TOPIC: A DISMISSAL OF THE COMPLAINT AS
AGAINST ONE OF THE INDISPENSABLE PARTIES, WILL RESULT TO DISMISSAL AS TO THE
OTHERS
NATURE OF THE CASE: The
case was elevated to the SC by way of petition for certiorari to annul and set
aside certain actuations of the CFI; specifically, its granting of the motion
to drop the two non-defaulted defendants and proceeding to hear to hear the
rest of Tan Put’s (plaintiff’s) evidence ex-parte, and subsequently rendering
judgment by default against the defaulted defendants.
FACTS:
Tee Hoon Lim Po Chuan, Alfonso Ng Sua
and Antonio Lim Tanhu were partners in the commercial partnership of Glory
Commercial Company with Tee Hoon as the manager. When Tee Hoon died, Tan Put,
claiming to be the widow, filed a complaint against spouses Antonio Lim Tanhu
and Dy Ochay. Later, the complaint included Lim Tanhu’s son Lim Teck Chuan, as
well as the spouses Alfonso Ng Sua and Co Oyo, and their son Eng Chong
Leonardo. Tan Put claims in her complaint that after Tee Hoon died, there was
no liquidation of the company assets made and that she owns one third of the
company shares. However, Lim Tanhu, Ng Sua, Lim Teck Chuan, and Eng Chong
Leonardo continued to manage the company and used the company funds to acquire
lands and buildings in several areas. Allegedly,
the defendants also used the company assets to organize another corporation
known as Glory Commercial, Inc.
Subsequently, Tan Put amended her
complaint and added other averments. According to Tan Put, she had asked the
defendants to liquidate the business of the defunct partnership including real
estate investments in Hong Kong. The defendants did not make good in their
promise to liquidate the said properties, and instead, induced her to execute a
quitclaim of all her rights and interests in the same. After the quitclaim was
executed, Lim Tanhu allegedly offered to pay her P65,000 and issued a receipt
to her bearing the said amount. She signed the receipt but was not given a copy
of it and had not received the said money. When she eventually made a formal
demand for the accounting and liquidation of the partnership company’s assets,
the defendants refused and stated that they will not give her share.
Lim Tanhu, et. al.: The
amended complaint (2nd paragraph) should not be admitted as there were material
modifications of the causes of action previously alleged.
CFI: The judge allowed
the amendment and said that the present action is for accounting of real and
personal properties as well as for the recovery of the same with damages. The
amended complaint only alleged facts that merely amplified the material
averments constituting the cause of action in the original complaint. It
likewise include necessary and indispensable defendants without whom no final
determination can be had in the action and in order that complete relief is to
be accorded as between those already parties. Thus, the amendments were allowed
because they did not change the main causes of action in the original
complaint.
---Trial continued
The
defendants filed a single answer with counterclaim. They assert that Tan Put
was not Tee Hoon’s legitimate wife as the real Mrs. Tee Hoon, Ang Siok Tin, is
in Hong Kong. They also denied the allegations of fraud and claimed that proper
liquidation had been regularly made of the business of the partnership and Tee
Hoon regularly received his share until his death. After which, the partnership
was dissolved and his supposed share were all given to Ang Siok and their
children.
Lim Tanhu,
et.al.: (By way of COUNTERCLAIM) The
case should be dismissed since Tan Put is not the legitimate wife, and thus,
lacks the legal capacity to sue them. Further, even before the death of Tee
Hoon, Tan Put was no longer the decedent’s common law wife and the ‘quitclaim’
was only offered to her by Lim Tanhu out of the latter’s kindness and
generosity. Thus, in the event that Tan Put is filing the case under Art. 144
of the Civil Code (this part was already removed in the present Civil Code and
was replaced by the Family Code), then, her acceptance of the ‘quitclaim’
constitutes a waiver for her claims.
The
newly acquired properties of the defendants were bought out of their own
personal funds and not from the funds belonging to the partnership. Further,
since Tee Hoon and Tan Put did not have a child together, there was no one who
is lawfully entitled to succeed to the properties left by Tee Hoon together
with the widow and the legitimate children.
Tan Put: The said counterclaim should be dismissed as it is
merely permissive and the corresponding filing fee was not paid.
CFI: (Ruling on the motion of Tan Put to dismiss the
counterclaim of the defendants) Overruled. The counterclaim was accepted by the
court and declared to be a compulsory counterclaim.
Tan Put: Denied all the allegations in the defendants
counterclaim.
--- However, on the date set for the pre-trial, the
spouses Lim Tanhus and Ng Suas did not appear, it being their belief that they
were all compulsory parties and that the defense of one is the defense of all
of them. Thus, they were all “declared in DEFAULT”. The said spouses tried to
lift the order thru a motion for reconsideration, but the court denied such.
During the trial, while her allegedly adopted son Antonio Nuñez
was testifying and was up for re-cross-examination, Tan Put suddenly filed a
motion to drop Lim Teck Chuan and Eng Chong Leonardo as defendants to the case
without justifications, which was granted by the court.
CFI: With the granting of the motion to drop Lim Teck
Chuan and Eng Chong Leonardo as defendants, the case against the two was
dismissed upon order. However, since the spouses Lim Tanhus and Ng Suas were
declared to be in default for their non-appearance in the pretrial, they remain
to be defendants in the complaint. Aside from giving the said order, the court
proceeded to hear ex-parte the rest of Tan Put’s evidence.
--- The dropped defendants separately filed a
motion for reconsideration over the said orders of the RTC, but were all
denied. However, the denial of their motions was received after the RTC’s
judgment was promulgated.
