 2005, however,
his payment was rejected by the Municipal Treasurer of Tanay, Rizal, at such time he
discovered that respondent spouses had already mortgaged the entire property in favor
of respondent Bank back in November 2002.
It is undisputed that there exists an identity of the parties and subject matter between
the prior action for partition and the instant subsequent action for recovery of property,
the same being filed by petitioner against the same spouses Gabor over the same
portion of land in Tanay, Rizal. The fact that respondents Bank and Register of Deeds
were only impleaded in the subsequent case is of no moment since absolute identity of
parties is not required; mere substantial identity of parties, or a community of interests
between the party in the first case and the party in the subsequent case, shall suffice.
Petitioner, however, contends that the causes of action in both cases differ inasmuch as
in the prior case, the cause of action is partition while in the case at hand, the cause of
action is the recovery of property or its value.
 ISSUE: Whether there is an identity of causes of action in the two cases?
Held: Yes.  Apropos, Carlet v. Court of Appeals states that:
As regards identity of causes of action, the test often used in determining whether
causes of action are identical is to ascertain whether the same evidence which is
necessary to sustain the second action would have been sufficient to authorize a
recovery in the first, even if the forms or nature of the two actions be different. If the
same facts or evidence would sustain both actions, the two actions are considered the
same within the rule that the judgment in the former is a bar to the subsequent action;
otherwise, it is not.
Applying the above guideline to the instant case, while the two cases are captioned
differently, petitioner cannot claim that there is no res judicata by simply changing the
title of the action from "Complaint for Partition of Real Property and Damages" to a
"Complaint for Recovery of Property or its Value." The records clearly reveal that the
evidence submitted by the parties in both cases are identical. Petitioner, in claiming that
he had either the right to partition or to recover the subject property, submitted the same
Deed of Assignment transferring in his favor the subject property as payment for his
legal services as well as the same Agreement of Rescission of his earlier transfer of the
subject property to Ms. Ramos. As previously mentioned, all of his claims in both
actions are actually anchored on his claim of ownership over the one-third (1/3) portion
of the subject property. If it be proven that he is not a co-owner of the subject portion, he
will neither have the right to partition in the prior action nor will he have the right to
recover the subject property or its value in the subsequent action. Hence, the ultimate
question which the trial court had to resolve in both cases was whether or not petitioner
is a co-owner of the subject property.

3. Heirs of Marcelo Sotto, et al. vs. Matilde Palicte G.R. No. 159691, February 17,
2014

Topic: Remedial Law; Cause of action

Facts: In the 2013 decision of this case by the Supreme Court, the Court directed Atty
Mahinay, counsel of the Petitioners, to show cause why he should not be sanctioned for
committing forum shopping. The Court expressed their alarm that this case is the fifth
suit to reach the Court dividing the several heirs of the late Don Filemon Y. Sotto
(Filemon) respecting four real properties that had belonged to Filemon’s estate (Estate
of Sotto). In the previous four cases filed, Matilde Palicte, one of the declared heirs of
Filemon, had validly redeemed the four properties in question and was entitled to have
title thereof.

On July 22, 2013, Atty. Mahinay submitted a so–called Compliance (With Humble
Motion for Reconsideration) containing his explanations, praying that he not be
sanctioned for violating the rule against forum shopping, on the ground that the first
three cases did not resolve the issues raised in the fifth case and that Marcelo Sotto's
cause of action arose only when respondent Palicte violated her "hypothetically
admitted" agreement with Marcelo Sotto.

Atty. Mahinay maintains that the fifth case filed was based on the agreement between
Palicte and Marcelo Sotto. To establish the agreement between Palicte and Marcelo
Sotto, Atty. Mahinay cites Palicte’s filing of a motion to dismiss, on the ground, among
others, of the complaint failing to state a cause of action whereby Palicte “hypothetically
admitted” the complaint’s averment of the agreement. He submits that a constructive
trust between Palicte and the Estate was thereby created

Issue: Whether or not a cause of action may arise on a violation of hypothetically

admitted agreement

Ruling: No. Atty. Mahinay’s reliance on Palicte’s hypothetical admission of her

agreement with Marcelo Sotto to buttress his explanation here is unjustified. Such
hypothetical admission is only for the purpose of resolving the merits of the ground of
insufficiency of the complaint

The test of the sufficiency of the statement of the cause of action is whether or not,
accepting the veracity of the facts alleged, the court could render a valid judgment
upon the same in accordance with the prayer of the complaint. Even so, the filing of the
motion to dismiss assailing the sufficiency of the complaint does not hypothetically
admit allegations of which the court will take judicial notice of to be not true, nor does
the rule of hypothetical admission apply to legally impossible facts, or to facts
inadmissible in evidence, or to facts that appear to be unfounded by record or document
included in the pleadings.

For the ground to be effective, the insufficiency of the complaint must appear on the
face of the complaint, and nowhere else. It will be unfair to the plaintiff, indeed, to
determine the sufficiency of his cause of action from facts outside of those
pleaded in the complaint.

To stress, the admission of the veracity of the facts alleged in the complaint, being only
hypothetical, does not extend beyond the resolution of the motion to dismiss, because a
defending party may effectively traverse the factual averments of the complaint or
other initiatory pleading only through the authorized responsive pleadings like
the answer. Clearly, Atty. Mahinay cannot bind Palicte to her hypothetical
admission of the agreement between her and Marcelo Sotto as the Administrator
of the Estate.

4. Chu v. Spouses Cunanan, G.R. No. 156185, September 12, 2011

RELEVANT PROVISION

If two or more suits are instituted on the basis of the same cause of action, the filing of
one or a judgment upon the merits in any one is available as a ground for the dismissal
of the others.1

FACTS

Spouses Manuel and Catalina Chu (Chus) executed a deed of sale with assumption of
mortgage3 involving their five parcels of land in favor of Trinidad N. Cunanan (Cunanan)
for the consideration of₱5,161,090.00. They also executed side agreement, whereby
they clarified that Cunanan had paid only ₱1,000,000.00 to the Chus despite the Chus,
as vendors, having acknowledged receiving ₱5,161,090.00.
Thereafter, the Chus executed a special power of attorney authorizing Cunanan to
borrow ₱5,161,090.00 from any banking institution and to mortgage the five lots as
security, and then to deliver the proceeds to the Chus net of the balance of the
mortgage obligation and the downpayment. Cunanan was able to transfer the title of the
five lots to her name without the knowledge of the Chus, and to borrow money with the
lots as security without paying the balance of the purchase price to the Chus. She later
transferred two of the lots to Spouses Amado and Gloria Carlos (Carloses). As a result,
Chus caused the annotation of an unpaid vendor’s lien on three of the lots.
Nonetheless, Cunanan still assigned the remaining three lots to Cool Town Realty
despite the annotation.

In February 1988, the Chus commenced Civil Case No. G-1936 in the RTC to recover
the unpaid balance from Spouses Fernando and Trinidad Cunanan (Cunanans). Five
years later, Chus amended the complaint to seek the annulment of the deed of sale with
assumption of mortgage and of the TCTs issued pursuant to the deed, and to recover
damages. They impleaded (Cool Town Realty), and the Office of the Registry of Deeds
of Pampanga as defendants in addition to the Cunanans.

Considering that the Carloses had meanwhile sold the two lots to (Benelda Estate), the
Chus further amended the complaint in Civil Case No. G-1936 to implead Benelda
Estate as additional defendant. In due course, Benelda Estate filed its answer with a
motion to dismiss, claiming, among others, that the amended complaint stated no cause
of action because it had acted in good faith in buying the affected lots, exerting all
efforts to verify the authenticity of the titles, and had found no defect in them. After the
RTC denied its motion to dismiss, Benelda Estate assailed the denial on certiorari in the
CA, which annulled the RTC’s denial for being tainted with grave abuse of discretion
and dismissed Civil Case No. G-1936 as against Benelda Estate. upheld the dismissal
of Civil Case No. G-1936 in G.R. No. 142313 entitled Chu, Sr. v. Benelda Estate
Development Corporation.8

Chus, the Cunanans, and Cool Town Realty entered into a compromise agreement,
whereby the Cunanans transferred to the Chus their 50% share in "all the parcels of
land situated in Saguin, San Fernando, Pampanga" registered in the name of Cool
Town Realty "for and in consideration of the full settlement of their case." The RTC
approved the compromise agreement.

Thereafter, petitioners herein (i.e., Catalina Chu and her children) brought another suit,
Civil Case No. 12251, against the Carloses and Benelda Estate, 11 seeking the
cancellation of the TCTs of the two lots in the name of Benelda Estate, and the
issuance of new TCTs in their favor, plus damages. The petitioners amended their
complaint to implead the Cunanans as additional defendants.

The Cunanans moved to dismiss the amended complaint based on two grounds,
namely: (a) bar by prior judgment, and (b) the claim or demand had been paid, waived,
and abandoned. Benelda Estate likewise moved to dismiss the amended complaint,
citing as grounds: (a) forum shopping; (b) bar by prior judgment, and (c) failure to state
a cause of action. On their part, the Carloses raised affirmative defenses in their
answer, namely: (a) the failure to state a cause of action; (b) res judicata or bar by prior
judgment; and (c) bar by statute of limitations.

