G.R. No.
193753, September 26, 2012 RULING
(Indispensable Party, Solidary Obligation)
FACTS
Petitioner Living @ Sense, Inc. sub-contracted to Dou
Mac, Inc. (DMI) its underground open-trench work for
the Network Project of Globe Telecom in Mindanao. As
required, DMI gave surety and performance bonds
which it secured from respondent Malayan Insurance
Company, Inc. (Malayan) which bound itself jointly and
severally liable with DMI. The bonds will answer for the
loss and damage to petitioner if DMI fails to perform its
obligations under the subcontract.
The excavation and restoration works by DMI was later
stopped by the government after it found DMI's work
unsatisfactory. Eventually, petitioner terminated the
subcontract and demanded from respondent insurance
company indemnification in the amount of P1.04
million. Respondent Malayan denied petitioner's claim
arguing that the liability of its principal, DMI, should first
be determined before Malayan can be held liable.
Thus, petitioner sued Malayan for specific performance
and breach of contract.
Respondent Malayan claimed that the suit should be
dismissed because petitioner failed to implead DMI as
an indispensable party. Petitioner, on the other hand,
argued that respondent is a surety who is directly and
primarily liable to indemnify petitioner, and that the
bond is "callable on demand" in the event of breach of
obligation. The Regional Trial Court ruled for the
respondent, and the case was elevated to the Supreme
Court on a pure question of law.
ISSUE
Is DMI an indispensable party in this case?
According to the facts alleged in the complaint, Tuazon
No, DMI is not an indispensable party in this case.
Article 1216 of the Civil Code on solidary obligations
allows petitioner, as creditor, to proceed against any of
the solidary debtors. Since respondent Malayan bound
itself "jointly and severally" with DMI under the surety
and performance bonds, it is considered a solidary
debtor and is therefore not an indispensable party. This
is because petitioner can claim indemnity directly from
respondent insurance company who has bound itself
solidarily with DMI for the obligations under the bonds.
An indispensable party is defined as "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." Without it, the court cannot act on the case
not only as to the absent party but also as to those
present.
Even if assuming that DMI was indeed an
indispensable party, the Regional Trial Court should
not have dismissed the case but should have ordered
the petitioner to implead the indispensable party, which
can be done on motion of the party or on the court's
own initiative at any stage of the action.
G.R. No. 141538, March 23, 2004
FACTS:
Noontime, June 26, 1993 -- A Country Bus Lines
passenger bus collided with a tricycle in Pampanga.
The driver of the tricycle Tuazon filed a complaint for
damages against Mrs. Cerezo, the owner of the bus
lines, her husband, Atty. Cerezo, and bus driver
Foronda.
was driving on the proper lane. There was a "Slow
Down" sign which Foronda ignored. After the complaint
was filed, alias summons was served upon the person
of Atty. Cerezo, the Tarlac Provincial Prosecutor.
In their reply, Mrs. Cerezo contended that the trial court
did not acquire jurisdiction because there was no
service of summons on Foronda. Moreover, Tuazon
failed to reserve his right to institute a separate civil
action for damages in the criminal action.
ISSUE:
Whether or not Mrs. Cerezo is liable for damages
HELD:
Mrs. Cerezo's contention is wrong. Tuazon's case is
not based on criminal law but on quasi-delict under the
Civil Code.
The same negligent act may produce civil liability
arising from a delict under Art. 103, RPC, or may give
rise to an action for quasi-delict under Art. 2180, C.C.
An aggrieved party may choose between the two
remedies. An action based on quasi-delict may
proceed independently from the criminal action. There
is, however, a distinction between civil liability arising
from a delict and civil liability arising from a quasi-
delict. The choice of remedy whether to sue for a delict
or a quasi-delict, affects the procedural and
jurisdictional issues of the action.
Tuazon's action is based on quasi-delict under Art.
2180: Employer's liability.
Foronda is not an indispensable party, contrary to Mrs.
Cerezo's contention. An indispensable party is one
whose interest is affected by the court's action in the
litigation, and without whom no final resolution of the
case is possible. However, Mrs. Cerezo's liability as an
employer in action for quasi-delict is not only solidary, it
is also primary and direct.

The responsibility of two or more persons who are
liable for a quasi-delict is solidary. Where there is a
solidary liability on the part of the debtors, as in this
case, each debtor is liable for the entire obligation.