Thus,
all the defendants filed a motion to quash the order dropping the 2 defendants,
but was later declared to be abandoned by the defendants. Hence this present
petition for certiorari to annul the decision and actuations of the CFI.
Lim Tanhu,
et.al. : There was a compulsory
counterclaim in the common answer of the defendants and it is the nature of
such that it cannot be decided in an independent action. Under Sec.4 Rule 18,
the CFI has no authority to divide the case before it by dismissing the case
against the non-defaulted defendants, and thereafter proceeded to hear the case
ex-parte and subsequently rendering judgment against the defaulted defendants.
Further, under the said rule, when a common cause of action is alleged against
several defendants, the default of any of them is a mere formality by which
those defaulted are not allowed to take part in the proceedings. But
otherwise, all the defendants, defaulted and not defaulted, are supposed to
have but a common fate, win or lose. Thus, there shall only be one common
judgment for or against all the defendants, whether defaulted or non-defaulted.
Following such argument, either the CFI dismiss the case against all the
defendants or resume the proceedings and allow the non-defendants to defend the
case for all the defendants.
Tan Put: The
spouses Lim Tanhu and the spouses Ng Suas were properly declared in default.
Thus, they have no personality or interest to question the dismissal of the
case as against their non-defaulted co-defendants and should suffer the
consequences of their own default.
ISSUE: Whether or not, by
virtue of the nature of the counterclaim of the defendants, either the
dismissal of the complaint be applied to all the defendants or the proceedings
be resumed and the non-defaulted defendants be allowed to present defense on
behalf of all of them.
HELD: Yes. The defendants’
counterclaim is a compulsory one because the same evidence to sustain it will
also refute the cause or causes of action alleged in plaintiff's complaint.
Moreover, it is compulsory because it is obvious that the same cannot
"remain pending for independent adjudication by the court."
Further, under the rules, "(i)f a
counterclaim has been pleaded by a defendant prior to the service upon him of
the plaintiff's motion to dismiss, the action shall not be dismissed against
the defendant's objection unless the counterclaim can remain pending for
independent adjudication by the court." In the instant case, it was
evident that the judgment against the defaulted defendants was rendered before
the non-defaulted defendants’ motion for reconsideration of the order dropping
them as defendants in the case was received by them.
It should be noted that when Tan Put
earlier questioned the defendants’ counterclaim, the CFI ruled that the same
was permissive, and yet, contrary to the nature of compulsory counterclaim, it
granted the dropping of the non-defaulted defendants and proceeded in hearing
Tan Put’s evidence ex-parte.
Moreover, it is clear that all the
defendants are indispensable parties and under the rules of court and according
to jurisprudence, “when an indispensable party is not before the court (that)
the action should be dismissed."
Additionally, the order dropping the
non-defaulted defendants “was not predicated on Section 2 of Rule 17 but more
on Section 11 of Rule 3. But the truth is that nothing can be more incorrect.”
To start with, the latter rule does not comprehend whimsical and irrational
dropping or adding of parties in a complaint. What it really contemplates is
erroneous or mistaken non-joinder and misjoinder of parties. No one is free to
join anybody in a complaint in court only to drop him unceremoniously later at
the pleasure of the plaintiff. The rule presupposes that the original inclusion
had been made in the honest conviction that it was proper and the subsequent
dropping is requested because it has turned out that such inclusion was a
mistake. And this is the reason why the rule ordains that the dropping be
"on such terms as are just" — just to all the other parties.
In the case at bar, there is nothing in the
record to legally justify the dropping of the non-defaulted defendants, Lim and
Leonardo. Even Tan Put’s motion dropping them as defendants did not provide any
justification. From all appearances, Tan Put just decided to ask for it,
without any relevant explanation at all. Usually, the court in granting such a
motion inquires for the reasons and in the appropriate instances directs the
granting of some form of compensation for the trouble undergone by the
defendant in answering the complaint, preparing for or proceeding partially to
trial, hiring counsel and making corresponding expenses in the premises.
Nothing of these, appears in the order in question. Most importantly, the judge
ought to have considered that the outright dropping of the non-defaulted
defendants Lim and Leonardo, over their objection at that, would certainly be
unjust not only to the petitioners, their own parents, who would in consequence
be entirely defenseless, but also to Lim and Leonardo themselves who would
naturally correspondingly suffer from the eventual judgment against their
parents. Respondent court paid no heed at all to the mandate that such dropping
must be on such terms as are just" — meaning to all concerned with its
legal and factual effects.
Thus, it is quite plain that
respondent court erred in issuing its order of dismissal of the order dropping
the non-defaulted defendants in the complaint as well as its order denying
reconsideration of such dismissal. Though Lim and Leonardo are not parties to
the herein petition, such consideration is inconsequential. The fate of the
case of petitioners is inseparably tied up with said order of dismissal, if
only because the order of ex-parte hearing of the case which directly
affects and prejudices said petitioners is predicated thereon.
Hence, PETITION GRANTED. All proceedings
held by the respondent CFI particularly the ex-parte proceedings against the
defendants are annulled and set aside. Further, “[r]espodent court is hereby
ordered to enter an order extending the effects of its order of dismissal of
the action dated October 21, 1974 to herein petitioners Antonio Lim Tanhu, Dy
Ochay, Alfonso Leonardo Ng Sua and Co Oyo. And respondent court is hereby
permanently enjoined from taking any further action in said civil case gave and
except as herein indicated.”
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