RTC denied both motions to dismiss. CA grant the petition for certiorari and nullifying
the challenged orders of the RTC. The CA ruled that the compromise agreement had
ended the legal controversy between the parties with respect to the cause of action
arising from the deed of sale with assumption of mortgage covering all the five parcels
of land; that Civil Case No. G-1936 and Civil Case No.12251 involved the violation by
the Cunanans of the same legal right under the deed of sale with assumption of
mortgage; and that the filing of Civil Case No.12251 contravened the rule against
splitting of a cause of action, and rendered Civil Case No.12251 subject of a motion to
dismiss based on bar by res judicata.

ISSUE

Was Civil Case No. 12251 barred by res judicata although the compromise agreement
did not expressly include Benelda Estate as a party and although the compromise
agreement made no reference to the lots now registered in Benelda Estate’s name?

WON filing of Civil Case No.12251 contravened the rule against splitting of a cause of
action

RULING

The petitioners contend that the compromise agreement did not apply or extend to the
Carloses and Benelda Estate; hence, their Civil Case No. 12251 was not barred by res
judicata.

We disagree.

A compromise agreement is a contract whereby the parties, by making reciprocal

concessions, avoid a litigation or put an end to one already commenced.

The following pertinent portions of the compromise agreement indicate that the parties
intended to thereby settle all their claims against each other.

The intent of the parties to settle all their claims against each other is expressed in the
phrase any and all their respective claims against each other as alleged in the pleadings
they respectively filed in connection with this case, which was broad enough to cover
whatever claims the petitioners might assert based on the deed of sale with assumption
of mortgage.

There is no question that the deed of sale with assumption of mortgage covered all the
five lots.To limit the compromise agreement only to the three lots mentioned therein
would contravene the avowed objective of Civil Case No. G-1936 to enforce or to
rescind the entire deed of sale with assumption of mortgage. Such interpretation is akin
to saying that the Cunanans separately sold the five lots, which is not the truth. For one,
Civil Case No. G-1936 did not demand separate amounts for each of the purchased
lots. Also, the compromise agreement did not state that the value being thereby
transferred to the petitioners by the Cunanans corresponded only to that of the three
lots.

Apparently, the petitioners were guilty of splitting their single cause of action to
enforce or rescind the deed of sale with assumption of mortgage. Splitting a
single cause of action is the act of dividing a single or indivisible cause of action
into several parts or claims and instituting two or more actions upon them.26 A
single cause of action or entire claim or demand cannot be split up or divided in
order to be made the subject of two or more different actions.27 Thus, Section 4,
Rule 2 of the Rules of Court expressly prohibits splitting of a single cause of
action, viz:

Section 4. Splitting a single cause of action; effect of. — If two or more suits are
instituted on the basis of the same cause of action, the filing of one or a judgment
upon the merits in any one is available as a ground for the dismissal of the
others. (4a)

The petitioners were not at liberty to split their demand to enforce or rescind the
deed of sale with assumption of mortgage and to prosecute piecemeal or present
only a portion of the grounds upon which a special relief was sought under the
deed of sale with assumption of mortgage, and then to leave the rest to be
presented in another suit; otherwise, there would be no end to litigation. 28 Their
splitting violated the policy against multiplicity of suits, whose primary objective
was to avoid unduly burdening the dockets of the courts. Their contravention of
the policy merited the dismissal of Civil Case No. 12251 on the ground of bar by
res judicata.

Yet, in order that res judicata may bar the institution of a subsequent action, the
following requisites must concur:– (a) the former judgment must be final; (b) it must
have been rendered by a court having jurisdiction of the subject matter and the parties;
(c) it must be a judgment on the merits; and (d) there must be between the first and
second actions (i) identity of parties, (ii) identity of the subject matter, and (iii) identity of
cause of action.

The first requisite was attendant. Civil Case No. G-1936 was already terminated under
the compromise agreement, for the judgment, being upon a compromise, was
immediately final and unappealable. As to the second requisite, the RTC had jurisdiction
over the cause of action in Civil Case No. G-1936 for the enforcement or rescission of
the deed of sale with assumption of mortgage, which was an action whose subject
matter was not capable of pecuniary estimation. That the compromise agreement
explicitly settled the entirety of Civil Case No. G-1936 by resolving all the claims of the
parties against each other indicated that the third requisite was also satisfied. 34

But was there an identity of parties, of subject matter, and of causes of action between
Civil Case No.G-1936 and Civil Case No. 12251?
There is identity of parties when the parties in both actions are the same, or there is
privity between them, or they are successors-in-interest by title subsequent to the
commencement of the action litigating for the same thing and under the same title and
in the same capacity.35 The requirement of the identity of parties was fully met, because
the Chus, on the one hand, and the Cunanans, on the other hand, were the parties in
both cases along with their respective privies. The fact that the Carloses and Benelda
Estate, defendants in Civil Case No. 12251, were not parties in the compromise
agreement was inconsequential, for they were also the privies of the Cunanans as
transferees and successors-in-interest. It is settled that the absolute identity of parties
was not a condition sine qua non for res judicata to apply, because a shared identity of
interest sufficed. Mere substantial identity of parties, or even community of interests
between parties in the prior and subsequent cases, even if the latter were not
impleaded in the first case, was sufficient.

As to identity of the subject matter, both actions dealt with the properties involved in the
deed of sale with assumption of mortgage. Identity of the causes of action was also met,
because Case No. G-1936 and Civil Case No. 12251 were rooted in one and the same
cause of action – the failure of Cunanan to pay in full the purchase price of the five lots
subject of the deed of sale with assumption of mortgage. In other words, Civil Case No.
12251 reprised Civil Case No. G-1936, the only difference between them being that the
petitioners alleged in the former that Benelda Estate was "not also a purchaser for value
and in good faith."

In fine, the rights and obligations of the parties vis-à-vis the five lots were all
defined and governed by the deed of sale with assumption of mortgage, the only
contract between them. That contract was single and indivisible, as far as they
were concerned. Consequently, the Chus could not properly proceed against the
respondents in Civil Case No. 12251, despite the silence of the compromise
agreement as to the Carloses and Benelda Estate, because there can only be one
action where the contract is entire, and the breach total, and the petitioners must
therein recover all their claims and damages. The Chus could not be permitted to
split up a single cause of action and make that single cause of action the basis of
several suits.

5. YAP V CA GR NO. 186730 JUNE 13 2012

Facts:

Yap filed a complaint against Chua and Te [c1] with RTC Makati for the cancellation and
discharge of several checks that he drew against his account in BPI. Thereafter, Chua
also filed with RTC Gen San [c2] a complaint for sum of money against Yap and his
wife, Bessie.

RTC General Santos rendered its decision in favour of Yap. Thereafter, Chua moved for
the dismissal of [c1] on the grounds of litis pendentia and forum shopping. Chua averred
that Yap committed forum shopping when he failed to inform RTC Makati of [c2].
RTC Makati refused to dismiss the case. Upon RTC’s denial of Chua’s Motion for
reconsideration, Chua filed a petition for certiorari before the CA. CA ordered the
dismissal of [c1].

Issue: Did the CA err when it dismissed [c1]?

Held: No. The Court agrees with the CA that all the elements of litis pendencia are
present.

The first requisite of litis pendentia is present as there is identity of parties. The second
and third requisites are likewise present. Apart from the fact that the same factual
antecedents prompted the filing of the two cases, that Yaps defense in [c1] constitutes
his cause of action in [c2] necessarily implies reliance on the same evidence for the
resolution of both cases.

Yap filed his complaint for the annulment of the checks he issued to Chua after he was
adjudged by the RTC of General Santos City liable. a. This strikes the Court as
indicative of his deliberate and willful attempt to render nugatory and defeat the adverse
decision of the RTC of General Santos City and relieve himself of his obligation to pay
by having the checks he issued annulled, albeit the remedy of appeal was available and
which he, in fact, resorted to. b. Chuas complaint is anchored on the amounts Yap
received from her and the RTC of General Santos City decided in her favor on the
strength of the checks that Yap issued and endorsed to her. c. By seeking to cancel or
discharge such checks, Yap attempted to use the RTC of Makati City to destroy the
evidentiary foundation of the decision of the RTC of General Santos City. d. In doing so,
Yap trifled with court processes and exposed the courts to the possibility of rendering
conflicting decisions. Worse, Yap sought to accomplish the prohibited - a court
reversing a decision rendered by a court of co-equal rank.

Notes:

1. The requisites of litis pendentia are: a. the identity of parties, or at least such as
representing the same interests in both actions; b. the identity of rights asserted and
relief prayed for, the relief being founded on the same facts; and c. the identity of the
two cases such that judgment in one, regardless of which party is successful, would
amount to res judicata in the other.

2. Identity of causes of action does not mean absolute identity; otherwise, a party could
easily escape the operation of res judicata by changing the form of the action or the
relief sought.

3. The test to determine whether the causes of action are identical is to ascertain
whether the same evidence will sustain both actions, or whether there is an identity in
the facts essential to the maintenance of the two actions.

a. If the same facts or evidence would sustain both, the two actions are considered the
same, and a judgment in the first case is a bar to the subsequent action.
b. Hence, a party cannot, by varying the form of action or adopting a different method of
presenting his case, escape the operation of the principle that one and the same cause
of action shall not be twice litigated between the same parties or their privies.

4. Among the several tests resorted to in ascertaining whether two suits relate to a
single or common cause of action are:

a. whether the same evidence would support and sustain both the first and second
causes of action; and

b. whether the defenses in one case may be used to substantiate the complaint in the
other.

c. Also fundamental is the test of determining whether the cause of action in the second
case existed at the time of the filing of the first complaint.

6. Pamplona Plantation Co., Inc. v. Tinghil, G.R. No. 159121, February 3, 2005

Subject matter : joinder of indispensable party

FACTS: [Petitioner] Pamplona Plantations Company, Inc. (company for brevity) was
organized for the purpose of taking over the operations of the coconut and sugar
plantation of Hacienda Pamplona located in Pamplona, Negros Oriental.

When the company took over the operation of Hacienda Pamplona in 1993, it did not
absorb all the workers of Hacienda Pamplona. Some, however, were hired by the
company during harvest season as coconut hookers or 'sakador,' coconut filers,
coconut haulers, coconut scoopers or 'lugiteros,' and charcoal makers.

Sometime in 1995, Pamplona Plantation Leisure Corporation was established for the
purpose of engaging in the business of operating tourist resorts, hotels, and inns, with
complementary facilities, such as restaurants, bars, boutiques, service shops,
entertainment, golf courses, tennis courts, and other land and aquatic sports and leisure
facilities.

Later, the Pamplona Plantation Labor Independent Union (PAPLIU) conducted an

organizational meeting wherein several [respondents] who are either union members or
officers participated in said meeting.

Upon learning that some of the [respondents] attended the said meeting, [Petitioner]
Jose Luis Bondoc, manager of the company, did not allow [respondents] to work
anymore in the plantation.

Thereafter, on various dates, [respondents] filed their respective complaints with the
NLRC, Sub-Regional Arbitration Branch No. VII, Dumaguete City against [petitioners]
for unfair labor practice, illegal dismissal, underpayment, overtime pay, premium pay for
rest day and holidays, service incentive leave pay, damages, attorney's fees and 13th
month pay.
On 09 October 1997, [respondent] Carlito Tinghil amended his complaint to implead
Pamplona Plantation Leisure Corporation.

On 31 August 1998, Labor Arbiter Jose G. Gutierrez rendered a decision finding

[respondents, to be entitled to separation pay.

[Petitioners] appealed the Labor Arbiter's decision to [the] NLRC. In the assailed
decision dated 19 July 2000, the NLRC's Fourth Division reversed the Labor Arbiter,
ruling that [respondents], except Carlito Tinghil, failed to implead Pamplona Plantation
Leisure Corporation, an indispensable party and that 'there exist no employer-employee
relation between the parties.' (dismissed by NLRC)

On appeal, the appellate court also held that respondents were regular employees,
because the tasks they performed were necessary and indispensable to the operation
of the company. Since there was no compliance with the twin requirements of a valid
and/or authorized cause and of procedural due process, their dismissal was illegal.

ISSUE RELATED

Whether the action should have been dismissed for non-joinder of the Pamplona
Plantation Leisure corporation

(note: Pamplona plantation co. is different from Pamplona plantation Leisure

corporation. the latter being organized and tasked to develop and to engaged in
business of operating tourist destination in the same land owned by Pamplona
Plantation Company)

HELD

Non-Joinder of Parties

Granting for the sake of argument that the Pamplona Plantation Leisure Corporation is
an indispensable party that should be impleaded, NLRC's outright dismissal of the
Complaints was still erroneous.

The non-joinder of indispensable parties is not a ground for the dismissal of an action.
At any stage of a judicial proceeding and/or at such times as are just, parties may be
added on the motion of a party or on the initiative of the tribunal concerned. If the
plaintiff refuses to implead an indispensable party despite the order of the court, that
court may dismiss the complaint for the plaintiff's failure to comply with the order. The
remedy is to implead the non-party claimed to be indispensable. In this case, the NLRC
did not require respondents to implead the Pamplona Plantation Leisure Corporation as
respondent; instead, the Commission summarily dismissed the Complaints.

In any event, there is no need to implead the leisure corporation because, insofar as
respondents are concerned, the leisure corporation and petitioner-company are one and
the same entity. Salvador v. Court of Appeals has held that this Court has "full powers,
apart from that power and authority which is inherent, to amend the processes,
pleadings, proceedings and decisions by substituting as party-plaintiff the real party-in-
interest."

7. Pantranco North Express, Inc. v. Standard Insurance Co., Inc., G.R. No. 140746,
March 16, 2005 

DOCTRINE/S:

Totality Rule in B.P. Blg. 129, Section 33: "Where there are several claims or causes
of action between the same or different parties, embodied in the same complaint, the
amount of the demand shall be the totality of the claims in all the causes of action ,
irrespective of whether the causes of action arose out of the same or different
transactions."
Test to Determine Identity of Cause of Action: To determine identity of cause of
action, it must be ascertained whether the same evidence which is necessary to sustain
the second cause of action would have been sufficient to authorize a recovery in the
first.
FACTS: 
This is a petition for review on certiorari filed by herein petitioners via Rule 45 of
the Rules of Court assailing the decisions of the Court of Appeals and the Regional Trial
Court Nueva Ecija. The case at bar is basically a vehicle mishap along the National
Highway of Talavera, Nueva Ecija. 
In one afternoon of the year 1984, a passenger jeepney driven by Crispin Gicale,
owned by his mother Martina Gicale, herein respondent was rear ended on the left side
by Alexander Buncan, the driver of the passenger bus at the time of the incident.
Pantranco North Express Inc. is the owner and operator of the said bus. Standard
Insurance Company Inc. is the insurance company who partially paid the damage dealt
to the jeepney caused by the accident. Respondents SIC and Martina after reporting the
incident to Talavera Police Station and paid the repair costs, demanded reimbursement
from herein petitioners but the latter refused. As a result, respondents went to the RTC
and filed a suit for collection of a sum of money. 
As embodied from the answer of the petitioners, they specifically denied the
allegations in the complaint and averred that the jurisdiction belongs to the
Metropolitan Trial Court and not with the Regional Trial Court. Further, they
averred that there was a case of misjoinder of parties, misjoinder of causes of
action and that they were denied of their constitutional right to due process. In essence,
of all these averments, they respectfully ask from the court that, with these reasons at
hand, these are clear grounds which would warrant the dismissal of the case. 
The RTC rendered its decision and favored on the side of SIC and Martina. The
case was elevated to the Court of Appeals (CA) but the CA merely affirmed the earlier
decision of the trial court. A motion for reconsideration before the CA was likewise filed
but met the same fate.
Hence, the petition before us for resolution. 
ISSUE/S:  

1. Whether or not there it was the RTC which has jurisdiction over the case;

2. Whether or not there was misjoinder of parties and assuming there is, is it
sufficient to be a ground for dismissal of the case?;

3. Whether or not the petitioners were denied their constitutional right to due
process?
RULING: 
Yes, it is the RTC who has jurisdiction over the case. 
“The Respondent Standard’s claim is P8,000.00, while that of respondent
Martina Gicale is P13,415.00, or a total of P21,415.00. Section 19 of B.P. Blg. 129
provides that the RTC has "exclusive original jurisdiction over all other cases, in which
the demand, exclusive of interest and cost or the value of the property in controversy,
amounts to more than twenty thousand pesos (P20,000.00).” 
Clearly, it is the RTC which has jurisdiction over the instant case. It bears
emphasis that when the complaint was filed, R.A. 7691 expanding the jurisdiction of
the Metropolitan, Municipal and Municipal Circuit Trial Courts had not yet taken
effect. It became effective on April 15, 1994.
There was no misjoinder of parties in the case at bar. As a rule, misjoinder of
parties is not a ground for the dismissal of an action.
 Permissive joinder of parties requires that: (a) the right to relief arises out of
the same transaction or series of transactions; (b) there is a question of law or
fact common to all the plaintiffs or defendants; and (c) such joinder is not
otherwise proscribed by the provisions of the Rules on jurisdiction and venue. 
 In this case, there is a single transaction common to all, that is, Pantranco’s
bus hitting the rear side of the jeepney. There is also a common question of fact, that
is, whether petitioners are negligent. There being a single transaction common to both
respondents, consequently, they have the same cause of action against petitioners.
To determine identity of cause of action, it must be ascertained whether the
same evidence which is necessary to sustain the second cause of action would
have been sufficient to authorize a recovery in the first. Here, had respondents filed
separate suits against petitioners, the same evidence would have been presented to
sustain the same cause of action. Thus, the filing by both respondents of the complaint
with the court below is in order. Such joinder of parties avoids multiplicity of suit
and ensures the convenient, speedy and orderly administration of justice.
No, there is no denial of due process on the part of the petitioners .
The High Court aptly said in this wise:
 “We have consistently held that the essence of due process is simply an
opportunity to be heard, or an opportunity to explain one’s side or an opportunity
to seek for a reconsideration of the action or ruling complained of.”
Petitioner, Pantranco filed an answer and participated during the trial and
presentation of respondents’ evidence. It was apprised of the notices of hearing
issued by the trial court. Indeed, it was afforded fair and reasonable opportunity to
explain its side of the controversy.
 Clearly, it was not denied of its right to due process. What is frowned upon is
the absolute lack of notice and hearing which is not present here.
 

8. Salvador vs. Patricia, Inc., G.R. No. 195834, November 9, 2016

Doctrine: Jurisdiction over a real action is determined based on the allegations in the
complaint of the assessed value of the property involved. The silence of the complaint
on such value is ground to dismiss the action for lack of jurisdiction because the trial
court is not given the basis for making the determination.

FACTS:

This is an action for injunction and quieting of title to determine who owns the property
occupied by the plaintiffs and intervenor, Ciriano C. Mijares. Additionally, to prevent the
defendant Patricia Inc. from evicting the plaintiffs from their respective improvements
along Juan Luna Street, plaintiffs applied for a preliminary injunction in their Complaint
pending the quieting of title on the merits. A Complaint-in-Intervention was filed by the
City of Manila as owner of the land occupied by the plaintiffs. A preliminary injunction
was granted and served on all the defendants. Based on the allegations of the parties
involved, the main issue to be resolved is whether the improvements of the plaintiffs
stand on land that belongs to Patricia Inc., or the City of Manila. Who owns the same?
Is it covered by a Certificate of Title? Since the Transfer Certificates of Title of both
Patricia Inc. and the City of Manila are admitted as genuine, the question now is on the
boundaries based on the description in the respective titles.

 On May 30, 2005, the RTC rendered judgment in favor of the petitioners and against
Patricia, Inc., permanently enjoining the latter from doing any act that would evict the
former from their respective premises, and from collecting any rentals from them. 

On appeal, the CA reversed the RTC's judgment, and dismissed the complaint. The CA
declared that the petitioners were without the necessary interest, either legal or
equitable title, to maintain a suit for quieting of title; castigated the RTC for acting like a
mere rubber stamp of the majority of the commissioners; opined that the RTC should
have conducted hearings on the reports of the commissioners; ruled as highly improper
the adjudication of the boundary dispute in an action for quieting of title. 
ISSUE:

Whether or not the petitioners had the sufficient interest to bring the suit for quieting of
title

HELD:

No. The joinder of the action for injunction and the action to quiet title was disallowed by
the Rules of Court  Under Rule 63. Section 5 - The joinder shall not include special civil
actions or actions governed by special rules. The RTC should have severed the causes
of action, either upon motion or motu proprio, and tried them separately, assuming it
had jurisdiction over both. Such severance was pursuant to Section 6, Rule 2 of the
Rules of Court.

  

Moreover, the petitioners did not show that they were real parties in interest to demand
either injunction or quieting of title. The competent court is tasked to determine the
respective rights of the complainant and other claimants, not only to put things in their
proper place, to make the one who has no rights to said immovable respect and not
disturb the other, but also for the benefit of both. For an action to quiet title to prosper,
two indispensable requisites must concur, namely: (1) the plaintiff or complainant has a
legal or an equitable title to or interest in the real property subject of the action; and (2)
the deed, claim, encumbrance, or proceeding claimed to be casting cloud on his title
must be shown to be in fact invalid or inoperative despite its prima facie appearance of
validity or legal efficacy. 

Legal title denotes registered ownership, while equitable title means beneficial
ownership (title derived through a valid contract or relation). To determine whether the
petitioner as plaintiffs had the requisite title to bring the suit, a resort to the allegations in
the complaint is necessary.

However, none of the above reasons validly clothed them with he necessary interest to
maintain the action for quieting of title. Presidential Decree No. 1517 only granted to the
occupants of APDs the right of first refusal, but such grant was true only if and when the
owner of the property decided to sell the property. Only then would the right of first
refusal accrue. Consequently, the right of first refusal remained contingent, and was
for that reason insufficient to vest any title, legal or equitable, in the petitioners.
The CA's adverse judgment dismissing their complaint as far as the action to quiet title
was concerned was correct. The main requirement for the action to be brought is that
there is a deed, claim, encumbrance, or proceeding casting cloud on the plaintiffs' title
that is alleged and shown to be in fact invalid or inoperative despite its prima facie
appearance of validity or legal efficacy, the eliminates the existence of the requirement.
Their admission of the genuineness and authenticity of Patricia, Inc.'s title negated the
existence of such deed, instrument, encumbrance or proceeding that was invalid, and
thus the action must necessarily fail. 

Furthermore, the petitioners did not have a cause of action for injunction. Accordingly,
the petitioners must prove the existence of a right to be protected. The records show,
however, that they did not have any right to be protected because they had established
only the existence of the boundary dispute between Patricia, Inc. and the City of Manila.
Any violation of the boundary by Patricia, Inc., if any, would give rise to the right of
action in favor of the City of Manila only. The dispute did not concern the petitioners at
all. Moreover, the boundary dispute should not be litigated in an action for the quieting
of title due to the limited scope of the action. The action for the quieting of title is a
tool specifically used to remove of any cloud upon, doubt, or uncertainty affecting
title to real property; it should not be used for any other purpose. And, secondly,
the boundary dispute would essentially seek to alter or modify either the Torrens title of
the City of Manila or that of Patricia, Inc., but any alteration or modification either
way should be initiated only by direct proceedings, not as an issue incidentally
raised by the parties herein. To allow the boundary dispute to be litigated in the
action for quieting of title would violate Section 48 of the Property Registration
Decree by virtue of its prohibition against collateral attacks on Torrens titles. A
collateral attack takes place when, in another action to obtain a different relief, the
certificate of title is assailed as an incident in said action. This is exactly what the
petitioners sought to do herein, seeking to modify or otherwise cancel Patricia, Inc.'s
title.

9. Ang v. Pacunio, G.R. No. 208928, July 8, 2015

Topic: Real party in interest

Short Facts: Assailed in this petition for review on certiorari under Rule 45 of the Rules
of Court are the Decision and Resolution of the Court of Appeals (CA) which affirmed
the Summary Judgment of the RTC of Cagayan de Oro City, Branch 38 (RTC) with
modification declaring, inter alia, the Deed of Absolute Sale between petitioner Andy
Ang (petitioner) and Felicisima Udiaan (Udiaan) null and void.

Facts:
Respondents Pacunio, et al filed a complaint for Declaration for nullity of Sale,
Reconveyance and damages before the RTC involving the subject land originally
owned by Felicisima Udiaan. Respondents alleged that they are grandchildren and
successor-in-interest of Udiaan, and that an imposter falsely representing herself as
Udiaan sold the subject land to petitioner.

Petitioner entered the subject land and used the same in his livestock business.
Respondents then informed petitioner that he did not validly acquire the subject
land, and thereafter, demanded its return, but to no avail.

Hence, they filed a complaint with the RTC, contending the Udiaan could not have sold
the subject parcel of land because she has been dead for more than 20 years when the
sale occurred.

Petitioner denied respondents' allegations and countered that:

(a) at first, he bought the subject land from a person representing herself as Udiaan
who showed a community tax certificate as proof of identity, has in her possession,
knew the location of the subject land, and was not afraid to face the notary public when
they executed the Questioned Deed of Absolute Sale;

(b) he was initially prevented from entering the subject land since it was being occupied
by the Heirs of Alfredo Gaccion;

(c) in order to buy peace, he had to "buy" the subject land anew from the Heirs of
Gaccion;

(d) he was a buyer in good faith, for value, and was without any knowledge or
participation in the alleged defects of the title thereof; and

(e) respondents were never in possession of the subject land and they never paid real
property taxes over the same.

Ultimately, petitioner claimed that he was duped and swindled into buying the subject
land twice.

RTC ruled in favor of the petitioner in a Summary Judgment, dismissed the case for
lack of merit. It found that while respondents claimed to be Udiaan's successors-in-
interest over the subject land, there is dearth of evidence proving their
successional rights to Udiaan's estate, specifically, over the subject land. As
such, the RTC concluded that respondents are not the real parties in interest to
institute an action against petitioner, warranting the dismissal of their complaint.

CA modified RTC’s decision by partitioning the land as follows: (a) 3,502 sq. m. to
petitioner; (b) 6,398 sq. m. to the Heirs of Gaccion; and (c) the remainder of the subject
land to Udiaan's children.

Petitioner filed an MR but was denied. Hence this petition.

Issue:  WON the CA correctly declared the nullity of the Questioned Deed of Absolute
Sale and distributed portions of the subject land to different parties, among others,
despite ruling that respondents are not real parties in interest to the instant case. NO

Held:
The petition is meritorious. 
Section 2, Rule 3 of the Rules of Court lays down the definition of a real party in interest
as follows:
SEC. 2. Parties in interest. - A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails
of the suit. Unless otherwise provided by law or these Rules, every action must
be prosecuted or defended in the name of the real party in interest.  

The rule on real parties in interest has two (2) requirements, namely: (a) to institute an
action, the plaintiff must be the real party in interest; and ( b) the action must be
prosecuted in the name of the real party in interest. Interest within the meaning of
the Rules of Court means material interest or an interest in issue to be affected by
the decree or judgment of the case, as distinguished from mere curiosity about the
question involved. One having no material interest cannot invoke the jurisdiction
of the court as the plaintiff in an action. When the plaintiff is not the real party in
interest, the case is dismissible on the ground of lack of cause of action.

In the instant case, respondents claim to be the successors-in-interest of the subject

land just because they are Udiaan's grandchildren. Under the law, however,
respondents will only be deemed to have a material interest over the subject land-
and the rest of Udiaan's estate for that matter if the right of representation
provided under Article 970, in relation to Article 982, of the Civil Code is available to
them. In this situation, representatives will be called to the succession by the law
and not by the person represented; and the representative does not succeed the
person represented but the one whom the person represented would have
succeeded.

For such right to be available to respondents, they would have to show first that their
mother: (a) predeceased Udiaan; (b) is incapacitated to inherit; or (c) was
disinherited, if Udiaan died testate. However, as correctly pointed out by the CA,
nothing in the records would show that the right of representation is available to
respondents. Hence, the RTC and the CA correctly found that respondents are
not real parties in interest to the instant case. It is well-settled that factual findings of
the RTC, when affirmed by the CA, are entitled to great weight and respect by the
Court and are deemed final and conclusive when supported by the evidence on
record, as in this case.

The issue stated by the SC ruling was, if the partition by the CA was proper even
though it declared that the respondents were not real parties in interest . The court
ruled that it was not proper because those who are strangers to the case, or those who
are not real parties in interest, cannot benefit nor be prejudiced by its decision. Thus,
the partition by the CA was not proper.
WHEREFORE, the petition is GRANTED. Accordingly, CA decision is REVERSED and
SET ASIDE. Accordingly, the Summary Judgment of RTC is REINSTATED. SO
ORDERED.

10. Caravan Travel and Tours v. Abejar, G.R. No. 170631, February 10, 2016

Topic: Real party- in- interest

Facts: Reyes was walking along the west-bound lane of Sampaguita Street, United
Parañaque Subdivision IV, Parañaque City. A Mitsubishi L-300 van was travelling along
the east-bound lane, opposite Reyes. To avoid an incoming vehicle, the van swerved to
its left and hit Reyes. A witness to the accident, went to her aid and loaded her in the
back of the van.Espinosa told the driver of the van, Jimmy Bautista to bring Reyes to
the hospital.Instead of doing so, Bautista appeared to have left the van parked inside a
nearby subdivision with Reyes still in the van. Fortunately for Reyes, an unidentified
civilian came to help and drove Reyes to the hospital.

Upon investigation, it was found that the registered owner of the van was Caravan.
Caravan is a corporation engaged in the business of organizing travels and tours.
Bautista was Caravan's employee assigned to drive the van as its service driver.

Caravan shouldered the hospitalization expenses of Reyes. Despite medical

attendance, Reyes died two (2) days after the accident. Respondent Ermilinda R.
Abejar, Reyes' paternal aunt and the person who raised her since she was nine (9)
years old, filed before the Regional Trial Court of Parañaque a Complaint for damages
against Bautista and Caravan. In her Complaint, Abejar alleged that Bautista was an
employee of Caravan and that Caravan is the registered owner of the van that hit
Reyes.

Caravan argues that Abejar has no personality to bring this suit because she is not
a real party in interest. According to Caravan, Abejar does not exercise legal or
substitute parental authority. She is also not the judicially appointed guardian or
the only living relative of the deceased. She is also not "the executor or
administrator of the estate of the deceased. According to Caravan, only the victim
herself or her heirs can enforce an action based on culpa aquiliana such as Abejar's
action for damages.

Issue: Whether respondent Abejar is a real party in interest who may bring an action
for damages against petitioner Caravan Travel and Tours International, Inc. on account
of Jesmariane R. Reyes' death?
 

Held: Yes.

In her Complaint, respondent made allegations that would sustain her action for
damages: that she exercised substitute parental authority over Reyes; that Reyes' death
was caused by the negligence of petitioner and its driver; and that Reyes' death caused
her damage. Respondent properly filed an action based on quasi-delict. She is a
real party in interest.

Sec.2, Rule 3 provides that A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.

To qualify a person to be a real party in interest in whose name an action must be

prosecuted, he or she must appear to be the present real owner of the right
sought to be enforced. Respondent's capacity to file a complaint against
petitioner stems from her having exercised substitute parental authority over
Reyes.

It was under these circumstances that respondent took custody of Reyes when she was
a child, assumed the role of Reyes' parents, and thus, exercised substitute parental
authority over her. As Reyes' custodian, respondent exercised the full extent of the
statutorily recognized rights and duties of a parent. Consistent with Article 220 of the
Family Code, respondent supported Reyes' education and provided for her personal
needs. To echo respondent's words in her Complaint, she treated Reyes as if she were
her own daughter. Thus, she has a capacity to bring the action against Caravan.

11. Guy v. Guy, G.R. No. 189486, September 5, 2012

Topic: Remedial Law; Indispensable Parties; Cause of action

Facts: With 519,997 shares of stock as reflected in Stock Certificate Nos. 004-014,
Respondent Gilbert G. Guy (Gilbert) practically owned almost 80 percent of the 650,000
subscribed capital stock of GoodGold Realty & Development Corporation (GoodGold),
GoodGold’s remaining shares were divided among Francisco Guy (Francisco) with
130,000 shares, Simny Guy (Simny), Benjamin Lim and Paulino Delfin Pe, with one
share each, respectively. Gilbert is the son of spouses Francisco and Simny. Simny,
one of the petitioners, however, alleged that it was she and her husband who
established GoodGold, putting the bulk of its shares under Gilbert’s name.

Accordingly, some of GoodGold’s certificates were cancelled and new ones were issued
to represent the redistribution of GoodGold’s shares of stock. The new certificates of
stock were signed by Francisco and Atty. Emmanuel Paras, as President and Corporate
Secretary, respectively.
In September 2004, or five years after the redistribution of GoodGold’s shares of stock,
Gilbert filed with the Regional Trial Court (RTC) of Manila, a Complaint for the
"Declaration of Nullity of Transfers of Shares in GoodGold and of General Information
Sheets and Minutes of Meeting, and for Damages with Application for a Preliminary
Injunctive Relief," against his mother, Simny, and his sisters, Geraldine, Grace, and
Gladys. Gilbert alleged, among others, that no stock certificate ever existed

Gilbert, however, withdrew the complaint, after the National Bureau of Investigation
(NBI) submitted a report to the RTC of Manila authenticating Gilbert’s signature in the
endorsed certificates.

The present controversy arose, when in 2008, three years after the complaint with the
RTC of Manila was withdrawn, Gilbert again filed an Intra-Corporate Controversy
Complaint with prayer for a Writ of Preliminary and Mandatory Injunction to protect his
rights., this time, with the RTC of Mandaluyong against his mother, Simny, his sisters,
Geraldine, Gladys, and the heirs of his late sister Grace.

In an Order dated 30 June 2008, the RTC denied Gilbert’s Motion for Injunctive Relief
which constrained him to file a motion for reconsideration, and, thereafter, a Motion for
Inhibition against Judge Edwin Sorongon, praying that the latter recuse himself from
further taking part in the case.

Meanwhile, Gilbert’s siblings filed a manifestation claiming that the complaint is a

nuisance and harassment suit under Section 1(b), Rule 1 of the Interim Rules of
Procedure on Intra-Corporate Controversies.

In an Order dated 6 November 2008, the RTC denied the motion for inhibition. The RTC
also dismissed the case, declaring it a nuisance and harassment suit. This constrained
Gilbert to assail the above Order before the Court of Appeals (CA).

Issues: Whether or not the complaint filed by Gilbert Guy will prosper and the shares of
stock prayed for be awarded to him.

Ruling: No. Suits by stockholders or members of a corporation based on wrongful or

fraudulent acts of directors or other persons may be classified into individual suits, class
suits, and derivative suits.

An individual suit may be instituted by a stockholder against another stockholder for

wrongs committed against him personally, and to determine their individual rights – this
is an individual suit between stockholders. But an individual suit may also be instituted
against a corporation, the same having a separate juridical personality, which by its own
may be sued. It is of course, essential that the suing stockholder has a cause of action
against the corporation.

Individual suits against another stockholder or against a corporation are remedies which
an aggrieved stockholder may avail of and which are recognized in our jurisdiction as
embedded in the Interim Rules on Intra-Corporate Controversy. Together with this right
is the parallel obligation of a party to comply with the compulsory joinder of
indispensable parties whether they may be stockholders or the corporation itself.

On indispensable parties:

The definition in the Rules of Court, Section 7, Rule 3 thereof, of indispensable parties
as "parties in interest without whom no final determination can be had of an action" has
been jurisprudentially amplified. 

In Sps. Garcia v. Garcia, et.al., an indispensable party is a party who has such an
interest in the controversy or subject matter that a final adjudication cannot be made, in
his absence, without injuring or affecting that interest, a party who has not only an
interest in the subject matter of the controversy, but also has an interest of such nature
that a final decree cannot be made without affecting his interest or leaving the
controversy in such a condition that its final determination may be wholly inconsistent
with equity and good conscience. It has also been considered that an indispensable
party is a person in whose absence there cannot be a determination between the
parties already before the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action before it may properly go
forward.

The absence of an indispensable party in a case renders all subsequent actions of the
court null and void for want of authority to act, not only as to the absent parties but even
as to those present.

It bears emphasis that this controversy started with Gilbert’s complaint filed with the
RTC of Mandaluyong City in his capacity as stockholder, director and Vice-President of
GoodGold.

Gilbert’s complaint essentially prayed for the return of his original 519,997 shares in
GoodGold, by praying that the court declare that "there were no valid transfers of the
contested shares to defendants and Francisco." It baffles this Court, however, that
Gilbert omitted Francisco as defendant in his complaint. While Gilbert could have opted
to waive his shares in the name of Francisco to justify the latter’s non-inclusion in the
complaint, Gilbert did not do so, but instead, wanted everything back and even wanted
the whole transfer of shares declared fraudulent. This cannot be done, without including
Francisco as defendant in the original case. The transfer of the shares cannot be, as
Gilbert wanted, declared entirely fraudulent without including those of Francisco who
owns almost a third of the total number.

Francisco, in both the 2004 and 2008 complaints, is an indispensable party without
whom no final determination can be had as he owns 195,000 shares of stocks which
Gilbert prays be returned to him.

It bears emphasis that Gilbert, while suing as a stockholder against his co-stockholders,
should have also impleaded GoodGold as defendant. His complaint also prayed for the
annulment of the 2004 stockholders’ annual meeting, the annulment of the 2004
election of the board of directors and of its officers, the annulment of 2004 GIS
submitted to the SEC, issuance of an order for the accounting of all monies and rentals
of GoodGold, and the issuance of a writ of preliminary and mandatory injunction. We
have made clear that GoodGold is a separate juridical entity distinct from its
stockholders and from its directors and officers. The trial court, acting as a special
commercial court, cannot settle the issues with finality without impleading GoodGold as
defendant. 

Like Francisco, and for the same reasons, GoodGold is an indispensable party which
Gilbert should have impleaded as defendant in his complaint.

On Cause of action:

Tested against established standards, we find that the charges of fraud which Gilbert
accuses his siblings are not supported by the required factual allegations. In Reyes v.
RTC of Makati,49 which we now reiterate, mutatis mutandis, while the complaint
contained allegations of fraud purportedly committed by his siblings, these allegations
are not particular enough to bring the controversy within the special commercial court’s
jurisdiction; they are not statements of ultimate facts, but are mere conclusions of law:
how and why the alleged transfer of shares can be characterized as "fraudulent" were
not explained and elaborated on.

Not every allegation of fraud done in a corporate setting or perpetrated by corporate

officers will bring the case within the special commercial court’s jurisdiction. To fall
within this jurisdiction, there must be sufficient nexus showing that the corporation’s
nature, structure, or powers were used to facilitate the fraudulent device or scheme.

Significantly, no corporate power or office was alleged to have facilitated the transfer of
Gilbert’s shares. How the petitioners perpetrated the fraud, if ever they did, is an
indispensable allegation which Gilbert must have had alleged with particularity in his
complaint, but which he failed to.

In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute
a ground for dismissal since such a defect can be cured by a bill of particulars.
However, this does not apply to intra-corporate controversies. 

In Reyes vs RTC of Makati, The Court pronounced that in cases governed by the
Interim Rules of Procedure on Intra-Corporate Controversies a bill of particulars is a
prohibited pleading. It is essential, therefore, for the complaint to show on its face what
are claimed to be the fraudulent corporate acts if the complainant wishes to invoke the
court’s special commercial jurisdiction.

It did not escape the Court that Gilbert, instead of particularly describing the fraudulent
acts that he complained of, just made a sweeping denial of the existence of stock
certificates by claiming that such were not necessary, GoodGold being a mere family
corporation.
12. Pepsi Co., Inc. v. Emerald Pizza, Inc., G.R. No. 153059, August 14, 2007

Topic: REAL PARTY IN INTEREST

FACTS

Petitioner PepsiCo, Inc. (PepsiCo) is a foreign corporation and licensed to do business

in the Philippines.3 Its operating unit, PepsiCo Restaurants International, oversees the
company's restaurants outside the United Statesand Canada. 4

Respondent Emerald Pizza, Inc. (Emerald), a domestic corporation, entered into a 20-
year Franchise Agreement5 with one of PepsiCo's restaurant businesses, the Pizza Hut,
Inc. (Pizza Hut), a Delaware (U.S.A.) corporation. Emerald also entered into a
Marketing Services Agreement with PepsiCo, which was implemented.

Due to an alleged breach by the franchisor of the franchise agreement, Emerald

instituted a civil action against PepsiCo (not Pizza Hut). However, the parties amicably
settled their differences and executed a compromise agreement to this effect. 8 This
Agreement, which made reference to the 20-year franchise period stated in the March
12, 1981 Franchise Agreement, was signed by the authorized representatives of
PepsiCo, Pizza Hut, and Emerald.

Then again, on account of purported violations by the franchisor of the franchise

agreement, among which was its refusal to renew the franchise, Emerald instituted
before the (RTC) of Pasig City a Complaint 10 against PepsiCo for specific performance,
injunction and damages with an application for the issuance of a TRO or a writ of
preliminary injunction. The trial court initially ordered the parties to maintain the status
quo for 72 hours.11

In opposing Emerald's application for a TRO, PepsiCo, through its resident

representative, argued, among others, that it was not a signatory to the franchise
agreement subject of the case, thus, the complaint states no cause of action for it was
not brought against the real party-in-interest. 12

After summary hearing, the RTC issued its Order, 13 lifting the previous restraining order
and dismissing the complaint. The trial court based its dismissal not on PepsiCo's
assertion that it was not a real party-in-interest but on its other argument that the case
was premature.

While the appellate court agreed with the RTC that the complaint was prematurely filed
because arbitration was not availed of as a remedy pursuant to the parties' franchise
agreement, it found as erroneous the trial court's dismissal of the complaint. 17 The CA
further found petitioner as a real party-in-interest, although it was not the franchisor in
the original franchise agreement.18

PepsiCo elevated the case before us via Rule 45 on the sole proposition that the
appellate court should have upheld the dismissal of the complaint as it was not filed
against the real party-in-interest. 22 It mainly argues that PepsiCo and Pizza Hut are
entities separate and distinct from each other; 23 that the parties to the franchise
agreement and its amendments were Pizza Hut and respondent; and that it was not
privy to the said agreement.24

ISSUE: WON whether or not PepsiCo is a real party-in-interest in the civil case filed by
Emerald.

RULING:

Under the Rules of Civil Procedure, every action must be prosecuted or defended in the
name of the real party-in-interest, the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. 25 "Interest" within the
meaning of the rule means material interest, an interest in issue and to be affected by
the decree, as distinguished from mere interest in the question involved, or a mere
incidental interest.26

The purpose of the rule is to protect parties against undue and unnecessary litigation
and to ensure that the court will have the benefit of having before it the real adverse
parties in the consideration of the case. This rule, however, is not to be narrowly and
restrictively construed, and its application should be neither dogmatic nor rigid at all
times but viewed in consonance with extant realities and practicalities. 27 Since a
contract may be violated only by the parties thereto as against each other, in an action
upon that contract, the real parties-in-interest, either as plaintiff or as defendant, must
be parties to the said contract.28

It is true that PepsiCo is not a signatory to the March 12, 1981 Franchise
Agreement, the parties thereto being only Pizza Hut and Emerald. However, the
settlement agreement entered into by the parties herein and Pizza Hut on January
13, 1989 clearly reveals that PepsiCo also assumed the obligations of Pizza Hut in
the said franchise agreement and that it was in effect acting as a franchisor
together with Pizza Hut, thus:

PepsiCo could not have allowed Emerald to relocate its then existing restaurant,
granted it a third unit site, reduced the protective radius of the franchise,
guaranteed its sales, represented that the overseeing unit would accede to the
settlement, and agreed to execute a franchise agreement without prejudice to the
original term agreed upon in the March 12, 1981 franchise, had it not been acting
as one of the franchisors or had it not assumed the duties, rights and obligations
of a franchisor. Thus, in this suit involving the franchise, PepsiCo is a real party-
in-interest.

The subsequent execution of the amendatory agreement on March 3, 1989 only by and
between Emerald and Pizza Hut does not in any way relieve PepsiCo of the obligations
it assumed as a franchisor in the settlement agreement. Let it be noted that the said
amendatory agreement came into being merely to formally implement the stipulations in
the settlement.
Moreover, Emerald in its complaint before the RTC pleaded as one of its causes of
action the franchisor's refusal to abide by the 20-year franchise period, one of the
important subjects of the settlement to which both PepsiCo and Pizza Hut conformed.
Necessarily, therefore, both of them, PepsiCo and Pizza Hut, will stand to benefit from a
possible breach of the said provision.

Notably, however, while PepsiCo was properly impleaded as a party defendant,

Pizza Hut, an indispensable party, was not. An indispensable party is a party-in-
interest without whom no final determination can be had of an action, and who
shall be joined either as plaintiff or defendant. 30 The joinder of indispensable
parties is mandatory. Their presence is necessary to vest the court with
jurisdiction, which is "the authority to hear and determine a cause, the right to act
in a case." Thus, without their presence to a suit or proceeding, judgment of a
court cannot attain real finality. The absence of an indispensable party renders all
subsequent actions of the court null and void for want of authority to act, not only
as to the absent parties but even as to those present. 31

Nevertheless, the non-joinder of indispensable parties is not a ground for the

dismissal of an action, and the remedy is to implead the non-party claimed to be
indispensable. Parties may be added by order of the court on motion of the party
or on its own initiative at any stage of the action and/or at such times as are just. 32
If the petitioner refuses to implead an indispensable party despite the order of the
court, the latter may dismiss the complaint/petition for the plaintiff/petitioner's
failure to comply therewith.33

Hence, as no final ruling on this matter can be had without impleading Pizza Hut,
its inclusion is necessary for the effective and complete resolution of the case
and in order to accord all parties the benefit of due process and fair play. 34

13. Juana Complex I Homeowners Association, Inc., et al. v. Fil-Estate Land,

Inc.,G.R. No. 152272, March 5, 2012
Juana Complex I Homeowners Association, Inc. (JCHA), together with individual residents of Juana
Complex I and other neighboring subdivisions (collectively referred as JCHA, et. al.), instituted a
complaint for damages, in its own behalf and as a class suit representing the regular commuters and
[5]

motorists of Juana Complex I and neighboring subdivisions who were deprived of the use of La Paz
Road, against Fil-Estate Land, Inc. (Fil-Estate), Fil-estate Ecocentrum Corporation (FEEC), La Paz
Housing & Development Corporation (La Paz), and Warbird Security Agency and their respective officers
(collectively referred as Fil-Estate, et al.). The complaint alleges that  JCHA, et al. were regular
commuters and motorists who constantly travelled towards the direction of Manila and Calamba; that they
used the entry and exit toll gates of South Luzon Expressway (SLEX) by passing through right-of-way
public road known as La Paz Road; that they had been using La Paz Road for more than ten (10) years;
that in August 1998, Fil-estate excavated, broke and deliberately ruined La Paz Road that led to SLEX so
JCHA, et al. would not be able to pass through the said road; that the act of Fil-estate in excavating La
Paz Road caused damage, prejudice, inconvenience, annoyance, and loss of precious hours to them, to
the commuters and motorists because traffic was re-routed to narrow streets that caused terrible traffic
congestion and hazard; and that its permanent closure would not only prejudice their right to free and
unhampered use of the property but would also cause great damage and irreparable injury. The
petitioners prayed for the issuance of a TRO and a writ of Preliminary Injunction. TRO was issued.
Respondents filed a motion to dismiss contending that the complaint failed to state a cause of action and
that it was improperly filed as a class suit. RTC issued WPI and denied respondents’ motion to dismiss
and the subsequent MR. Respondents filed a petition for certiorari and prohibition with the CA raising the
same contention. CA partially granted respondents’ petition ruling that the petition sufficiently states a
cause of action and that the complaint was properly filed as a class suit. Both parties appealed. Hence,
this case.

ISSUE: W/N the complaint sufficiently stated a cause of action; and 

W/N the complaint was properly filed as a class suit.

HELD: YES IN BOTH ISSUES. Section 2, Rule 2 of the Rules of Court defines a cause of action
as an act or omission by which a party violates the right of another. A complaint states a cause of action
when it contains three (3) essential elements of a cause of action, namely:

(1) the legal right of the plaintiff,

(2) the correlative obligation of the defendant, and

(3) the act or omission of the defendant in violation of said legal right.

The question of whether the complaint states a cause of action is determined by its averments regarding
the acts committed by the defendant.Thus, it must contain a concise statement of the ultimate or essential
facts constituting the plaintiff’s cause of action.To be taken into account are only the material allegations
in the complaint; extraneous facts and circumstances or other matters aliunde are not considered.

The test of sufficiency of facts alleged in the complaint as constituting a cause of action is whether or not
admitting the facts alleged, the court could render a valid verdict in accordance with the prayer of said
complaint. Stated differently, if the allegations in the complaint furnish sufficient basis by which the
complaint can be maintained, the same should not be dismissed regardless of the defense that may be
asserted by the defendant.

In the present case, the Court finds the allegations in the complaint sufficient to establish a cause of
action. First, JCHA, et al.’s averments in the complaint show a demandable right over La Paz Road.
These are: (1) their right to use the road on the basis of their allegation that they had been using the road
for more than 10 years; and (2) an easement of a right of way has been constituted over the said roads.
There is no other road as wide as La Paz Road existing in the vicinity and it is the shortest, convenient
and safe route towards SLEX Halang that the commuters and motorists may use. Second, there is an
alleged violation of such right committed by Fil-Estate, et al. when they excavated the road and prevented
the commuters and motorists from using the same. Third, JCHA, et al. consequently suffered injury and
that a valid judgment could have been rendered in accordance with the relief sought therein.

Sec. 12. Class suit. – When the subject matter of the controversy is one of common or general interest to
many persons so numerous that it is impracticable to join all as parties, a number of them which the court
finds to be sufficiently numerous and representative as to fully protect the interests of all concerned may
sue or defend for the benefit of all. Any party in interest shall have the right to intervene to protect his
individual interest.

The necessary elements for the maintenance of a class suit are:  1) the subject matter of controversy is
one of common or general interest to many persons; 2) the parties affected are so numerous that it is
impracticable to bring them all to court; and 3) the parties bringing the class suit are sufficiently numerous
or representative of the class and can fully protect the interests of all concerned.
In this case, the suit is clearly one that benefits all commuters and motorists who use La Paz Road. As
succinctly stated by the CA:

The subject matter of the instant case, i.e., the closure and excavation of the La Paz Road, is initially
shown to be of common or general interest to many persons. The records reveal that numerous
individuals have filed manifestations with the lower court, conveying their intention to join private
respondents in the suit and claiming that they are similarly situated with private respondents for they were
also prejudiced by the acts of petitioners in closing and excavating the La Paz Road. Moreover, the
individuals sought to be represented by private respondents in the suit are so numerous that it is
impracticable to join them all as parties and be named individually as plaintiffs in the complaint. These
individuals claim to be residents of various barangays in Biñan, Laguna and other barangays in San
Pedro, Laguna.

14. A.M. No. 88-1-646-0 March 3, 1988

RE: REQUEST OF THE PLAINTIFFS, HEIRS OF THE PASSENGERS OF THE DOÑA

PAZ TO SET ASIDE THE ORDER DATED JANUARY 4, 1988 OF JUDGE B.D.
CHINGCUANGCO.
FACTS: on January 4, 1988 a complaint for damages amounting to more than one
and a half billion pesos was filed in the name and behalf of the relatives or heirs of the
victims of "the worst sea disaster in history:" the sinking of the vessel Doña Paz caused
by its collision with another vessel. The complaint characterized the action thereby
instituted as a "class suit", prosecuted by the twenty-seven (27) named plaintiffs in their
behalf and in presentation of the approximately 4,000 persons . . (who also) are all
close relatives and legal heirs of the passengers of the Doña Paz" (par. 5). The action's
character as a class suit results, it is claimed, from "the subject matter . . . (thereof
being) of general or common interest to 4,000 persons, more or less, all of whom are
residing variously in Samar, Leyte and Metro Manila;" and its institution is proper
because the Identified plaintiffs are sufficiently numerous and representative to fully
protect the interests of all" (par. 3). The complaint prayed that:
judgment be rendered in favor of the plaintiffs and all other persons embraced in this
class suit, and against the defendants, ordering them to pay to the former, jointly and
severally
 the plaintiffs filed a "MOTION FOR LEAVE TO FILE CASE AS PAUPER LITIGANT."
They alleged that "a big majority ... (of them) are poor and have no sufficient means to
finance the filing of this case especially because, considering the gargantuan amount of
damages involved, the amount of filing fee alone will run to several thousands of
pesos," that in view thereof and the fact that the case was one of "national concern as
shown by the public outcry and sustained publicity that it has evoked,' the Court "may
be justified in ... (allowing them) to file the instant suit as pauper litigants or, in the
alternative, (ruling) that the legal fees incident to the filing of this case may constitute a
lien on whatever judgment may be recovered by the plaintiffs therein.
In the comment submitted by him in response to this Court's direction, Judge
Chingcuangco declared that he had opted to leave the matter of the propriety of the
class suit "to the sound judgment of the branch to which this case may be raffled,"
( Note:in other words, the judge treated tha action as a class suit)
ISSUE
Is the action can be treated as a class suit? If not, what Rule should apply?
Held:
The judge is wrong.  it is not the rule governing class suits under Section 12,
Rule 3 of the Rules of Court that in truth is involved in the proceedings at bar, but that
concerning permissive joinder of parties in Section 6 of the same Rule 3.  It is
perhaps not inappropriate to avail of the opportunity that the proceeding at bar
presents to point out the distinctions between the two rules, as these appear to
have been missed by the petitioners and even by the Court a quo.
Class suit vs permissive joinder of parties
In a class suit, what is contemplated is that (a) the subject matter in controversy
is of common or general interest to many persons, and (b) those persons are so
numerous as to make it impracticable to bring them all before the court. Illustrative of
the rule is a so-called derivative suit brought in behalf of numerous stockholders of a
corporation to perpetually enjoin or nullify what is claimed to be a breach of trust or
an ultra vires act of the company's board of directors.  In such a suit, there is one, single
right of action pertaining to numerous stockholders, not multiple rights belonging
separately to several, distinct persons.
On the other hand, if there are many persons who have distinct, separate rights against
the same party or group of parties, but those rights arise from the same transaction or
series of transactions and there are common questions of fact or law resulting
therefrom, the former may join as plaintiffs in one action against the same defendant.
This is authorized by the above mentioned joinder-of- parties rule in Section 6 of Rule 3.
The other factor that serves to distinguish the rule on class suits from that of
permissive joinder of parties is, of course, the numerousness of parties involved
in the former. The rule is that for a class suit to be allowed, it is needful inter
alia that the parties be so numerous that it would be impracticable to bring them
all before the court.
The case at bar not being a proper one for a class suit, it follows that the action may not
be maintained by a representative few in behalf of all the others. 