Hence, each debtor is liable to pay for the entire
obligation in full. There is no merger or renunciation of
rights, but only mutual representation. Where the
obligation of the parties is solidary, either of the parties
is indispensable, and the other is not even a necessary
party because complete relief is available from either.
Therefore, jurisdiction over Foronda is not even
necessary as Tuazon may collect from Mrs. Cerezo
alone.
Moreover, an employer's liability based on a quasi-
delict is primary and direct, while the employer's liability
based on a delict is merely subsidiary. The words
"primary and direct," as contrasted with "subsidiary,"
refers to the remedy provided by law for enforcing the
obligation rather than to the character and limits of the
obligation. Although liability under Art. 2180 originates
from the negligent act of the employee, the aggrieved
party may sue the employer directly. When an
employee causes damage, the law presumes that the
employer has himself committed an act of negligence
in not preventing or avoiding the damage. This is the
fault that the law condemns. While the employer is
civilly liable in a subsidiary capacity for the employee's
criminal negligence, the employer is also civilly liable
directly and separate for his own civil negligence in
failing to exercise due diligence in selecting and
supervising his employee. The idea that the employer's
liability is wholly subsidiary is wrong.
The action can be brought directly against the person
responsible (for another) without including the author of
the act. The action against the principal is accessory in
the sense that it implies the existence of a prejudicial
act committed by the employee, but is not subsidiary in
the sense that it cannot be instituted till after the
judgment against he author of the act or at least, that it
is subsidiary to the principal action; action for
responsibility (of the employer) is in itself a principal
action.
In contrast, an action based on a delict seeks to
enforce the subsidiary liability of the employer for the
criminal negligence of the employee as provided in Art.
103, RPC. To hold the employer liable in a subsidiary
capacity under a delict, the aggrieved party must
initiate a criminal action where the employee's delict
and corresponding primary liability are established. If
the present action proceeds from a delict, then the trial
court's jurisdiction over Foronda is necessary.
However, the action filed by Tuazon was based on a
quasi-delict, which is separate and independent from
an action based on a delict. Hence, there was no need
to reserve the filing of a separate civil action. The
purpose of allowing the filing the of an independent
action based on quasi-delict against the employer is to
facilitate the remedy for civil wrongs.
Nestor Ching and Andrew Wellington vs. Subic Bay
Golf And Country Club,Inc., Hu Ho Hsiu Lien alias
Susan Hu, Hu Tsung Chieh alias Jack Hu, Hu TsungHui,
Hu Tsung Tzu and Reynald R. Suarez, G.R. No.
174353,September 10, 2014
FACTS:
Petitioners Nestor Ching and Andrew Wellington own
stocks of the Subic Bay Golf and Country Club,
Inc.(SBGCCI). On June 27, 1996, Securities and
Exchange Commission (SEC) approved amendments
to SBGCCI Articles of Incorporation which the
petitioners allege make their shares non-
proprietary.Petitioners allege that this change was
made without the appropriate disclosure of SBGCCI to
its shareholders.Furthermore, petitioners allege several
instances of fraud committed by SBGCCI’s board of
directors in itsFebruary 26, 2003
complaint.Respondent’s answered the complaint by
refuting allegations made by petitioners. As a way of
defense,respondents underscored petitioners’failure
to:show that it was authorized by SBGSI to file
complaint on said company’s behalscomply with the
requisites for filing a derivative suit and an action for
receivership justify their prayer for injunctive relief since
the complaint may be considered a nuisance or
harassmentsuit. Thus, respondents prayed for
dismissal of the complaint.On July 28, 2003, the RTC
held that the action is a derivative suit and issued an
order dismissing the complaint. Petitioners elevated the
case to the Court of Appeals but the appellate court
affirmed the RTC decision.
ISSUE:
WON the petitioners are proper party in interest WON
the complaint is a derivative suit
RULING:
Petitioners did not offer proof that they were authorized
to represent SBGSI.The Court ruling in Cua, Jr. v.
Tan elaborated the three (3) types of suit:individual,
class orrepresentative, and derivative suit.The reliefs
prayed for by petitioners, to wit: (i) enjoining
defendants from acting as officers and Board
of Directors of the corporation, (ii) the appointment of
receiver, (iii) damages, clearly show that thecomplaint
was filed to curb the alleged mismanagement of
SBGCCI. The cause of action pleaded by petitioners
do not accrue to a single shareholder or a class of
shareholders but to the corporation itself.