15. Carandang v. Heirs of De Guzman, et al., G.R. No. 160347, November 29, 2006
DOCTRINE/S:

When a party dies in an action that survives and no order is issued by the court for
the appearance of the legal representative or of the heirs of the deceased in
substitution of the deceased, and as a matter of fact no substitution has ever been
effected, the trial held by the court without such legal representatives or heirs and the
judgment rendered after such trial are null and void because the court acquired no
jurisdiction over the persons of the legal representatives or of the heirs .

Unlike jurisdiction over the subject matter which is conferred by law and is not subject to
the discretion of the parties, jurisdiction over the person of the parties to the case
may be waived either expressly or impliedly. Implied waiver comes in the form of
either voluntary appearance or a failure to object.

  Lack of jurisdiction over the person, being subject to waiver , is a personal

defense which can only be asserted by the party who can thereby waive it by
silence.

The underlying principle therefore is not really because substitution of heirs is a

jurisdictional requirement, but because non-compliance therewith results in the
undeniable violation of the right to due process of those who, though not duly
notified of the proceedings, are substantially affected by the decision.

A real party in interest is the party who stands to be benefited or injured by the
judgment of the suit, or the party entitled to the avails of the suit. On the other
hand, an indispensable party is a party in interest without whom no final
determination can be had of an action, in contrast to a necessary party, which is
one who is not indispensable but who ought to be joined as a party if complete
relief is to be accorded as to those already parties, or for a complete
determination or settlement of the claim subject of the action.

The failure to comply with the order for his inclusion, without justifiable cause, shall
be deemed a waiver of the claim against such party.
The non-inclusion of a necessary party does not prevent the court from
proceeding in the action, and the judgment rendered therein shall be without
prejudice to the rights of such necessary party.
Non-compliance with the order for the inclusion of a necessary party would not
warrant the dismissal of the complaint. This is an exception to Section 3, Rule 17
which allows the dismissal of the complaint for failure to comply with an order of
the court, as Section 9, Rule 3 specifically provides for the effect of such non-
inclusion.

Pro forma parties are those required to be joined as co-parties in suits by or

against another party as may be provided by the applicable substantive law or
procedural rule.

FACTS:
The case at bar pertains to a recovery of loan for an amount of ₱336,375 filed by Mr.
Quirino De Guzman before the Regional Trial Court (RTC) against herein petitioners
Spouses Carandang. The said loan accrued by virtue of the parties’ relation as
stockholders and/or corporate officers of Mabuhay Broadcasting System (MBS) with
equities at 54% (for Mr. Quirino De Guzman) and 46% (for Spouses Carandang).

On November 26, 1983, the capital stock of the said corporation was increased, from
₱500,000 to P1.5 million and ₱345,000 of this increase was subscribed by the
petitioners.
On March 3, 1989, MBS again increased its capital stock, from ₱1.5 million to ₱3
million, the petitioner’s spouses Carandang, yet again subscribed to the increase. They
subscribed to ₱93,750 worth of newly issued capital stock.
Mr. De Guzman claims that certain payments for the amounts subscribed by petitioners
Spouses Carandang were actually paid by him. Consequently, as these amounts were
in the nature of a loan, Mr. De Guzman sent a demand letter to Spouses Carandang for
collection.
However, the Spouses Carandang refused to pay on the premise that a “pre-
incorporation agreement” was executed between Arcadio and Mr. De Guzman
whereby, Mr. De Guzman promised to pay for the stock subscriptions without costs, in
consideration for Arcadio ‘s technical expertise, his newly purchased equipment, and his
skill in repairing and upgrading radio/communication equipment therefore, there is no
indebtedness on their part.
The trial court rendered its decision in favor of Mr. De Guzman. The case thereafter was
elevated to the Court of Appeals (CA) but the CA merely affirmed the earlier decision of
the RTC. A motion for reconsideration was filed but the same was likewise denied.
Hence, the present petition for review seeking for reversal.

ISSUE/S:

1.    Whether or not the RTC Decision is void for failure to comply with Section 16, Rule
3 of the Rules of Court;

2.    Whether or not a non-inclusion in the complaint of an indispensable party may be a

ground for the dismissal of the action?

RULING:

1.    No, RTC’s decision is valid based on two premises: (1) by express waiver of the
Heirs of the late Mr. Quirino De Guzman and; (2) before the promulgation of the RTC
Decision, no further proceedings requiring appearance of De Guzman’s counsel.

The Court explained its decision in this wise:

“In the cases cited by the Spouses Carandang, we held that there had been no valid
substitution by the heirs of the deceased party, and therefore the judgment cannot
be made binding upon them. In the case at bar, not only do the heirs of de
Guzman interpose no objection to the jurisdiction of the court over their
persons; they are actually claiming and embracing such jurisdiction. In doing
 so, their waiver is not even merely implied (by their participation in the appeal of
said Decision), but express (by their explicit espousal of such view in both the
Court of Appeals and in this Court). The heirs of de Guzman had no objection to
being bound by the Decision of the RTC.”

“Care should, however, be taken in applying the foregoing conclusions. In People v.

Florendo, where we likewise held that the proceedings that took place after the
death of the party are void, we gave another reason for such nullity: "the attorneys
for the offended party ceased to be the attorneys for the deceased upon the death of
the latter, the principal.” Nevertheless, the case at bar had already been
submitted for decision before the RTC on 4 June 1998, several months before
the passing away of de Guzman on 19 February 1999. Hence, no further
proceedings requiring the appearance of de Guzman’s counsel were
conducted before the promulgation of the RTC Decision. Consequently, de
Guzman’s counsel cannot be said to have no authority to appear in trial, as trial had
already ceased upon the death of de Guzman.

In sum, the RTC Decision is valid despite the failure to comply with Section 16, Rule
3 of the Rules of Court, because of the express waiver of the heirs to the
jurisdiction over their persons, and because there had been, before the
promulgation of the RTC Decision, no further proceedings requiring the
appearance of de Guzman’s counsel.

2. As a rule, Yes.  However, the rule will not apply in this case as the account of
the late Quirino De Guzman and her wife Milagros was a joint account hence,
considered as a conjugal property. As a rule, if the property is classified as conjugal,
either one of the parties may institute the action without anymore impleading the other.
The non-inclusion of Milagros in the complaint will not constitute as a defect which will
warrant the dismissal of the action.

The Court aptly interpreted the factual milieu of the case at bar in this wise:

“The joint account of spouses Quirino A de Guzman and Milagros de Guzman from
which the four checks were drawn is part of their conjugal property and under both
the Civil Code and the Family Code the husband alone may institute an action for
the recovery or protection of the spouses’ conjugal property.”

Quirino and Milagros de Guzman were married before the effectivity of the Family Code
on 3 August 1988. As they did not execute any marriage settlement, the regime of
conjugal partnership of gains govern their property relations.
All properties acquired during the marriage, whether the acquisition appears to
have been made, contracted or registered in the name of one or both spouses, is
presumed to be conjugal unless the contrary is proved. Credits are personal
properties acquired during the time the loan or other credit transaction was
executed. Therefore, credits loaned during the time of the marriage are presumed
to be conjugal property.
Consequently, assuming that the four checks created a debt for which the spouses
Carandang are liable, such credits are presumed to be conjugal property. There being
no evidence to the contrary, such presumption subsists. As such, Quirino de
Guzman, being a co-owner of specific partnership property, is certainly a real
party in interest. Dismissal on the ground of failure to state a cause of action, by
reason that the suit was allegedly not brought by a real party in interest, is
therefore unwarranted.
 --End--