While there were allegations of fraud in the
subscription, petitioners do not wish to
have theirsubscription rescinded. Instead, the
petitioners asked that the respondents be removed
from themanagement of the corporation. Petitioner’s
only possible causeof action as the minority
shareholderagainst the actions of the board is to file
the common law right to file a derivative suit. As
minority shareholders, petitioners do not have any
statutory right to override the business judgements of
SBGCCI’sofficers and board of directors on the ground
of the latter’s alleged lack of qualification to manage a
golf course. The legal standing of the petitioners is not
a statutory right, there being no provision in
theCorporation Code or related statutes, but is instead
a product of jurisprudence based on equity. However,a
derivative suit cannot prosper without first
complying with the legalrequisites for its
institution:Interim Rules Governing Intra-Corporate
Controversies.Petitioners failed to comply with
secondrequisite: “…exerted all reasonable efforts, and
alleges the same withparticularity in the complaint, to
exhaust all remedies available under thearticles of
incorporation, by-laws, laws or rules governing the
corporation orpartnership to obtain the relief he
desires…”
Thus, a complaint which contained no allegation
whatsoever of any effort to availof intra-corporate remedies
allows the court to dismiss it, even motu proprio.Indeed,
even if petitioners thought it was futile to exhaust intra-
corporateremedies, they should have stated the same in
the Complaint and specified thereasons for such opinion.
The requirement of this allegation in the Complaint isnot a
useless formality which may be disregarded at will.
Vda. De Salazar vs. CA, Primitivo Nepomuceno and
Emerenciana Nepomunceno
Facts:
Both Nepomuceno filed separate complaints with the
court of agrarian relations of malolos, bulacan,for
ejectment on the ground of personal cultivation and
conversion of land for useful non-agriculturalpurposes
against petitioner's deceased husband, Benjamin
Salazar. The case went through theagrarian court and
RTC from 1970 to 1993 and decided in favour of the
Nepomucenos. Which an appeal was interposed in the
name of Benjamin Salazar on the ground of that
Nepomuceno’s failed to satisfy the requirements
pertaining to personal cultivation and conversion of the
landholdings intonon-agricultural uses. However it was
rejected. A year later, petitioner assailed the decision
of the trial court before the CA by way of petition
forannulment of judgement. That it did not have
jurisdiction over her and the other heirs of her
husbandthat said husband had already died on oct 3
1991 which the trial still proceeded and rendered
itsdecision on aug 23 1993 w/o affecting the
substitution under rule 3 sec 17 Rules of court.CA ruled
in favor of the validity of the challenged decision.
Issues:
W/N there formal substitution of heirs in not
necessary?
Held:
Yes.theCA correctly ruled that formal substitution of
heirs is not necessary when the heirsthemselves
voluntarily appeared, participated in the case and
presented evidence in defense ofdeceased
defendant. As expounded by CA: jurisprudential rule is
that failure to make the substitution is a
jurisdictionaldefect, purpose of this procedural rule is to
comply with due process requirements. For the case
tocontinue, the real party in interest must be
substituted for the deceased. The real party in interest
isthe one who would be affected by the judgment. It
could be the administrator or executor or the heirs.In
the instant case, the heirs are the proper substitutes.
Substitution gives them the opportunity tocontinue the
defense for the deceased. Substitution is important
because such opportunity to defendis a requirement to
comply with due process.The following are the active
participation of the heirs in the defence after the death
of Salazar:1.lawyer did not stop representing the
deceased which lasted for about two more
years,counsel was allowed by the petitioner who was
well aware of the instant litigation to continueappearing
as counsel until August 23, 1993 when the challenged
decision was rendered.
2.The wife testified in court and declared that her
husband is already deceased. She newtherefore that
there was a litigation against her husband, which her
and her childrens interestare involve.
3.The petition for judgement was filed 1 and ½ after the
decision was rendered.
4.Jurisdiction by estoppel, which jurisdiction over the
person may be acquired by simpleappearance of the
person in court.
Consequently, it undeniably being evident that
the heirs themselves sought their day in court and
exercisetheir right to due process.The ejectment being
an action involving recovery of real property, is a real
action which is not extinguished bydeath. And that a
judgement in an ejectment case is conclusive between
the parties and their successors ininterest by title
subsequent to the commencement of the
action.Petition dismiss.
OCHOA VS CHINA BANK
GR 192877
Petitioners insist that it was error for the CA to rule that
the stipulated exclusive venue of Makati City is binding
only on petitioners’ complaint for Annulment of
Foreclosure, Sale, and Damages filed before the
Regional Trial Court of Parañaque City, but not on
respondent bank’s Petition for Extrajudicial Foreclosure
of Mortgage, which was filed with the same court.
We disagree.
The extrajudicial foreclosure sale of a real estate
mortgage is governed by Act No. 3135, as amended by
Act No. 4118, otherwise known as "An Act to Regulate
the Sale of Property Under Special Powers Inserted In
or Annexed to Real-Estate Mortgages." Sections 1 and
2 thereof clearly state:
Section 1. When a sale is made under a special power
inserted in or attached to any real-estate mortgage
hereafter made as security for the payment of money
or the fulfillment of any other obligation, the provisions
of the following sections shall govern as to the manner
in which the sale and redemption shall be effected,
whether or not provision for the same is made in the
power.
Sec. 2. Said sale cannot be made legally outside of the
province in which the property sold is situated; and in
case the place within said province in which the sale is
to be made is the subject of stipulation, such sale shall
be made in said place or in the municipal building of
the municipality in which the property or part thereof is
situated.5
The case at bar involves petitioners’ mortgaged real
property located in Parañaque City over which
respondent bank was granted a special power to
foreclose extra-judicially. Thus, by express provision of
Section 2, the sale can only be made in Parañaque
City.
The exclusive venue of Makati City, as stipulated by
the parties6 and sanctioned by Section 4, Rule 4 of the
Rules of Court,7 cannot be made to apply to the
Petition for Extrajudicial Foreclosure filed by
respondent bank because the provisions of Rule 4
pertain to venue of actions, which an extrajudicial
foreclosure is not.
Pertinent are the following disquisitions in Supena v.
De la Rosa:8
Section 1, Rule 2 [of the Rules of Court] defines
an action in this wise:
"Action means an ordinary suit in a court of justice, by
which one party prosecutes another for the
enforcement or protection of a right, or the prevention 1. All applications for extrajudicial foreclosure of
or redress of a wrong." mortgage whether under the direction of the sheriff or a
notary public, pursuant to Act 3135, as amended by
Hagans v. Wislizenus does not depart from this Act 4118, and Act 1508, as amended, shall be filed
definition when it states that "[A]n action is a formal with the Executive Judge, through the Clerk of Court
demand of one's legal rights in a court of justice in the who is also the Ex-Officio Sheriff.
manner prescribed by the court or by the law. x x x." It
is clear that the determinative or operative fact which Verily then, with respect to the venue of extrajudicial
converts a claim into an "action or suit" is the filing of foreclosure sales, Act No. 3135, as amended, applies,
the same with a "court of justice." Filed elsewhere, as it being a special law dealing particularly with
with some other body or office not a court of justice, the extrajudicial foreclosure sales of real estate mortgages,
claim may not be categorized under either term. Unlike and not the general provisions of the Rules of Court on
an action, an extrajudicial foreclosure of real estate Venue of Actions.
mortgage is initiated by filing a petition not with any
court of justice but with the office of the sheriff of the Consequently, the stipulated exclusive venue of Makati
province where the sale is to be made.1avvphi1 By no City is relevant only to actions arising from or related to
stretch of the imagination can the office of the sheriff the mortgage, such as petitioners’ complaint for
come under the category of a court of justice. And as Annulment of Foreclosure, Sale, and Damages.
aptly observed by the complainant, if ever the
executive judge comes into the picture, it is only The other arguments raised in the motion are a mere
because he exercises administrative supervision over reiteration of those already raised in the petition for
the sheriff. But this administrative supervision, review. As declared in this Court’s Resolution on
however, does not change the fact that extrajudicial January 17, 2011, the same failed to show any
foreclosures are not judicial proceedings, actions or sufficient ground to warrant the exercise of our
suits.9 appellate jurisdiction.
These pronouncements were confirmed on August 7,
2001 through A.M. No. 99-10-05-0, entitled "Procedure
in Extra-Judicial Foreclosure of Mortgage," the
significant portions of which provide:
In line with the responsibility of an Executive Judge
under Administrative Order No. 6, date[d] June 30,
1975, for the management of courts within his
administrative area, included in which is the task of
supervising directly the work of the Clerk of Court, who
is also the Ex-Office Sheriff, and his staff, and the
issuance of commissions to notaries public and
enforcement of their duties under the law, the following
procedures are hereby prescribed in extra-judicial
foreclosure of mortgages: