G.R. No. 162788. July 28, 2005. Spouses JULITA DE LA CRUZ and FELIPE DE LA CRUZ, petitioners, vs.

PEDRO JOAQUIN, respondent. George Erwin M. Garcia for petitioners. Nicolas P. Lapena, Jr. for respondent. SYLLABUS 1. REMEDIAL LAW; CIVIL PROCEDURE; PARTIES TO CIVIL ACTIONS; WHEN A PARTY TO A PENDING ACTION DIES AND THE CLAIM IS NOT EXTINGUISHED, SUBSTITUTION OF THE DECEASED IS REQUIRED; PURPOSE. When a party to a pending action dies and the claim is not extinguished, the Rules of Court require a substitution of the deceased. The procedure is specifically governed by Section 16 of Rule 3, . . . . The rule on the substitution of parties was crafted to protect every party's right to due process. The estate of the deceased party will continue to be properly represented in the suit through the duly appointed legal representative. Moreover, no adjudication can be made against the successor of the deceased if the fundamental right to a day in court is denied. 2. ID.; ID.; ID.; ID.; A FORMAL SUBSTITUTION BY HEIRS IS NOT NECESSARY WHEN THEY THEMSELVES VOLUNTARILY APPEAR, PARTICIPATE IN THE CASE, AND PRESENT EVIDENCE IN DEFENSE OF THE DECEASED. The Court has nullified not only trial proceedings conducted without the appearance of the legal representatives of the deceased, but also the resulting judgments. In those instances, the courts acquired no jurisdiction over the persons of the legal representatives or the heirs upon whom no judgment was binding. This general rule notwithstanding, a formal substitution by heirs is not necessary when they themselves voluntarily appear, participate in the case, and present evidence in defense of the deceased. These actions negate any claim that the right to due process was violated. CDcHSa 3. ID.; ID.; ID.; ID.; RULE ON SUBSTITUTION BY HEIRS IS NOT A MATTER OF JURISDICTION BUT A REQUIREMENT OF DUE PROCESS. Strictly speaking, the rule on the substitution by heirs is not a matter of jurisdiction, but a requirement of due process. Thus, when due

process is not violated, as when the right of the representative or heir is recognized and protected, noncompliance or belated formal compliance with the Rules cannot affect the validity of a promulgated decision. Mere failure to substitute for a deceased plaintiff is not a sufficient ground to nullify a trial court's decision. The alleging party must prove that there was an undeniable violation of due process. 4. ID.; ID.; ACTIONS; FORUM SHOPPING; DEFINED. Forum shopping is the institution of two or more actions or proceedings involving the same parties for the same cause of action, either simultaneously or successively, on the supposition that one or the other court would make a favorable disposition. Forum shopping may be resorted to by a party against whom an adverse judgment or order has been issued in one forum, in an attempt to seek a favorable opinion in another, other than by an appeal or a special civil action for certiorari. 5. ID.; ID.; ID.; ID.; WILLFUL AND DELIBERATE VIOLATION OF THE RULE ON FORUM SHOPPING IS A GROUND FOR THE SUMMARY DISMISSAL OF CASE AND CONSTITUTES DIRECT CONTEMPT OF COURT. Forum shopping trifles with the courts, abuses their processes, degrades the administration of justice, and congests court dockets. Willful and deliberate violation of the rule against it is a ground for the summary dismissal of the case; it may also constitute direct contempt of court. 6. ID.; ID.; ID.; ID.; TEST TO DETERMINE ITS EXISTENCE. The test for determining the existence of forum shopping is whether the elements of litis pendentia are present, or whether a final judgment in one case amounts to res judicata in another. 7. ID.; ID.; JUDGMENTS; RES JUDICATA; BARS A SUBSEQUENT SUIT INVOLVING THE SAME PARTIES, SUBJECT MATTER, AND CAUSE OF ACTION. Under res judicata, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies, in all later suits and on all points and matters determined in the previous suit. The term literally means a "matter adjudged, judicially acted upon, or settled by judgment." The principle bars a subsequent suit involving the same parties, subject matter, and cause of action. Public policy requires that controversies must be settled with finality at a given point in time.

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8. ID.; ID.; ID.; ID.; ELEMENTS OF RES JUDICATA. The elements of res judicata are as follows: (1) the former judgment or order must be final; (2) it must have been rendered on the merits of the controversy; (3) the court that rendered it must have had jurisdiction over the subject matter and the parties; and (4) there must have been between the first and the second actions an identity of parties, subject matter and cause of action. cTaDHS DECISION PANGANIBAN, J p: The Rules require the legal representatives of a dead litigant to be substituted as parties to a litigation. This requirement is necessitated by due process. Thus, when the rights of the legal representatives of a decedent are actually recognized and protected, noncompliance or belated formal compliance with the Rules cannot affect the validity of the promulgated decision. After all, due process had thereby been satisfied. cCESaH The Case Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the August 26, 2003 Decision 2 and the March 9, 2004 Resolution 3 of the Court of Appeals (CA) in CA-GR CV No. 34702. The challenged Decision disposed as follows: "WHEREFORE, the foregoing considered, the appeal is DISMISSED and the assailed decision accordingly AFFIRMED in toto. No costs." 4 On the other hand, the trial court's affirmed Decision disposed as follows: "WHEREFORE, judgment is hereby rendered: "a) declaring the Deed of Absolute Sale (Exh. 'D') and 'Kasunduan' (Exhibit B), to be a sale with right of repurchase; IaAScD "b) ordering the plaintiff to pay the defendants the sum of P9,000.00 by way of repurchasing the land in question;

"c) ordering the defendants to execute a deed of reconveyance of said land in favor of the plaintiff after the latter has paid them the amount of P9,000.00 to repurchase the land in question; "d) ordering the defendants to yield possession of the subject land to the plaintiff after the latter has paid them the amount of P9,000.00 to repurchase the property from them; and "e) ordering the defendants to pay the plaintiff the amount P10,000.00 as actual and compensatory damages; the amount P5,000[.00] as exemplary damages; the amount of P5,000.00 expenses of litigation and the amount of P5,000.00 by way attorney's fees." 5 The Facts The case originated from a Complaint for the recovery of possession and ownership, the cancellation of title, and damages, filed by Pedro Joaquin against petitioners in the Regional Trial Court of Baloc, Sto. Domingo, Nueva Ecija. 6 Respondent alleged that he had obtained a loan from them in the amount of P9,000 on June 29, 1974, payable after five (5) years; that is, on June 29, 1979. To secure the payment of the obligation, he supposedly executed a Deed of Sale in favor of petitioners. The Deed was for a parcel of land in Pinagpanaan, Talavera, Nueva Ecija, covered by TCT No. T-111802. The parties also executed another document entitled "Kasunduan." 7 Respondent claimed that the Kasunduan showed the Deed of Sale to be actually an equitable mortgage. 8 Spouses De la Cruz contended that this document was merely an accommodation to allow the repurchase of the property until June 29, 1979, a right that he failed to exercise. 9 On April 23, 1990, the RTC issued a Decision in his favor. The trial court declared that the parties had entered into a sale with a right of repurchase. 10 It further held that respondent had made a valid tender of payment on two separate occasions to exercise his right of repurchase. 11 Accordingly, petitioners were required to reconvey the property upon his payment. 12 Ruling of the Court of Appeals of of as of

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Sustaining the trial court, the CA noted that petitioners had given respondent the right to repurchase the property within five (5) years from the date of the sale or until June 29, 1979. Accordingly, the parties executed the Kasunduan to express the terms and conditions of their actual agreement. 13 The appellate court also found no reason to overturn the finding that respondent had validly exercised his right to repurchase the land. 14 In the March 9, 2004 Resolution, the CA denied reconsideration and ordered a substitution by legal representatives, in view of respondent's death on December 24, 1988. 15 Hence, this Petition. 16 The Issues Petitioners assign the following errors for our consideration: "I. Public Respondent Twelfth Division of the Honorable Court of Appeals seriously erred in dismissing the appeal and affirming in toto the Decision of the trial court in Civil Case No. SD-838; CHDAEc "II. Public Respondent Twelfth Division of the Honorable Court of Appeals likewise erred in denying [petitioners'] Motion for Reconsideration given the facts and the law therein presented." 17 Succinctly, the issues are whether the trial court lost jurisdiction over the case upon the death of Pedro Joaquin, and whether respondent was guilty of forum shopping. 18 The Court's Ruling The Petition has no merit. First Issue: Jurisdiction Petitioners assert that the RTC's Decision was invalid for lack of jurisdiction. 19 They claim that respondent died during the pendency of the case. There being no substitution by the heirs, the trial court allegedly lacked jurisdiction over the litigation. 20

Rule on Substitution When a party to a pending action dies and the claim is not extinguished, 21 the Rules of Court require a substitution of the deceased. The procedure is specifically governed by Section 16 of Rule 3, which reads thus: "Section 16. Death of a party; duty of counsel. Whenever a party to a pending action dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact thereof, and to give the name and address of his legal representative or representatives. Failure of counsel to comply with this duty shall be a ground for disciplinary action. "The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an executor or administrator and the court may appoint a guardian ad litem for the minor heirs. "The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of thirty (30) days from notice. "If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail to appear within the specified period, the court may order the opposing party, within a specified time, to procure the appointment of an executor or administrator for the estate of the deceased, and the latter shall immediately appear for and on behalf of the deceased. The court charges in procuring such appointment, if defrayed by the opposing party, may be recovered as costs." The rule on the substitution of parties was crafted to protect every party's right to due process. The estate of the deceased party will continue to be properly represented in the suit through the duly appointed legal representative. Moreover, no adjudication can be made against the successor of the deceased if the fundamental right to a day in court is denied. The Court has nullified not only trial proceedings conducted without the appearance of the legal representatives of the deceased, but also

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the resulting judgments. In those instances, the courts acquired no jurisdiction over the persons of the legal representatives or the heirs upon whom no judgment was binding. This general rule notwithstanding, a formal substitution by heirs is not necessary when they themselves voluntarily appear, participate in the case, and present evidence in defense of the deceased. These actions negate any claim that the right to due process was violated. The Court is not unaware of Chittick v. Court of Appeals, 28 in which the failure of the heirs to substitute for the original plaintiff upon her death led to the nullification of the trial court's Decision. The latter had sought to recover support in arrears and her share in the conjugal partnership. The children who allegedly substituted for her refused to continue the case against their father and vehemently objected to their inclusion as parties. Moreover, because he died during the pendency of the case, they were bound to substitute for the defendant also. The substitution effectively merged the persons of the plaintiff and the defendant and thus extinguished the obligation being sued upon. 30 Clearly, the present case is not similar, much less identical, to the factual milieu of Chittick. Strictly speaking, the rule on the substitution by heirs is not a matter of jurisdiction, but a requirement of due process. Thus, when due process is not violated, as when the right of the representative or heir is recognized and protected, noncompliance or belated formal compliance with the Rules cannot affect the validity of a promulgated decision. 31 Mere failure to substitute for a deceased plaintiff is not a sufficient ground to nullify a trial court's decision. The alleging party must prove that there was an undeniable violation of due process. Substitution in the Instant Case The records of the present case contain a "Motion for Substitution of Party Plaintiff" dated February 15, 2002, filed before the CA. The prayer states as follows:

"WHEREFORE, it is respectfully prayed that the Heirs of the deceased plaintiff-appellee as represented by his daughter Lourdes dela Cruz be substituted as party-plaintiff for the said Pedro Joaquin. "It is further prayed that henceforth the undersigned counsel 32 for the heirs of Pedro Joaquin be furnished with copies of notices, orders, resolutions and other pleadings at its address below." Evidently, the heirs of Pedro Joaquin voluntary appeared and participated in the case. We stress that the appellate court had ordered 33 his legal representatives to appear and substitute for him. The substitution even on appeal had been ordered correctly. In all proceedings, the legal representatives must appear to protect the interests of the deceased. 34 After the rendition of judgment, further proceedings may be held, such as a motion for reconsideration or a new trial, an appeal, or an execution. 35 Considering the foregoing circumstances, the Motion for Substitution may be deemed to have been granted; and the heirs, to have substituted for the deceased, Pedro Joaquin. There being no violation of due process, the issue of substitution cannot be upheld as a ground to nullify the trial court's Decision. Second Issue: Forum Shopping Petitioners also claim that respondents were guilty of forum shopping, a fact that should have compelled the trial court to dismiss the Complaint. 36 They claim that prior to the commencement of the present suit on July 7, 1981, respondent had filed a civil case against petitioners on June 25, 1979. Docketed as Civil Case No. SD-742 for the recovery of possession and for damages, it was allegedly dismissed by the Court of First Instance of Nueva Ecija for lack of interest to prosecute. Forum Shopping Defined Forum shopping is the institution of two or more actions or proceedings involving the same parties for the same cause of action, either simultaneously or successively, on the supposition that one or the other court would make a favorable disposition. 37 Forum

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shopping may be resorted to by a party against whom an adverse judgment or order has been issued in one forum, in an attempt to seek a favorable opinion in another, other than by an appeal or a special civil action for certiorari. 38 Forum shopping trifles with the courts, abuses their processes, degrades the administration of justice, and congests court dockets. 39 Willful and deliberate violation of the rule against it is a ground for the summary dismissal of the case; it may also constitute direct contempt of court. 40 The test for determining the existence of forum shopping is whether the elements of litis pendentia are present, or whether a final judgment in one case amounts to res judicata in another. We note, however, petitioners' claim that the subject matter of the present case has already been litigated and decided. Therefore, the applicable doctrine is res judicata. Applicability of Res Judicata Under res judicata, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies, in all later suits and on all points and matters determined in the previous suit. The term literally means a "matter adjudged, judicially acted upon, or settled by judgment." 44 The principle bars a subsequent suit involving the same parties, subject matter, and cause of action. Public policy requires that controversies must be settled with finality at a given point in time. IDcHCS The elements of res judicata are as follows: (1) the former judgment or order must be final; (2) it must have been rendered on the merits of the controversy; (3) the court that rendered it must have had jurisdiction over the subject matter and the parties; and (4) there must have been between the first and the second actions an identity of parties, subject matter and cause of action. Failure to Support Allegation The onus of proving allegations rests upon the party raising them. 46 As to the matter of forum shopping and res judicata, petitioners have

failed to provide this Court with relevant and clear specifications that would show the presence of an identity of parties, subject matter, and cause of action between the present and the earlier suits. They have also failed to show whether the other case was decided on the merits. Instead, they have made only bare assertions involving its existence without reference to its facts. In other words, they have alleged conclusions of law without stating any factual or legal basis. Mere mention of other civil cases without showing the identity of rights asserted and reliefs sought is not enough basis to claim that respondent is guilty of forum shopping, or that res judicata exists. 47 WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED. Costs against petitioners. ASETHC SO ORDERED.

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[G.R. No. 190823. April 4, 2011.] DOMINGO CARABEO, petitioner, vs. SPOUSES NORBERTO and SUSAN DINGCO, respondents. DECISION CARPIO MORALES, J p: On July 10, 1990, Domingo Carabeo (petitioner) entered into a contract denominated as "Kasunduan sa Bilihan ng Karapatan sa Lupa" 1 (kasunduan) with Spouses Norberto and Susan Dingco (respondents) whereby petitioner agreed to sell his rights over a 648 square meter parcel of unregistered land situated in Purok III, Tugatog, Orani, Bataan to respondents for P38,000. TDCAIS Respondents tendered their initial payment of P10,000 upon signing of the contract, the remaining balance to be paid on September 1990. Respondents were later to claim that when they were about to hand in the balance of the purchase price, petitioner requested them to keep it first as he was yet to settle an on-going "squabble" over the land. Nevertheless, respondents gave petitioner small sums of money from time to time which totaled P9,100, on petitioner's request according to them; due to respondents' inability to pay the amount of the remaining balance in full, according to petitioner. By respondents' claim, despite the alleged problem over the land, they insisted on petitioner's acceptance of the remaining balance of P18,900 but petitioner remained firm in his refusal, proffering as reason therefor that he would register the land first. Sometime in 1994, respondents learned that the alleged problem over the land had been settled and that petitioner had caused its registration in his name on December 21, 1993 under Transfer Certificate of Title No. 161806. They thereupon offered to pay the balance but petitioner declined, drawing them to file a complaint before the Katarungan Pambarangay. No settlement was reached, however, hence, respondent filed a complaint for specific

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performance before the Regional Trial Court (RTC) of Balanga, Bataan. AEIHCS Petitioner countered in his Answer to the Complaint that the sale was void for lack of object certain, the kasunduan not having specified the metes and bounds of the land. In any event, petitioner alleged that if the validity of the kasunduan is upheld, respondents' failure to comply with their reciprocal obligation to pay the balance of the purchase price would render the action premature. For, contrary to respondents' claim, petitioner maintained that they failed to pay the balance of P28,000 on September 1990 to thus constrain him to accept installment payments totaling P9,100. After the case was submitted for decision or on January 31, 2001, 2 petitioner passed away. The records do not show that petitioner's counsel informed Branch 1 of the Bataan RTC, where the complaint was lodged, of his death and that proper substitution was effected in accordance with Section 16, Rule 3, Rules of Court. 3 By Decision of February 25, 2001, 4 the trial court ruled in favor of respondents, disposing as follows: WHEREFORE, premises considered, judgment is hereby rendered ordering: 1. The defendant to sell his right over 648 square meters of land pursuant to the contract dated July 10, 1990 by executing a Deed of Sale thereof after the payment of P18,900 by the plaintiffs; ISAaTH 2. The defendant to pay the costs of the suit.

(A) . . . in holding that the element of a contract, i.e., an object certain is present in this case. (B) . . . in considering it unfair to expect respondents who are not lawyers to make judicial consignation after herein petitioner allegedly refused to accept payment of the balance of the purchase price. (C) . . . in upholding the validity of the contract, "Kasunduan sa Bilihan ng Karapatan sa Lupa," despite the lack of spousal consent, (underscoring supplied) TCaEIc and proffering that (D) [t]he death of herein petitioner causes the dismissal of the action filed by respondents; respondents' cause of action being an action in personam. (underscoring supplied) The petition fails. The pertinent portion of the kasunduan reads: 8 xxx xxx xxx

SO ORDERED. 5 Petitioner's counsel filed a Notice of Appeal on March 20, 2001. By the herein challenged Decision dated July 20, 2009, 6 the Court of Appeals affirmed that of the trial court. Petitioner's motion for reconsideration having been denied by Resolution of January 8, 2010, the present petition for review was filed by Antonio Carabeo, petitioner's son, 7 faulting the appellate court:

Na ako ay may isang partial na lupa na matatagpuan sa Purok 111, Tugatog, Orani Bataan, na may sukat na 27 x 24 metro kuwadrado, ang nasabing lupa ay may sakop na dalawang punong santol at isang punong mangga, kaya't ako ay nakipagkasundo sa mag-asawang Norby Dingco at Susan Dingco na ipagbili sa kanila ang karapatan ng nasabing lupa sa halagang P38,000.00. xxx xxx xxx (underscoring supplied)

That the kasunduan did not specify the technical boundaries of the property did not render the sale a nullity. The requirement that a sale must have for its object a determinate thing is satisfied as long as, at

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the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties. 9 As the above-quoted portion of the kasunduan shows, there is no doubt that the object of the sale is determinate. ACETID Clutching at straws, petitioner proffers lack of spousal consent. This was raised only on appeal, hence, will not be considered, in the present case, in the interest of fair play, justice and due process. 10 Respecting the argument that petitioner's death rendered respondents' complaint against him dismissible, Bonilla v. Barcena 11 enlightens: The question as to whether an action survives or not depends on the nature of the action and the damage sued for. In the causes of action which survive, the wrong complained [of] affects primarily and principally property and property rights, the injuries to the person being merely incidental, while in the causes of action which do not survive, the injury complained of is to the person, the property and rights of property affected being incidental. (emphasis and underscoring supplied) In the present case, respondents are pursuing a property right arising from the kasunduan, whereas petitioner is invoking nullity of the kasunduan to protect his proprietary interest. Assuming arguendo, however, that the kasunduan is deemed void, there is a corollary obligation of petitioner to return the money paid by respondents, and since the action involves property rights, 12 it survives. It bears noting that trial on the merits was already concluded before petitioner died. Since the trial court was not informed of petitioner's death, it may not be faulted for proceeding to render judgment without ordering his substitution. Its judgment is thus valid and binding upon petitioner's legal representatives or successors-ininterest, insofar as his interest in the property subject of the action is concerned. 13 SAaTHc In another vein, the death of a client immediately divests the counsel of authority. 14 Thus, in filing a Notice of Appeal, petitioner's counsel of record had no personality to act on behalf of the already deceased

client who, it bears reiteration, had not been substituted as a party after his death. The trial court's decision had thereby become final and executory, no appeal having been perfected. WHEREFORE, the petition is DENIED. SO ORDERED.

[G.R. No. 153788. November 27, 2009.] ROGER V. NAVARRO, petitioner, vs. HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN T. GO, doing business under the name KARGO ENTERPRISES, respondents. DECISION BRION, J p: This is a petition for review on certiorari 1 that seeks to set aside the Court of Appeals (CA) Decision 2 dated October 16, 2001 and Resolution 3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26, 2000 4 and March 7, 2001 5 orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarro's (Navarro) motion to dismiss. TDcEaH BACKGROUND FACTS

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On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first complaint) 6 and 98-598 (second complaint), 7 before the RTC for replevin and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarro's possession. The first complaint stated: 1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City and doing business under the trade name KARGO ENTERPRISES, an entity duly registered and existing under and by virtue of the laws of the Republic of the Philippines, which has its business address at Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he may be served with summons and other processes of the Honorable Court; that defendant "JOHN DOE" whose real name and address are at present unknown to plaintiff is hereby joined as party defendant as he may be the person in whose possession and custody the personal property subject matter of this suit may be found if the same is not in the possession of defendant ROGER NAVARRO; 2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles, including hauling trucks and other heavy equipment; SEHACI 3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle which is more particularly described as follows Make/Type Serial No. Motor No. Plate No. FUSO WITH MOUNTED CRANE FK416K-51680 6D15-338735 GHK-378

as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and between KARGO ENTERPRISES, then represented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER NAVARRO . . .; that in accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were supposedly in payment of the agreed rentals; that when the fifth and sixth checks, i.e., PHILIPPINE BANK OF COMMUNICATIONS-CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively dated January 8, 1998 and February 8, 1998, were presented for payment and/or credit, the same were dishonored and/or returned by the drawee bank for the common reason that the current deposit account against which the said checks were issued did not have sufficient funds to cover the amounts thereof; that the total amount of the two (2) checks, i.e., the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66) therefore represents the principal liability of defendant ROGER NAVARRO unto plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH RIGHT TO PURCHASE; that demands, written and oral, were made of defendant ROGER NAVARRO to pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in vain to the great damage and injury of herein plaintiff; . . . cSaATC 4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law, or seized under an execution or an attachment as against herein plaintiff; xxx xxx xxx

8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the above-described motor vehicle from defendants unto plaintiff pending the final determination of this case on the merits and, for that purpose, there is attached hereto an affidavit duly executed and bond double the value of the personal property subject matter hereof to answer for damages and costs which defendants may suffer in the event that the

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order for replevin prayed for may be found out to having not been properly issued. The second complaint contained essentially the same allegations as the first complaint, except that the Lease Agreement with Option to Purchase involved is dated October 1, 1997 and the motor vehicle leased is described as follows: Make/Type Serial No. Motor No. FUSO WITH MOUNTED CRANE FK416K-510528 6D14-423403

court ordered Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff. When the RTC denied Navarro's motion for reconsideration on March 7, 2001, Navarro filed a petition for certiorari with the CA, essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of the case and directed Karen Go to amend her complaints by including her husband Glenn Go as coplaintiff. According to Navarro, a complaint which failed to state a cause of action could not be converted into one with a cause of action by mere amendment or supplemental pleading. CIScaA On October 16, 2001, the CA denied Navarro's petition and affirmed the RTC's order. 13 The CA also denied Navarro's motion for reconsideration in its resolution of May 29, 2002, 14 leading to the filing of the present petition. THE PETITION Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the requisite juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was Karen Go who filed the complaints and not Glenn Go, she was not a real party-in-interest and the complaints failed to state a cause of action. Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-plaintiff, instead of dismissing the complaint outright because a complaint which does not state a cause of action cannot be converted into one with a cause of action by a mere amendment or a supplemental pleading. In effect, the lower court created a cause of action for Karen Go when there was none at the time she filed the complaints. Even worse, according to Navarro, the inclusion of Glenn Go as coplaintiff drastically changed the theory of the complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed that the leased vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of the complaint are her paraphernal properties and the RTC gravely erred when it ordered the inclusion of Glenn Go as a co-plaintiff. SATDEI

The second complaint also alleged that Navarro delivered three postdated checks, each for the amount of P100,000.00, to Karen Go in payment of the agreed rentals; however, the third check was dishonored when presented for payment. 8 SAHIDc On October 12, 1998 9 and October 14, 1998, 10 the RTC issued writs of replevin for both cases; as a result, the Sheriff seized the two vehicles and delivered them to the possession of Karen Go. In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the lease agreements) the actionable documents on which the complaints were based. On Navarro's motion, both cases were duly December 13, 1999. consolidated on

In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of action. In response to the motion for reconsideration Karen Go filed dated May 26, 2000, 11 the RTC issued another order dated July 26, 2000 setting aside the order of dismissal. Acting on the presumption that Glenn Go's leasing business is a conjugal property, the RTC held that Karen Go had sufficient interest in his leasing business to file the action against Navarro. However, the RTC held that Karen Go should have included her husband, Glenn Go, in the complaint based on Section 4, Rule 3 of the Rules of Court (Rules). 12 Thus, the lower

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Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to amend her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules. Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were premature because no prior demand was made on him to comply with the provisions of the lease agreements before the complaints for replevin were filed. Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were illegally seized from his possession and should be returned to him immediately. Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the subject of the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of Kargo Enterprises and Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarro's insistence that Kargo Enterprises is Karen Go's paraphernal property is without basis. Based on the law and jurisprudence on the matter, all property acquired during the marriage is presumed to be conjugal property. Finally, Karen Go insists that her complaints sufficiently established a cause of action against Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff, this was merely to comply with the rule that spouses should sue jointly, and was not meant to cure the complaints' lack of cause of action. THE COURT'S RULING We find the petition devoid of merit. Karen Go is the real party-in-interest The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real party-ininterest, i.e., 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. 15 TcHCIS

Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he still insists that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts were in Kargo Enterprises' name, this was merely a trade name without a juridical personality, so the actual parties to the lease agreements were Navarro and Glenn Go, to the exclusion of Karen Go. As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was none. We do not find Navarro's arguments persuasive. The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name appears in the title of the Complaint where the plaintiff was identified as "KAREN T. GO doing business under the name KARGO ENTERPRISES", and this identification was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant "leased from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the Complaint specifies and attaches as its integral part the Lease Agreement that underlies the transaction between the plaintiff and the defendant. Again, the name KARGO ENTERPRISES entered the picture as this Lease Agreement provides: This agreement, made and entered into by and between: AHDaET

GLENN O. GO, of legal age, married, with post office address at . . ., herein referred to as the LESSOR-SELLER; representing KARGO ENTERPRISES as its Manager, xxx xxx xxx

thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by the express terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises and the latter is clearly the real party to the lease agreements.

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As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a juridical person, as defined by Article 44 of the Civil Code: Art. 44.The following are juridical persons: (1) The State and its political subdivisions;

This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states: DECSIT 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 authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest. As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a judgment in this case. Thus, contrary to Navarro's contention, Karen Go is the real party-ininterest, and it is legally incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease Agreement that her husband signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease Agreement in his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, as this is a matter for the trial court to consider in a trial on the merits. Glenn Go's Role in the Case We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go, 19 who described herself in the Complaints to be "a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing business under the trade name KARGO ENTERPRISES". 20 That Glenn Go and Karen Go are married to each other is a fact never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of a married woman, a fact material to the side issue of whether Kargo Enterprises and its properties are paraphernal or conjugal properties. To restate the parties' positions, Navarro alleges that Kargo Enterprises is Karen Go's paraphernal property, emphasizing the fact that the business is registered solely in Karen Go's name. On the other hand, Karen Go contends that while the business is registered in her name, it is in fact part of their conjugal property. cda The registration of the trade name in the name of one person a woman does not necessarily lead to the conclusion that the trade name as a property is hers alone, particularly when the woman is married. By law, all property acquired during the marriage, whether

(2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins as soon as they have been constituted according to law; (3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member. AICTcE Thus, pursuant to Section 1, Rule 3 of the Rules, 16 Kargo Enterprises cannot be a party to a civil action. This legal reality leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo Enterprises? We faced a similar question in Juasing Hardware v. Mendoza, 17 where we said: Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual, and requires the proprietor or owner thereof to secure licenses and permits, register the business name, and pay taxes to the national government. It does not vest juridical or legal personality upon the sole proprietorship nor empower it to file or defend an action in court. Thus, the complaint in the court below should have been filed in the name of the owner of Juasing Hardware. The allegation in the body of the complaint would show that the suit is brought by such person as proprietor or owner of the business conducted under the name and style Juasing Hardware. The descriptive words "doing business as Juasing Hardware" may be added to the title of the case, as is customarily done. 18 [Emphasis supplied.]

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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. 21 Our examination of the records of the case does not show any proof that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all, only the bare allegation of Navarro to this effect exists in the records of the case. As we emphasized in Castro v. Miat: 22 Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife". This article does not require proof that the property was acquired with funds of the partnership. The presumption applies even when the manner in which the property was acquired does not appear. 23 [Emphasis supplied.] Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is conjugal or paraphernal property, we hold that it is conjugal property. Article 124 of the Family Code, on the administration of the conjugal property, provides: Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision. ESTDcC xxx xxx xxx

relations of the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family Code and, suppletorily, by the spouses' marriage settlement and by the rules on partnership under the Civil Code. In the absence of any evidence of a marriage settlement between the spouses Go, we look at the Civil Code provision on partnership for guidance. A rule on partnership applicable to the spouses' circumstances is Article 1811 of the Civil Code, which states: Art. 1811. A partner is a co-owner with the other partners of specific partnership property. The incidents of this co-ownership are such that: (1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes; . . . Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered under this name; hence, both have an equal right to seek possession of these properties. Applying Article 484 of the Civil Code, which states that "in default of contracts, or special provisions, co-ownership shall be governed by the provisions of this Title", we find further support in Article 487 of the Civil Code that allows any of the co-owners to bring an action in ejectment with respect to the co-owned property. While ejectment is normally associated with actions involving real property, we find that this rule can be applied to the circumstances of the present case, following our ruling in Carandang v. Heirs of De Guzman. 24 In this case, one spouse filed an action for the recovery of credit, a personal property considered conjugal property, without including the other spouse in the action. In resolving the issue of whether the other spouse was required to be included as a co-plaintiff in the action for the recovery of the credit, we said: Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses Carandang, seems to be either an indispensable or a necessary party. If she is an indispensable party, dismissal would be proper. If she is merely a necessary party,

This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before performing an act of administration or any act that does not dispose of or encumber their conjugal property. Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements. In other words, the property

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dismissal is not warranted, whether or not there was an order for her inclusion in the complaint pursuant to Section 9, Rule 3. Article 108 of the Family Code provides: Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements. This provision is practically the same as the Civil Code provision it superseded: Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter. In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with the other partners of specific partnership property". Taken with the presumption of the conjugal nature of the funds used to finance the four checks used to pay for petitioners' stock subscriptions, and with the presumption that the credits themselves are part of conjugal funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit. Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-ownership, co-owners may bring actions for the recovery of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the benefit of his co-owners. In the latter case and in that of De Guia v. Court of Appeals, we also held that Article 487 of the Civil Code, which provides that any of the co-owners may bring an action for ejectment, covers all kinds of action for the recovery of possession. In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for

the recovery of the co-owned property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is presumed to have been filed for the benefit of all co-owners. 25 [Emphasis supplied.] Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo Enterprisesleased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code, supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the property in question without the other spouse's consent. On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the Rules, which states: Section 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided by law. Non-joinder of indispensable parties not ground to dismiss action Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases 26 that the misjoinder or nonjoinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated in Macababbad v. Masirag: 27 Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the dismissal of an action, thus: Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately. TAHIED

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In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable party at any stage of the action. The court, either motu proprio or upon the motion of a party, may order the inclusion of the indispensable party or give the plaintiff opportunity to amend his complaint in order to include indispensable parties. If the plaintiff to whom the order to include the indispensable party is directed refuses to comply with the order of the court, the complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only upon unjustified failure or refusal to obey the order to include or to amend is the action dismissed. In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is fully in order. Demand not required prior to filing of replevin action In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a replevin action to an unlawful detainer. For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2, Rule 60 of the Rules, which states: Sec. 2. Affidavit and bond. The applicant must show by his own affidavit or that of some other person who personally knows the facts: (a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof; IaEScC (b) That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof according to the best of his knowledge, information, and belief; (c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of execution or preliminary attachment, or otherwise placed under

custodia legis, or if so seized, that it is exempt from such seizure or custody; and (d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the affidavit aforementioned, for the return of the property to the adverse party if such return be adjudged, and for the payment to the adverse party of such sum as he may recover from the applicant in the action. We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action for a writ of replevin. More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already admitted in his Answers that he had received the letters that Karen Go sent him, demanding that he either pay his unpaid obligations or return the leased motor vehicles. Navarro's position that a demand is necessary and has not been made is therefore totally unmeritorious. WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs against petitioner Roger V. Navarro. SO ORDERED.

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IMELDA RELUCIO, petitioner, vs. ANGELINA MEJIA LOPEZ, respondent. SYNOPSIS Respondent Angelina Lopez filed a petition for Appointment as Sole Administratrix of Conjugal Partnership of Properties, Forfeiture, etc. against Alberto Lopez and petitioner Imelda Relucio. Allegedly, when Alberto abandoned his legal wife Angelina and their children, Alberto maintained an illicit relationship with Imelda and used the conjugal property of Angelina and Alberto in amassing properties. Angelina and her children, however, never benefited from the same. caTESD The issue is whether Angelina has a cause of action against Imelda. The Court ruled in the negative. The causes of the action here are for the judicial appointment of Angelina as administratrix of the conjugal partnership arising from her marriage to Alberto; for the accounting of the conjugal partnership; for the forfeiture of Alberto's share in the co-owned property acquired during his illicit relationship with Imelda; for support and moral damages. To all these, Imelda is a complete stranger. The administration of the property of the marriage is entirely between the spouses, to the exclusion of all other persons. Hence, the cause of action pertains only to Alberto. Imelda is not a real party in interest, neither can she be an indispensable party, nor a necessary party in the petition filed by Angelina. SYLLABUS 1. REMEDIAL LAW; CIVIL PROCEDURE; CAUSE OF ACTION; ELUCIDATED. First issue: whether a cause of action exists against petitioner in the proceedings below. "A cause of action is an act or omission of one party the defendant in violation of the legal right of the other." The elements of a cause of action are: 1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; 2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages. A cause of action is sufficient if a valid judgment may be rendered thereon if the alleged facts were admitted or proved. In order to

[G.R. No. 138497. January 16, 2002.]

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sustain a motion to dismiss for lack of cause of action, the complaint must show that the claim for relief does not exist, rather than that a claim has been merely defectively stated or is ambiguous, indefinite or uncertain. 2. ID.; ID.; ID.; NOT PRESENT AGAINST A COMPLETE STRANGER IN AN ACTION FOR JUDICIAL APPOINTMENT OF ABANDONED WIFE AS ADMINISTRATRIX OF THE CONJUGAL PARTNERSHIP. The first cause of action is for judicial appointment of respondent as administratrix of the conjugal partnership or absolute community property arising from her marriage to Alberto J. Lopez. Petitioner is a complete stranger to this cause of action. Article 128 of the Family Code refers only to spouses, to wit: "If a spouse without just cause abandons the other or fails to comply with his or her obligations to the family, the aggrieved spouse may petition the court for receivership, for judicial separation of property, or for authority to be the sole administrator of the conjugal partnership property . . ." The administration of the property of the marriage is entirely between them, to the exclusion of all other persons. Respondent alleges that Alberto J. Lopez is her husband. Therefore, her first cause of action is against Alberto J. Lopez. There is no right-duty relation between petitioner and respondent that can possibly support a cause of action. In fact, none of the three elements of a cause of action exists. cDAEIH 3. ID.; ID.; ID.; NOT PRESENT AGAINST A COMPLETE STRANGER IN AN ACTION FOR ACCOUNTING OF CONJUGAL PARTNERSHIP. The second cause of action is for an accounting "by respondent husband." The accounting of conjugal partnership arises from or is an incident of marriage. Petitioner has nothing to do with the marriage between respondent Alberto J. Lopez. Hence, no cause of action can exist against petitioner on this ground. 4. ID.; ID.; ID.; NOT PRESENT AGAINST A COMPLETE STRANGER IN AN ACTION FOR FORFEITURE OF HUSBAND'S SHARE IN PROPERTY CO-OWNED WITH THE STRANGER. Respondent's alternative cause of action is for forfeiture of Alberto J. Lopez' share in the co-owned property "acquired during his illicit relationship and cohabitation with [petitioner]" and for the "dissolution of the conjugal partnership of gains between him [Alberto J. Lopez] and the [respondent]." The third cause of action is essentially for forfeiture of Alberto J. Lopez' share in property co-owned by him and petitioner. It does not involve the

issue of validity of the co-ownership between Alberto J. Lopez and petitioner. The issue is whether there is basis in law to forfeit Alberto J. Lopez' share, if any there be, in property co-owned by him with petitioner. Respondent's asserted right to forfeit extends to Alberto J. Lopez' share alone. Failure of Alberto J. Lopez to surrender such share, assuming the trial court finds in respondent's favor, results in a breach of an obligation to respondent and gives rise to a cause of action. Such cause of action, however, pertains to Alberto J. Lopez, not petitioner. 5. ID.; ID.; ID.; NOT PRESENT AGAINST A COMPLETE STRANGER IN AN ACTION FOR SUPPORT, MORAL DAMAGES. The respondent also sought support. Support cannot be compelled from a stranger. As to the moral damages, respondent's claim for moral damages is against Alberto J. Lopez, not petitioner. To sustain a cause of action for moral damages, the complaint must have the character of an action for interference with marital or family relations under the Civil Code. 6. ID.; ID.; PARTIES; ONE WHO IS NOT A REAL PARTY IN INTEREST CANNOT BE AN INDISPENSABLE PARTY, NOR BE A NECESSARY PARTY. A real party in interest is one who stands "to be benefited or injured by the judgment of the suit." In this case, petitioner would not be affected by any judgment in Special Proceedings No. M-3630. If petitioner is not a real party in interest, she cannot be an indispensable party. An indispensable party is one without whom there can be no final determination of an action. Petitioner's participation in Special Proceedings M-3630 is not indispensable. Nor can petitioner be a necessary party in Special Proceedings M-3630. A necessary party as one who is not indispensable but who ought to be joined as party if complete relief is to be accorded those already parties, or for a complete determination or settlement of the claim subject of the action. EDHTAI DECISION PARDO, J p: The Case The case is a petition for review on certiorari 1 seeking to set aside the decision 2 of the Court of Appeals that denied a petition for

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certiorari assailing the trial court's order denying petitioner's motion to dismiss the case against her inclusion as party defendant therein. DCcTHa The Facts The facts, as found by the Court of Appeals, are as follows: "On September 15, 1993, herein private respondent Angelina Mejia Lopez (plaintiff below) filed a petition for "APPOINTMENT AS SOLE ADMINISTRATRIX OF CONJUGAL PARTNERSHIP OF PROPERTIES, FORFEITURE, ETC.," against defendant Alberto Lopez and petitioner Imelda Relucio, docketed as Spec. Proc. M-3630, in the Regional Trial Court of Makati, Branch 141. In the petition, private-respondent alleged that sometime in 1968, defendant Lopez, who is legally married to the private respondent, abandoned the latter and their four legitimate children; that he arrogated unto himself full and exclusive control and administration of the conjugal properties, spending and using the same for his sole gain and benefit to the total exclusion of the private respondent and their four children; that defendant Lopez, after abandoning his family, maintained an illicit relationship and cohabited with herein petitioner since 1976. "It was further alleged that defendant Lopez and petitioner Relucio, during their period of cohabitation since 1976, have amassed a fortune consisting mainly of stockholdings in Lopez-owned or controlled corporations, residential, agricultural, commercial lots, houses, apartments and buildings, cars and other motor vehicles, bank accounts and jewelry. These properties, which are in the names of defendant Lopez and petitioner Relucio singly or jointly or their dummies and proxies, have been acquired principally if not solely through the actual contribution of money, property and industry of defendant Lopez with minimal, if not nil, actual contribution from petitioner Relucio. "In order to avoid defendant Lopez obligations as a father and husband, he excluded the private respondent and their four children from sharing or benefiting from the conjugal properties and the income or fruits there from. As such, defendant Lopez either did not place them in his name or otherwise removed, transferred, stashed away or concealed them from the private-respondent. He placed

substantial portions of these conjugal properties in the name of petitioner Relucio. "It was also averred that in the past twenty five years since defendant Lopez abandoned the private-respondent, he has sold, disposed of, alienated, transferred, assigned, canceled, removed or stashed away properties, assets and income belonging to the conjugal partnership with the private-respondent and either spent the proceeds thereof for his sole benefit and that of petitioner Relucio and their two illegitimate children or permanently and fraudulently placed them beyond the reach of the private-respondent and their four children. "On December 8, 1993, a Motion to Dismiss the Petition was filed by herein petitioner on the ground that private respondent has no cause of action against her. "An Order dated February 10, 1994 was issued by herein respondent Judge denying petitioner Relucio's Motion to Dismiss on the ground the she is impleaded as a necessary or indispensable party because some of the subject properties are registered in her name and defendant Lopez, or solely in her name. "Subsequently thereafter, petitioner Relucio filed a Motion for Reconsideration to the Order of the respondent Judge dated February 10, 1994 but the same was likewise denied in the Order dated May 31, 1994." 3 On June 21, 1994, petitioner filed with the Court of Appeals a petition for certiorari assailing the trial court's denial of her motion to dismiss. 4 On May 31, 1996, the Court of Appeals promulgated a decision denying the petition. 5 On June 26, 1996, petitioner filed a motion for reconsideration. 6 However, on April 6, 1999, the Court of Appeals denied petitioner's motion for reconsideration. 7 Hence, this appeal. 8 The Issues

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1. Whether respondent's petition for appointment as sole administratrix of the conjugal property, accounting, etc. against her husband Alberto J. Lopez established a cause of action against petitioner. 2. Whether petitioner's inclusion as party defendant is essential in the proceedings for a complete adjudication of the controversy. 9 The Court's Ruling We grant the petition. We resolve the issues in seriatim. First issue: whether a cause of action exists against petitioner in the proceedings below. "A cause of action is an act or omission of one party the defendant in violation of the legal right of the other." 10 The elements of a cause of action are: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages. 11 A cause of action is sufficient if a valid judgment may be rendered thereon if the alleged facts were admitted or approved. 12 In order to sustain a motion to dismiss for lack of cause of action, the complaint must show that the claim for relief does not exist, rather than that a claim has been merely defectively stated or is ambiguous, indefinite or uncertain. 13 Hence, to determine the sufficiency of the cause of action alleged in Special Proceedings M-3630, we assay its allegations. In Part Two on the "Nature of [the] Complaint," respondent Angelina Mejia Lopez summarized the causes of action alleged in the complaint below.

The complaint is by an aggrieved wife against her husband. Nowhere in the allegations does it appear that relief is sought against petitioner. Respondent's causes of action were all against her husband. The first cause of action is for judicial appointment of respondent as administratrix of the conjugal partnership or absolute community property arising from her marriage to Alberto J. Lopez. Petitioner is a complete stranger to this cause of action. Article 128 of the Family Code refers only to spouses, to wit: cSTHAC "If a spouse without just cause abandons the other or fails to comply with his or her obligations to the family, the aggrieved spouse may petition the court for receivership, for judicial separation of property, or for authority to be the sole administrator of the conjugal partnership property . . ." The administration of the property of the marriage is entirely between them, to the exclusion of all other persons. Respondent alleges that Alberto J. Lopez is her husband. Therefore, her first cause of action is against Alberto J. Lopez. There is no right-duty relation between petitioner and respondent that can possibly support a cause of action. In fact, none of the three elements of a cause of action exists. The second cause of action is for an accounting "by respondent husband." 14 The accounting of conjugal partnership arises from or is an incident of marriage. Petitioner has nothing to do with the marriage between respondent Alberto J. Lopez. Hence, no cause of action can exist against petitioner on this ground. Respondent's alternative cause of action is for forfeiture of Alberto J. Lopez' share in the co-owned property "acquired during his illicit relationship and cohabitation with [petitioner]" 15 and for the "dissolution of the conjugal partnership of gains between him [Alberto J. Lopez] and the [respondent]." The third cause of action is essentially for forfeiture of Alberto J. Lopez' share in property co-owned by him and petitioner. It does not

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involve the issue of validity of the co-ownership between Alberto J. Lopez and petitioner. The issue is whether there is basis in law to forfeit Alberto J. Lopez' share, if any there be, in property co-owned by him with petitioner. Respondent's asserted right to forfeit extends to Alberto J. Lopez' share alone. Failure of Alberto J. Lopez to surrender such share, assuming the trial court finds in respondent's favor, results in a breach of an obligation to respondent and gives rise to a cause of action. 16 Such cause of action, however, pertains to Alberto J. Lopez, not petitioner. The respondent also sought support. Support cannot be compelled from a stranger. The action in Special Proceedings M-3630 is, to use respondent Angelina M. Lopez' own words, one by "an aggrieved wife against her husband." 17 References to petitioner in the common and specific allegations of the fact in the complaint are merely incidental, to set forth facts and circumstances that prove the causes of action alleged against Alberto J. Lopez. DCTSEA Finally, as to the moral damages, respondent's claim for moral damages is against Alberto J. Lopez, not petitioner. To sustain a cause of action for moral damages, the complaint must have the character of an action for interference with marital or family relations under the Civil Code. A real party in interest is one who stands "to be benefited or injured by the judgment of the suit." 18 In this case, petitioner would not be affected by any judgment in Special Proceedings M3630. If petitioner is not a real party in interest, she cannot be an indispensable party. An indispensable party is one without whom there can be no final determination of an action. 19 Petitioner's participation in Special Proceedings M-3630 is not indispensable. Certainly, the trial court can issue a judgment ordering Alberto J. Lopez to make an accounting of his conjugal partnership with respondent, and give support to respondent and their children, and dissolve Alberto J. Lopez' conjugal partnership with respondent,

and forfeit Alberto J. Lopez' share in property co-owned by him and petitioner. Such judgment would be perfectly valid and enforceable against Alberto J. Lopez. Nor can petitioner be a necessary party in Special Proceedings M3630. A necessary party is one who is not indispensable but who ought to be joined as party if complete relief is to be accorded those already parties, or for a complete determination or settlement of the claim subject of the action. 20 In the context of her petition in the lower court, respondent would be accorded complete relief if Alberto J. Lopez were ordered to account for his alleged conjugal partnership property with respondent, give support to respondent and her children, turn over his share in the co-ownership with petitioner and dissolve his conjugal partnership or absolute community property with respondent. The Judgment WHEREFORE, the Court GRANTS the petition and REVERSES the decision of the Court of Appeals. 21 The Court DISMISSES Special Proceedings M-3630 of the Regional Trial Court, Makati Branch 141 as against petitioner. cHDAIS No costs. SO ORDERED.

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[G.R. No. 166302. July 28, 2005.] LOTTE PHIL. CO., INC., petitioner, vs. ERLINDA DELA CRUZ, LEONOR MAMAUAG, LOURDES CAUBA, JOSEPHINE DOMANAIS, ARLENE CAGAYAT, AMELITA YAM, VIVIAN DOMARAIS, MARILYN ANTALAN, CHRISTOPHER RAMIREZ, ARNOLD SAN PEDRO, MARISSA SAN PEDRO, LORELI JIMENEZ, JEFFREY BUENO, CHRISTOPHER CAGAYAT, GERARD CABILES, JOAN ENRIQUEZ, JOSEPH DE LA CRUZ, NELLY CLERIGO, DULCE NAVARETTE, ROWENA BELLO, DANIEL RAMIREZ, AILEEN BAUTISTA and BALTAZAR FERRERA, respondents. SYLLABUS 1. REMEDIAL LAW; CIVIL PROCEDURE; PARTIES TO CIVIL ACTIONS; INDISPENSABLE PARTIES; THE PRESENCE OF INDISPENSABLE PARTIES IS NECESSARY TO VEST THE COURT WITH JURISDICTION; CASE AT BAR. 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 plaintiffs or defendants. The joinder of indispensable parties is mandatory. The presence of indispensable parties 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 the presence of indispensable parties 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. In the case at bar, 7J is an indispensable party. It is a party in interest because it will be affected by the outcome of the case. The Labor Arbiter and the NLRC found 7J to be solely liable as the employer of respondents. The Court of Appeals however rendered Lotte jointly and severally liable with 7J who was not impleaded by holding that the former is the real employer of respondents. Plainly, its decision directly affected 7J.

2. ID.; ID.; ID.; ID.; COMPULSORY JOINDER OF INDISPENSABLE PARTIES; NON-JOINDER OF INDISPENSABLE PARTIES IS NOT A GROUND FOR THE DISMISSAL OF THE ACTION. In Domingo v. Scheer, we held that 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 such times as are just. If the petitioner refuses to implead an indispensable party despite the order of the court, the latter may dismiss the complaint/petition for the petitioner/plaintiff's failure to comply therefor. 3. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. Although 7J was a co-party in the case before the Labor Arbiter and the NLRC, respondents failed to include it in their petition for certiorari in the Court of Appeals. Hence, the Court of Appeals did not acquire jurisdiction over 7J. No final ruling on this matter can be had without impleading 7J, whose inclusion is necessary for the effective and complete resolution of the case and in order to accord all parties with due process and fair play. HcDSaT DECISION YNARES-SANTIAGO, J p: This petition for review on certiorari 1 assails the July 9, 2004 decision 2 of the Court of Appeals in CA-G.R. SP No. 72732 and its November 26, 2004 resolution 3 denying reconsideration thereof. The established facts of this case are as follows: Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a domestic corporation. Petitioners (respondents herein) are among those who were hired and assigned to the confectionery facility operated by private respondent. TcAECH On December 14, 1995 and yearly thereafter until the year 2000 7J Maintenance and Janitorial Services ("7J") entered into a contract with private respondent to provide manpower for needed maintenance, utility, janitorial and other services to the latter. In compliance with the terms and conditions of the service contract, and to accommodate the needs of private respondent for

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personnel/workers to do and perform "piece works," petitioners, among others, were hired and assigned to private respondent as repackers or sealers. However, either in October, 1999 or on February 9, 2000, private respondent dispensed with their services allegedly due to the expiration/termination of the service contract by respondent with 7J. They were either told "hwag muna kayong pumasok at tatawagan na lang kung may gawa"; or were asked to wait "pag magrereport sila sa trabaho." Unfortunately, petitioners were never called back to work again. Aggrieved, petitioners lodged a labor complaint against both private respondent Lotte and 7J, for illegal dismissal, regularization, payment of corresponding backwages and related employment benefits, 13th month pay, service incentive leave, moral and exemplary damages and attorney's fees based on total judgment award. 4 On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr., rendered judgment 5 declaring 7J as employer of respondents. 6 The arbiter also found 7J guilty of illegal dismissal 7 and ordered to reinstate respondents, 8 pay P2,374,710.00 as backwages, P713,648.00 as 13th month pay and P117,000.00 as service incentive leave pay. 9 Respondents appealed to the National Labor Relations Commission (NLRC) praying that Lotte be declared as their direct employer because 7J is merely a labor-only contractor. In its decision 10 dated April 24, 2002, the NLRC found no cogent reason to disturb the findings of the labor arbiter and affirmed its ruling that 7J is the employer of respondents and solely liable for their claims. aDSAEI Respondents' motion for reconsideration was denied by the NLRC in a resolution dated June 18, 2002. Undaunted, they filed a petition for certiorari in the Court of Appeals 11 against the NLRC and Lotte, insisting that their employer is Lotte and not 7J. Lotte, however, denied that respondents were its employees. It prayed that the petition be dismissed for failure to implead 7J who is

a party interested in sustaining the proceedings in court, pursuant to Section 3, Rule 46 of the Revised Rules of Civil Procedure. On July 9, 2004, the Court of Appeals reversed and set aside the rulings of the Labor Arbiter and the NLRC. In its decision, the Court of Appeals declared Lotte as the real employer of respondents and that 7J who engaged in labor-only contracting was merely the agent of Lotte. Respondents who performed activities directly related to Lotte's business were its regular employees under Art. 280 of the Labor Code. As such, they must be accorded security of tenure and their services terminated only on "just" and "authorized" causes. DSHcTC Lotte's motion for reconsideration was denied, hence this petition, on the following issues: 8. Whether or not petitioner herein had the burden of proof to establish before the proceedings in the Court of Appeals that 7J Maintenance and Janitorial Service was not a labor-only contractor. 8.1. Whether or not the Petition in CA-G.R. SP No. 72732 is dismissible for failure to comply with Section 3, Rule 46 in relation to Section 5, Rule 65 of the 1997 Rules of Civil Procedure. 12 We first resolve the procedural issue raised by petitioner. Lotte asserts that 7J is an indispensable party and should have been impleaded in respondents' petition in the Court of Appeals. It claims that the petition before the Court of Appeals was dismissible for failure to comply with Section 3, 13 Rule 46 in relation to Section 5 14 of Rule 65 of the Revised Rules of Civil Procedure. cITCAa Petitioner's contention is tenable. An indispensable party is a party in interest without whom no final determination can be had of an action, 15 and who shall be joined either as plaintiffs or defendants. 16 The joinder of indispensable parties is mandatory. 17 The presence of indispensable parties 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". 18 Thus, without the presence of indispensable parties to a suit or proceeding, judgment of a court cannot attain real finality. 19 The

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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. 20 In the case at bar, 7J is an indispensable party. It is a party in interest because it will be affected by the outcome of the case. The Labor Arbiter and the NLRC found 7J to be solely liable as the employer of respondents. The Court of Appeals however rendered Lotte jointly and severally liable with 7J who was not impleaded by holding that the former is the real employer of respondents. Plainly, its decision directly affected 7J. IHEAcC In Domingo v. Scheer, 21 we held that the non-joinder of indispensable parties is not a ground for the dismissal of an action 22 and the remedy is to implead the non-party claimed to be indispensable. 23 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 such times as are just. If the petitioner refuses to implead an indispensable party despite the order of the court, the latter may dismiss the complaint/petition for the petitioner/plaintiff's failure to comply therefor. 24 Although 7J was a co-party in the case before the Labor Arbiter and the NLRC, respondents failed to include it in their petition for certiorari in the Court of Appeals. Hence, the Court of Appeals did not acquire jurisdiction over 7J. No final ruling on this matter can be had without impleading 7J, whose inclusion is necessary for the effective and complete resolution of the case and in order to accord all parties with due process and fair play. IaTSED In light of the foregoing, the Court sees no need to discuss the second issue raised by petitioner. WHEREFORE, the July 9, 2004 decision of the Court of Appeals in CAG.R. SP No. 72732 and the November 26, 2004 resolution, are SET ASIDE. Let the case be REMANDED to the Court of Appeals to include 7J Maintenance and Janitorial Services as an indispensable party to the case for further proceedings. SO ORDERED.

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against petitioner bank. She alleged that she is the registered and lawful owner of the subject property and that she did not apply for a loan or surrender her title to petitioner bank. Petitioner moved to dismiss the case for lack of cause of action and non-joinder of an indispensable party, the mortgagor Oliver. The trial court, however, dismissed petitioner's motion to dismiss. Instead of filing an answer, petitioner filed a petition for certiorari with the Court of Appeals. On motion of respondent Oliver, the trial court declared petitioner bank in default for failure to file an answer within the reglementary period. Consequently. petitioner filed a supplemental petition seeking annulment of the trial court's order of default. It argued that the special civil action for certiorari filed in the Court of Appeals interrupted the proceedings before the trial court, thereby staying the period for filing the answer. The Court of Appeals, however, sustained the dismissal of petitioner's motion to dismiss ruling that Rule 6, Section 11 of the Rules of Court allows petitioner bank to file a thirdparty complaint against mortgagor Oliver. Anent the default order, the appellate court affirmed the same holding that the special civil action for certiorari did not interrupt the period to file an answer, there being no temporary restraining order or writ of preliminary injunction issued. Hence, this petition for review. SCHIcT An indispensable party is a party in interest, without whom no final determination can be had on an action. In denying the petition, the Supreme Court held that mortgagor Oliver is not an indispensable party in the case filed by respondent Oliver. It is true that mortgagor Oliver is a party in interest, for she will be affected by the outcome of the case. However, mortgagor Oliver's absence from the case does not hamper the trial court in resolving the dispute between respondent Oliver and petitioner bank. A perusal of respondent Oliver's allegations in the complaint below showed that it was for annulment of mortgage due to petitioner's negligence in determining the actual ownership of the property, resulting in the mortgage's annotation on TCT No. S-50195 in the Registry of Deeds' custody. To support said allegations, respondent Oliver had to prove (1) that she is the real Mercedes M. Oliver referred to in the TCT, and (2) that she is not the same person using the name who entered into a deed of mortgage with the petitioner. This, respondent Oliver can do in her complaint without necessarily impleading the mortgagor Oliver. Thus, since mortgagor Oliver is not an indispensable party, the Court held that Section 11, Rule 3 of the Rules of Court applies.

[G.R. No. 135796. October 3, 2002.] CHINA BANKING CORPORATION, petitioner, vs. MERCEDES M. OLIVER, respondent. SYNOPSIS Pangan Lim, Jr. and a certain Mercedes M. Oliver obtained a loan from petitioner bank secured by a real estate mortgage on the property covered by TCT No. S-50195 in the name of Oliver. Thereafter, respondent, claiming that she is Mercedes M. Oliver, filed an action for annulment of mortgage and cancellation of title with damages

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SYLLABUS 1. REMEDIAL LAW; CIVIL PROCEDURE; PARTIES; INDISPENSABLE PARTY; DEFINED; CASE AT BAR. An indispensable party is a party in interest, without whom no final determination can be had of an action. It is true that mortgagor Oliver One is a party in interest, for she will be affected by the outcome of the case. She stands to be benefited in case the mortgage is declared valid, or injured in case her title is declared fake. However, mortgagor Oliver One's absence from the case does not hamper the trial court in resolving the dispute between respondent Oliver Two and petitioner. A perusal of Oliver Two's allegations in the complaint below shows that it was for annulment of mortgage due to petitioner's negligence in not determining the actual ownership of the property, resulting in the mortgage's annotation on TCT No. S-50195 in the Registry of Deeds' custody. To support said allegations, respondent Oliver Two had to prove (1) that she is the real Mercedes M. Oliver referred to in the TCT, and (2) that she is not the same person using that name who entered into a deed of mortgage with the petitioner. This, respondent Oliver Two can do in her complaint without necessarily impleading the mortgagor Oliver One. Hence, Oliver One is not an indispensable party in the case filed by Oliver Two. EcDSHT 2. ID.; ID.; ID.; PARTY IS NOT INDISPENSABLE IF HIS INTEREST IN THE CONTROVERSY IS DISTINCT AND DIVISIBLE FROM INTEREST OF THE OTHER PARTIES. In Noceda vs. Court of Appeals, et al., 313 SCRA 504 (1999), we held that a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in court. In this case, Chinabank has interest in the loan which, however, is distinct and divisible from the mortgagor's interest, which involves the land used as collateral for the loan. 3. ID.; ID.; ID.; A PARTY IS NOT INDISPENSABLE IF HIS PRESENCE WILL SIMPLY AVOID MULTIPLE LITIGATION; CASE AT BAR. Further, a declaration of the mortgage's nullity in this case will not necessarily prejudice mortgagor Oliver One. The bank still needs to initiate proceedings to go after the mortgagor, who in turn can raise other defenses pertinent to the two of them. A party is also not indispensable if his presence would merely permit complete relief

between him and those already parties to the action, or will simply avoid multiple litigation, as in the case of Chinabank and mortgagor Oliver One. The latter's participation in this case will simply enable petitioner Chinabank to make its claim against her in this case, and hence, avoid the institution of another action. Thus, it was the bank who should have filed a third-party complaint or other action versus the mortgagor Oliver One. 4. ID.; ID.; ID.; NON-JOINDER OF PARTIES; NOT A GROUND FOR DISMISSAL OF AN ACTION; PERSON NOT A PARTY TO AN ACTION MAY BE IMPLEADED BY THE DEFENDANT EITHER ON THE BASIS OF LIABILITY TO HIMSELF OR ON THE GROUND OF DIRECT LIABILITY TO THE PLAINTIFF. As to the second issue, since mortgagor Oliver One is not an indispensable party, Section 7, Rule 3 of the 1997 Rules of Civil Procedure, which requires compulsory joinder of indispensable parties in a case, does not apply. Instead, it is Section 11, Rule 3, that applies. Nonjoinder of parties is not a ground for dismissal of an action. Parties may be added by order of the court, either on its own initiative or on motion of the parties. Hence, the Court of Appeals committed no error when it found no abuse of discretion on the part of the trial court for denying Chinabank's motion to dismiss and, instead, suggested that petitioner file an appropriate action against mortgagor Oliver One. A person who is not a party to an action may be impleaded by the defendant either on the basis of liability to himself or on the ground of direct liability to the plaintiff. DISaEA 5. ID.; SPECIAL CIVIL ACTIONS; PETITION FOR CERTIORARI; FILING THEREOF DOES NOT INTERRUPT THE COURSE OF THE PRINCIPAL CASE UNLESS AN INJUNCTIVE RELIEF IS ISSUED. Now, the third issue, did the Court of Appeals err when it sustained the trial court's ruling that petitioner Chinabank was in default? As found by the Court of Appeals, petitioner did not file its answer, although it received the March 13, 1997 order denying the motion to dismiss. Instead, petitioner filed a petition for certiorari under Rule 65 of the Rules of Court. Said petition, however, does not interrupt the course of the principal case unless a temporary restraining order or writ of preliminary injunction is issued. No such order or writ was issued in this case. Hence, Chinabank as defendant below was properly declared in default by the trial court, after the 15-day period to file its answer or other responsive pleading lapsed. TESDcA

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6. ID.; APPEAL; PETITION FOR REVIEW; LIMITED ONLY TO QUESTIONS OF LAW. Lastly, were the withdrawal and consequent dismissal of the complaint against officials of the Registry of Deeds conclusive of the authenticity of mortgagor Oliver One's copy of TCT No. S-50195? This is a question of fact, which is not a proper subject for review in this petition. Here, we are limited only to questions of law, as a general rule. Petitioner failed to show that this case falls under any of the exceptions to this rule. We need not tarry on this issue now. RESOLUTION QUISUMBING, J p: This petition for review 1 seeks the reversal of the decision dated June 1, 1998, of the Court of Appeals in CA-G.R. SP No. 43836, dismissing China Banking Corporation's petition for certiorari to annul the two orders of the Regional Trial Court of Muntinlupa City, Branch 276, which earlier denied petitioner's motion to dismiss and then declared the bank in default in Civil Case No. 96-219. The appellate court also denied petitioner's motion for reconsideration in a resolution dated September 30, 1998. cCaATD The facts of this case are culled from the records. In August 1995, Pangan Lim, Jr. and a certain Mercedes M. Oliver opened a joint account in China Banking Corporation (hereinafter Chinabank) at EDSA Balintawak Branch. Lim introduced Oliver to the bank's branch manager as his partner in the rice and palay trading business. Thereafter, Lim and Oliver applied for a P17 million loan, offering as collateral a 7,782 square meter lot located in Tunasan, Muntinlupa and covered by TCT No. S-50195 in the name of Oliver. The bank approved the application. On November 17, 1995, Lim and Oliver executed in favor of Chinabank a promissory note for P16,650,000, as well as a Real Estate Mortgage on the property. The mortgage was duly registered and annotated on the original title under the custody of the Registry of Deeds of Makati and on the owner's duplicate copy in the bank's possession. The mortgage document showed Mercedes Oliver's address to be No. 95 Malakas Street, Diliman, Quezon City. For brevity, she is hereafter referred to as "Oliver One."

On November 18, 1996, respondent claiming that she is Mercedes M. Oliver with postal office address at No. 40 J.P. Rizal St., San Pedro, Laguna, filed an action for annulment of mortgage and cancellation of title with damages against Chinabank, Register of Deeds Atty. Mila G. Flores, and Deputy Register of Deeds Atty. Ferdinand P. Ignacio. Respondent, whom we shall call as "Oliver Two," claimed that she was the registered and lawful owner of the land subject of the real estate mortgage; that the owner's duplicate copy of the title had always been in her possession; and that she did not apply for a loan or surrender her title to Chinabank. 2 She prayed that: (1) the owner's duplicate copy surrendered to Chinabank as well as the original title with the Registry of Deeds be cancelled; (2) the mortgage be declared null and void; and (3) the Registry of Deeds be ordered to issue a new and clean title in her name. 3 On January 31, 1997, Chinabank moved to dismiss the case for lack of cause of action and non-joinder of an indispensable party, the mortgagor. On March 13, 1997, Judge Norma C. Perello issued an order denying the motion to dismiss, stating that: A reading of the COMPLAINT which of course is hypothetically admitted, will show that a valid judgment can be rendered against defendant. Plaintiff having sufficiently averred that defendants negligently failed to ascertain the genuineness or not (sic) of the title of the land mortgaged to it upon the claim of ownership by the mortgagors. Furthermore, the matters alleged in the MOTION TO DISMISS are all evidentiary which Defendants may substantiate at the appointed hours. 4 On April 7, 1997, Chinabank filed with the Court of Appeals a petition for certiorari with prayer for the issuance of a writ of preliminary injunction and/or restraining order to enjoin enforcement of the March 13, 1997 order and further action on the case. The Court of Appeals directed respondent Oliver Two to file her comment and deferred action on the prayer for the issuance of the preliminary injunction pending submission of the comment. On June 30, 1997, respondent Oliver Two moved to declare petitioner Chinabank in default. She pointed out that since petitioner received

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the order denying the motion to dismiss on March 21, 1997, it had only until April 7, 1997 to file its answer to the complaint. However, until the filing of the motion for default, no answer had been filed yet. The trial court granted the motion and declared petitioner in default in its order dated July 17, 1997, thus: Acting on the Motion To Declare Defendant Bank in Default, and finding the same to be legally tenable is granted. Accordingly, the Defendant Bank is declared in default as summons was served on It as early as December 16, 1996, but until date they have not filed an Answer nor any responsive pleading and instead, It filed a Motion to Dismiss, which was denied by this Court on March 13, 1997. The filing of a CERTIORARI to question the Orders by this Court did not toll the period for Defendants to answer the complaint. Therefore, the reglementary period for the filing of responsive pleading has long expired. Let the case be submitted for Decision based on the complaint. It is SO ORDERED. 5 Consequently, petitioner Chinabank filed a supplemental petition on August 11, 1997, seeking annulment of the July 17, 1997 order. It argued that the special civil action for certiorari filed in the Court of Appeals interrupted the proceedings before the trial court, thereby staying the period for filing the answer. On June 1, 1998, the Court of Appeals promulgated the assailed decision, finding no grave abuse of discretion committed by the trial judge in ruling that the Rules of Court provided the manner of impleading parties to a case and in suggesting that petitioner file an appropriate action to bring the mortgagor within the court's jurisdiction. The appellate court said that Rule 6, Section 11 of the Rules of Court allows petitioner to file a third-party complaint against the mortgagor. As to the judgment by default, the Court of Appeals said that an order denying the motion to dismiss is interlocutory and may not be questioned through a special civil action for certiorari. The defendant must proceed with the case and raise the issues in his

motion to dismiss when he appeals to a higher court. In this case, petitioner Chinabank should have filed its answer when it received the March 13, 1997 order denying the motion to dismiss. The special civil action for certiorari with the Court of Appeals did not interrupt the period to file an answer, there being no temporary restraining order or writ of preliminary injunction issued. The Court of Appeals denied petitioner's motion for reconsideration. Hence, this petition anchored on the following grounds: I SEC. 11, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE DOES NOT APPLY WHERE THE PARTY WHO WAS NOT IMPLEADED IS AN INDISPENSABLE PARTY; INSTEAD, SECTION 7, RULE 3 THEREOF, APPLIES. II THE MORTGAGOR MERCEDES M. OLIVER IS AN INDISPENSABLE PARTY UNDER SECTION 7, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE, AND MUST THEREFORE INDISPENSABLY BE JOINED AS A PARTY-DEFENDANT. III RESPONDENT'S CAUSE OF ACTION IS ANCHORED ON HER CLAIM AS THE REGISTERED AND LAWFUL OWNER OF THE PROPERTY IN QUESTION AND THAT HER OWNER'S DUPLICATE COPY OF THE TITLE (ANNEX "A") IS THE TRUE AND GENUINE TITLE. THUS, THE ACTION BEFORE THE HONORABLE COURT-A-QUO IS A LAND DISPUTE BETWEEN TWO (2) PERSONS CLAIMING OWNERSHIP. aHSTID IV THE ANNULMENT OF THE MORTGAGE AND THE CANCELLATION OF ANNEXES "B" AND "C" AS PRAYED FOR IN THE COMPLAINT IN CIVIL CASE NO. 96-219 ARE INEXTRICABLY INTERTWINED WITH THE ISSUE OF OWNERSHIP, HENCE, THE LATTER MUST FIRST BE RESOLVED TO DETERMINE THE FORMER. V

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THE OWNER'S DUPLICATE COPY OF THE TITLE OF MORTGAGOR MERCEDES M. OLIVER OWNER'S DUPLICATE COPY CANNOT, IN HER ABSENCE, BE DECLARED NULL AND VOID. CONSEQUENTLY, INASMUCH AS THE MORTGAGE IN FAVOR OF PETITIONER IS DEPENDENT UPON THE OWNER'S DUPLICATE COPY OF THE MORTGAGOR, THE COMPLAINT IN CIVIL CASE NO. 96-219 CAN NOT RESOLVE THE CONTROVERSY WITH FINALITY. VI THE CASE OF CHURCH OF CHRIST VS. VALLESPIN, G.R. NO. 53726, AUGUST 15, 1988, DOES NOT APPLY INASMUCH AS THE USE OF TERM "INDISPENSABLE PARTY" IN SAID CASE WAS LOOSELY USED AND IN TRUTH WAS INTENDED TO MEAN "PARTIES-IN-INTEREST" AS CONTEMPLATED BY SECTION 2, RULE 3 OF THE RULES OF COURT. VII THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT SANCTIONED THE TRIAL COURT'S ERROR IN DECLARING DEFENDANT CBC IN DEFAULT FOR FAILURE TO FILE AN ANSWER, NOTWITHSTANDING THE SETTLED DOCTRINE THAT WHERE AN INDISPENSABLE PARTY IS NOT IN COURT, THE TRIAL COURT SHOULD NOT PROCEED BUT INSTEAD SHOULD DISMISS THE CASE. VIII THE DISMISSAL/WITHDRAWAL OF THE COMPLAINT AGAINST DEFENDANTS REGISTER AND DEPUTY REGISTER OF DEEDS NECESSARILY GIVE RISE TO, AND BOLSTERS, THE CONCLUSION THAT THE OWNER'S DUPLICATE COPY OF TCT NO. S-50195 OF MORTGAGOR MERCEDES M. OLIVER IS THE GENUINE AND AUTHENTIC COPY. 6 For a clearer discussion of the issues in this controversy, we may state them as follows: 1. Is the mortgagor who goes by the name of Mercedes M. Oliver, herein called Oliver One, an indispensable party in Civil Case No. 96219? 2. Should Section 7 Rule 3 of the 1997 Rules of Civil Procedure 7 apply in this case?

3. Did the Court of Appeals err when it sustained the trial court's declaration that petitioner was in default? 4. Were the withdrawal and consequent dismissal of the complaint against the Registry of Deeds' officials indicative of the authenticity of mortgagor Oliver One's copy of TCT No. S-50195? Petitioner Chinabank alleges that there are two owner's duplicate copies of TCT No. S-50195 involved in this case and two persons claiming to be the real "MERCEDES MARAVILLA OLIVER." One is the mortgagor, Oliver One. The other is the respondent, Oliver Two. Respondent's complaint before the trial court was one for cancellation of the transfer certificate of title in petitioner's possession (Annex B). According to petitioner, the issue below is the genuineness of the titles, which is intertwined with the issue of ownership. This being the case, said the petitioner, the mortgagor Oliver One must necessarily be impleaded for she is the registered owner under Annex "B". Petitioner argues that mortgagor Oliver One is in a better position to defend her title. She stands to suffer if it is declared fake. Further, petitioner claims that the validity and enforceability of the mortgage entirely depends on the validity and authenticity of Annex "B". The mortgage cannot be declared a nullity without the trial court declaring Annex "B" a nullity. Hence, mortgagor Oliver One's participation in the suit is indispensable, according to petitioner. In brief, what petitioner Chinabank is saying is that it was indispensable for respondent Oliver Two to implead mortgagor Oliver One in the case before the trial court. Failing to do that, the complaint of herein respondent Oliver Two should have been dismissed. Petitioner's contention is far from tenable. An indispensable party is a party in interest, without whom no final determination can be had of an action. 8 It is true that mortgagor Oliver One is a party in interest, for she will be affected by the outcome of the case. She stands to be benefited in case the mortgage is declared valid, or injured in case her title is declared fake. 9 However, mortgagor Oliver One's absence from the case does not hamper the trial court in resolving the dispute between respondent Oliver Two and petitioner. A perusal of Oliver Two's allegations in the complaint below shows that it was for annulment of mortgage due to petitioner's negligence in not determining the actual ownership of the property, resulting in the

28 | C i v P r o Rule 1-5

mortgage's annotation on TCT No. S-50195 in the Registry of Deeds' custody. To support said allegations, respondent Oliver Two had to prove (1) that she is the real Mercedes M. Oliver referred to in the TCT, and (2) that she is not the same person using that name who entered into a deed of mortgage with the petitioner. This, respondent Oliver Two can do in her complaint without necessarily impleading the mortgagor Oliver One. Hence, Oliver One is not an indispensable party in the case filed by Oliver Two. In Noceda vs. Court of Appeals, et al., 313 SCRA 504 (1999), we held that a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in court. In this case, Chinabank has interest in the loan which, however, is distinct and divisible from the mortgagor's interest, which involves the land used as collateral for the loan. Further, a declaration of the mortgage's nullity in this case will not necessarily prejudice mortgagor Oliver One. The bank still needs to initiate proceedings to go after the mortgagor, who in turn can raise other defenses pertinent to the two of them. A party is also not indispensable if his presence would merely permit complete relief between him and those already parties to the action, or will simply avoid multiple litigation, as in the case of Chinabank and mortgagor Oliver One. 10 The latter's participation in this case will simply enable petitioner Chinabank to make its claim against her in this case, and hence, avoid the institution of another action. Thus, it was the bank who should have filed a third-party complaint or other action versus the mortgagor Oliver One. As to the second issue, since mortgagor Oliver One is not an indispensable party, Section 7, Rule 3 of the 1997 Rules of Civil Procedure, which requires compulsory joinder of indispensable parties in a case, does not apply. Instead, it is Section 11, Rule 3, that applies. 11 Non-joinder of parties is not a ground for dismissal of an action. Parties may be added by order of the court, either on its own initiative or on motion of the parties. 12 Hence, the Court of Appeals committed no error when it found no abuse of discretion on the part of the trial court for denying Chinabank's motion to dismiss and, instead, suggested that petitioner

file an appropriate action against mortgagor Oliver One. A person who is not a party to an action may be impleaded by the defendant either on the basis of liability to himself or on the ground of direct liability to the plaintiff. 13 Now, the third issue, did the Court of Appeals err when it sustained the trial court's ruling that petitioner Chinabank was in default? As found by the Court of Appeals, petitioner did not file its answer, although it received the March 13, 1997 order denying the motion to dismiss. Instead, petitioner filed a petition for certiorari under Rule 65 of the Rules of Court. Said petition, however, does not interrupt the course of the principal case unless a temporary restraining order or writ of preliminary injunction is issued. 14 No such order or writ was issued in this case. Hence, Chinabank as defendant below was properly declared in default by the trial court, after the 15-day period to file its answer or other responsive pleading lapsed. Lastly, were the withdrawal and consequent dismissal of the complaint against officials of the Registry of Deeds conclusive of the authenticity of mortgagor Oliver One's copy of TCT No. S-50195? This is a question of fact, which is not a proper subject for review in this petition. Here, we are limited only to questions of law, 15 as a general rule. Petitioner failed to show that this case falls under any of the exceptions to this rule. We need not tarry on this issue now. WHEREFORE, the petition is DENIED for lack of merit. The assailed decision dated June 1, 1998 and the resolution dated September 30, 1998 of the Court of Appeals in CA-G.R. SP No. 43836 are AFFIRMED. Costs against petitioner. SO ORDERED. EHASaD

29 | C i v P r o Rule 1-5

sector manager in the Philippines. His salary was to be paid partly by PPI and PCIJ. [G.R. No. 166920. February 19, 2007.] PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and JENS PETER HENRICHSEN, petitioners, vs. KLAUS K. SCHONFELD, respondent. DECISION CALLEJO, SR., J p: Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision reversed the Resolution of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 029319-01, which, in turn, affirmed the Decision of the Labor Arbiter in NLRC NCR Case No. 30-12-04787-00 dismissing the complaint of respondent Klaus K. Schonfeld. ISAcHD The antecedent facts are as follows: Respondent is a Canadian citizen and was a resident of New Westminster, British Columbia, Canada. He had been a consultant in the field of environmental engineering and water supply and sanitation. Pacicon Philippines, Inc. (PPI) is a corporation duly established and incorporated in accordance with the laws of the Philippines. The primary purpose of PPI was to engage in the business of providing specialty and technical services both in and out of the Philippines. 2 It is a subsidiary of Pacific Consultants International of Japan (PCIJ). The president of PPI, Jens Peter Henrichsen, who was also the director of PCIJ, was based in Tokyo, Japan. Henrichsen commuted from Japan to Manila and vice versa, as well as in other countries where PCIJ had business. In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the Philippines. In October 1997, respondent was employed by PCIJ, through Henrichsen, as Sector Manager of PPI in its Water and Sanitation Department. However, PCIJ assigned him as PPI On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada, requesting him to accept the same and affix his conformity thereto. Respondent made some revisions in the letter of employment and signed the contract. 3 He then sent a copy to Henrichsen. The letter of employment reads: Mr. Klaus K. Schonfeld II-365 Ginger Drive New Westminster, B.C. Canada V3L 5L5 Tokyo 7 January 1998 Dear Mr. Schonfeld, Letter of Employment This Letter of Employment with the attached General Conditions of Employment constitutes the agreement under which you will be engaged by our Company on the terms and conditions defined hereunder. In case of any discrepancies or contradictions between this Letter of Employment and the General Conditions of Employment, this Letter of Employment will prevail. THDIaC You will, from the date of commencement, be ["seconded"] to our subsidiary Pacicon Philippines, Inc. in Manila, hereinafter referred as Pacicon. Pacicon will provide you with a separate contract, which will define that part of the present terms and conditions for which Pacicon is responsible. In case of any discrepancies or contradictions between the present Letter of Employment and the contract with Pacicon Philippines, Inc. or in the case that Pacicon should not live up to its obligations, this Letter of Employment will prevail. 1. Project Country: The Philippines with possible short-term assignments in other countries. 2. Duty Station: Manila, the Philippines.

30 | C i v P r o Rule 1-5

3. 4. 5.

Family Status: Married. Position: Sector Manager, Water and Sanitation. 1st October 1997.

Klaus Schonfeld as annotated and initialed 4 Section 21 of the General Conditions of Employment appended to the letter of employment reads: 21 Arbitration

Commencement:

6. Remuneration: US$7,000.00 per month. The amount will be paid partly as a local salary (US$2,100.00 per month) by Pacicon and partly as an offshore salary (US$4,900.00) by PCI to bank accounts to be nominated by you. A performance related component corresponding to 17.6% of the total annual remuneration, subject to satisfactory performance against agreed tasks and targets, paid offshore. 7. Accommodation: The company will provide partly furnished accommodation to a rent including association fees, taxes and VAT not exceeding the Pesos equivalent of US$2,900.00 per month. 8. 9. Transportation: Included for in the remuneration.

Any question of interpretation, understanding or fulfillment of the conditions of employment, as well as any question arising between the Employee and the Company which is in consequence of or connected with his employment with the Company and which can not be settled amicably, is to be finally settled, binding to both parties through written submissions, by the Court of Arbitration in London. 5 Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was accorded the status of a resident alien. As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor Code, PPI applied for an Alien Employment Permit (Permit) for respondent before the Department of Labor and Employment (DOLE). It appended respondent's contract of employment to the application. On February 26, 1999, the DOLE granted the application and issued the Permit to respondent. It reads: Republic of the Philippines Department of Labor & Employment National Capital Region ALIEN EMPLOYMENT PERMIT ISSUED TO: SCHONFELD, KLAUS KURT DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian POSITION: VP WATER & SANITATION EMPLOYER: PACICON PHILIPPINES, INC.

Leave Travels: You are entitled to two leave travels per year. maximum allowance is

10. Shipment of Personal Effects: The US$4,000.00.

11. Mobilization Travel: Mobilization travel will be from New Westminster, B.C., Canada. This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us. Yours sincerely, Pacific Consultants International Jens Peter Henrichsen Above terms and conditions accepted Date: 2 March 1998 (Sgd.)

31 | C i v P r o Rule 1-5

ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave., Makati City PERMIT ISSUED ON: February 26, 1999 VALID UNTIL: January 7, 2000 (Sgd.) APPROVED: BIENVENIDO S. LAGUESMA By: MAXIMO B. ANITO REGIONAL DIRECTOR (Emphasis supplied) 6 Respondent received his compensation from PPI for the following periods: February to June 1998, November to December 1998, and January to August 1999. He was also reimbursed by PPI for the expenses he incurred in connection with his work as sector manager. He reported for work in Manila except for occasional assignments abroad, and received instructions from Henrichsen. 7 On May 5, 1999, respondent received a letter from Henrichsen informing him that his employment had been terminated effective August 4, 1999 for the reason that PCIJ and PPI had not been successful in the water and sanitation sector in the Philippines. 8 However, on July 24, 1999, Henrichsen, by electronic mail, 9 requested respondent to stay put in his job after August 5, 1999, until such time that he would be able to report on certain projects and discuss all the opportunities he had developed. 10 Respondent continued his work with PPI until the end of business hours on October 1, 1999. Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare from Manila to Canada, and cost of shipment of goods to Canada. PPI partially settled some of his claims (US$5,635.99), but refused to pay the rest. On December 5, 2000, respondent filed a Complaint 11 for Illegal Dismissal against petitioners PPI and Henrichsen with the Labor Arbiter. It was docketed as NLRC-NCR Case No. 30-12-04787-00. In his Complaint, respondent alleged that he was illegally dismissed; PPI had not notified the DOLE of its decision to close one of its SIGNATURE OF BEARER:

departments, which resulted in his dismissal; and they failed to notify him that his employment was terminated after August 4, 1999. Respondent also claimed for separation pay and other unpaid benefits. He alleged that the company acted in bad faith and disregarded his rights. He prayed for the following reliefs: 1. Judgment be rendered in his favor ordering the respondents to reinstate complainant to his former position without loss of seniority and other privileges and benefits, and to pay his full backwages from the time compensation was with held (sic) from him up to the time of his actual reinstatement. In the alternative, if reinstatement is no longer feasible, respondents must pay the complainant full backwages, and separation pay equivalent to one month pay for every year of service, or in the amount of US$16,400.00 as separation pay; 2. Judgment be rendered ordering the respondents to pay the outstanding monetary obligation to complainant in the amount of US$10,131.76 representing the balance of unpaid salaries, leave pay, cost of his air travel and shipment of goods from Manila to Canada; and SHCaEA 3. Judgment be rendered ordering the respondent company to pay the complainant damages in the amount of no less than US $10,000.00 and to pay 10% of the total monetary award as attorney's fees, and costs. Other reliefs just and equitable under the premises are, likewise, prayed for. 12 Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter had no jurisdiction over the subject matter; and (2) venue was improperly laid. It averred that respondent was a Canadian citizen, a transient expatriate who had left the Philippines. He was employed and dismissed by PCIJ, a foreign corporation with principal office in Tokyo, Japan. Since respondent's cause of action was based on his letter of employment executed in Tokyo, Japan dated January 7, 1998, under the principle of lex loci contractus, the complaint should have been filed in Tokyo, Japan. Petitioners claimed that respondent did not offer any justification for filing his complaint against PPI before the NLRC in the Philippines.

32 | C i v P r o Rule 1-5

Moreover, under Section 12 of the General Conditions of Employment appended to the letter of employment dated January 7, 1998, complainant and PCIJ had agreed that any employment-related dispute should be brought before the London Court of Arbitration. Since even the Supreme Court had already ruled that such an agreement on venue is valid, Philippine courts have no jurisdiction. 13 Respondent opposed the Motion, contending that he was employed by PPI to work in the Philippines under contract separate from his January 7, 1998 contract of employment with PCIJ. He insisted that his employer was PPI, a Philippine-registered corporation; it is inconsequential that PPI is a wholly-owned subsidiary of PCIJ because the two corporations have separate and distinct personalities; and he received orders and instructions from Henrichsen who was the president of PPI. He further insisted that the principles of forum non conveniens and lex loci contractus do not apply, and that although he is a Canadian citizen, Philippine Labor Laws apply in this case. IaTSED Respondent adduced in evidence the following contract of employment dated January 9, 1998 which he had entered into with Henrichsen: Mr. Klaus K. Schonfeld II-365 Ginger Drive New Westminster, B.C. Canada V3L 5L5 Manila 9 January, 1998 Dear Mr. Schonfeld, Letter of Employment This Letter of Employment with the attached General Conditions of Employment constitutes the agreement, under which you will be engaged by Pacicon Philippines, Inc. on the terms and conditions defined hereunder.

1. Project Country: The assignments in other countries. 2. 3.

Philippines

with

possible

Duty Station: Manila, the Philippines. Family Status: Married. Sector Manager Water and Sanitation

4. Position: Sector. 5.

Commencement:

1 January, 1998.

6. Remuneration: US$3,100.00 per month payable to a bank account to be nominated by you. 7. Accommodation: The company furnished accommodation to a rent including association exceeding the Pesos equivalent fees, will provide partly

taxes

and

VAT

not

of US$2300.00 per month. 8. Transportation: Included for in the remuneration.

9. Shipment of Personal Effects: The maximum allowance is US$2500.00 in connection with initial shipment of personal effects from Canada. 10. Mobilization Travel: Westminster, B.C., Canada. Mobilization travel will be from New

This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us. Yours sincerely, Pacicon Philippines, Inc. Jens Peter Henrichsen President 14

33 | C i v P r o Rule 1-5

According to respondent, the material allegations of the complaint, not petitioners' defenses, determine which quasi-judicial body has jurisdiction. Section 21 of the Arbitration Clause in the General Conditions of Employment does not provide for an exclusive venue where the complaint against PPI for violation of the Philippine Labor Laws may be filed. Respondent pointed out that PPI had adopted two inconsistent positions: it was first alleged that he should have filed his complaint in Tokyo, Japan; and it later insisted that the complaint should have been filed in the London Court of Arbitration. 15 In their reply, petitioners claimed that respondent's employer was PCIJ, which had exercised supervision and control over him, and not PPI. Respondent was dismissed by PPI via a letter of Henrichsen under the letterhead of PCIJ in Japan. 16 The letter of employment dated January 9, 1998 which respondent relies upon did not bear his (respondent's) signature nor that of Henrichsen. On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners' Motion to Dismiss. The dispositive portion reads: WHEREFORE, finding merit in respondents' Motion to Dismiss, the same is hereby granted. The instant complaint filed by the complainant is dismissed for lack of merit. SO ORDERED. 17 The Labor Arbiter found, among others, that the January 7, 1998 contract of employment between respondent and PCIJ was controlling; the Philippines was only the "duty station" where Schonfeld was required to work under the General Conditions of Employment. PCIJ remained respondent's employer despite his having been sent to the Philippines. Since the parties had agreed that any differences regarding employer-employee relationship should be submitted to the jurisdiction of the court of arbitration in London, this agreement is controlling. On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latter's decision in toto. 18 Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the following arguments:

I WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE LABOR ARBITER'S DECISION CONSIDERING THAT: A. PETITIONER'S TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS INTERNATIONAL OF JAPAN BUT RESPONDENT COMPANY, AND THEREFORE, THE LABOR ARBITER HAS JURISDICTION OVER THE INSTANT CASE; AND cHCIEA B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION BRANCH OF THE NLRC AND NOT THE COURT OF ARBITRATION IN LONDON. II WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE DISMISSAL OF THE COMPLAINT CONSIDERING THAT PETITIONER'S TERMINATION FROM EMPLOYMENT IS ILLEGAL: A. THE CLOSURE OF RESPONDENT COMPANY'S WATER AND SANITATION SECTOR WAS NOT BONA FIDE. B. ASSUMING ARGUENDO THAT THE CLOSURE OF RESPONDENT COMPANY'S WATER AND SANITATION SECTOR WAS JUSTIFIABLE, PETITIONER'S DISMISSAL WAS INEFFECTUAL AS THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) AND PETITIONER WAS NOT NOTIFIED THIRTY (30) DAYS BEFORE THE ALLEGED CLOSURE. 19 Respondent averred that the absence or existence of a written contract of employment is not decisive of whether he is an employee of PPI. He maintained that PPI, through its president Henrichsen, directed his work/duties as Sector Manager of PPI; proof of this was his letter-proposal to the Development Bank of the Philippines for PPI to provide consultancy services for the Construction Supervision of the Water Supply and Sanitation component of the World BankAssisted LGU Urban Water and Sanitation Project. 20 He emphasized that as gleaned from Alien Employment Permit (AEP) No. M-029908-

34 | C i v P r o Rule 1-5

5017 issued to him by DOLE on February 26, 1999, he is an employee of PPI. It was PPI president Henrichsen who terminated his employment; PPI also paid his salary and reimbursed his expenses related to transactions abroad. That PPI is a wholly-owned subsidiary of PCIJ is of no moment because the two corporations have separate and distinct personalities. ECSHID The CA found the petition meritorious. Applying the four-fold test 21 of determining an employer-employee relationship, the CA declared that respondent was an employee of PPI. On the issue of venue, the appellate court declared that, even under the January 7, 1998 contract of employment, the parties were not precluded from bringing a case related thereto in other venues. While there was, indeed, an agreement that issues between the parties were to be resolved in the London Court of Arbitration, the venue is not exclusive, since there is no stipulation that the complaint cannot be filed in any other forum other than in the Philippines. On November 25, 2004, the CA rendered its decision granting the petition, the decretal portion of which reads: WHEREFORE, the petition is GRANTED in that the assailed Resolutions of the NLRC are hereby REVERSED and SET ASIDE. Let this case be REMANDED to the Labor Arbiter a quo for disposition of the case on the merits. SO ORDERED. 22 A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which the appellate court denied for lack of merit. 23 In the present recourse, PPI and Henrichsen, as petitioners, raise the following issues: I THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT RELATIONSHIP EXISTED BETWEEN PETITIONERS AND RESPONDENT DESPITE THE UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD,

AND WAS MERELY "SECONDED" TO PETITIONERS SINCE HIS WORK ASSIGNMENT WAS IN MANILA. AScTaD II THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR ARBITER A QUO HAS JURISDICTION OVER RESPONDENT'S CLAIM DESPITE THE UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND HAD AGREED THAT ANY DISPUTE BETWEEN THEM "SHALL BE FINALLY SETTLED BY THE COURT OF ARBITRATION IN LONDON." 24 Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC. Petitioners aver that the findings of the Labor Arbiter, as affirmed by the NLRC, are conclusive on the CA. They maintain that it is not within the province of the appellate court in a petition for certiorari to review the facts and evidence on record since there was no conflict in the factual findings and conclusions of the lower tribunals. Petitioners assert that such findings and conclusions, having been made by agencies with expertise on the subject matter, should be deemed binding and conclusive. They contend that it was the PCIJ which employed respondent as an employee; it merely seconded him to petitioner PPI in the Philippines, and assigned him to work in Manila as Sector Manager. Petitioner PPI, being a whollyowned subsidiary of PCIJ, was never the employer of respondent. Petitioners assert that the January 9, 1998 letter of employment which respondent presented to prove his employment with petitioner PPI is of doubtful authenticity since it was unsigned by the purported parties. They insist that PCIJ paid respondent's salaries and only coursed the same through petitioner PPI. PPI, being its subsidiary, had supervision and control over respondent's work, and had the responsibilities of monitoring the "daily administration" of respondent. Respondent cannot rely on the pay slips, expenses claim forms, and reimbursement memoranda to prove that he was an employee of petitioner PPI because these documents are of doubtful authenticity. Petitioners further contend that, although Henrichsen was both a director of PCIJ and president of PPI, it was he who signed the

35 | C i v P r o Rule 1-5

termination letter of respondent upon instructions of PCIJ. This is buttressed by the fact that PCIJ's letterhead was used to inform him that his employment was terminated. Petitioners further assert that all work instructions came from PCIJ and that petitioner PPI only served as a "conduit." Respondent's Alien Employment Permit stating that petitioner PPI was his employer is but a necessary consequence of his being "seconded" thereto. It is not sufficient proof that petitioner PPI is respondent's employer. The entry was only made to comply with the DOLE requirements. There being no evidence that petitioner PPI is the employer of respondent, the Labor Arbiter has no jurisdiction over respondent's complaint. Petitioners aver that since respondent is a Canadian citizen, the CA erred in ignoring their claim that the principles of forum non conveniens and lex loci contractus are applicable. They also point out that the principal office, officers and staff of PCIJ are stationed in Tokyo, Japan; and the contract of employment of respondent was executed in Tokyo, Japan. Moreover, under Section 21 of the General Conditions for Employment incorporated in respondent's January 7, 1998 letter of employment, the dispute between respondent and PCIJ should be settled by the court of arbitration of London. Petitioners claim that the words used therein are sufficient to show the exclusive and restrictive nature of the stipulation on venue. Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and employers, while the Labor Code of the Philippines applies only to Filipino employers and Philippine-based employers and their employees, not to PCIJ. In fine, the jurisdictions of the NLRC and Labor Arbiter do not extend to foreign workers who executed employment agreements with foreign employers abroad, although "seconded" to the Philippines. 25 In his Comment, 26 respondent maintains that petitioners raised factual issues in their petition which are proscribed under Section 1, Rule 45 of the Rules of Court. The finding of the CA that he had been an employee of petitioner PPI and not of PCIJ is buttressed by his documentary evidence which both the Labor Arbiter and the NLRC

ignored; they erroneously opted to dismiss his complaint on the basis of the letter of employment and Section 21 of the General Conditions of Employment. In contrast, the CA took into account the evidence on record and applied case law correctly. The petition is denied for lack of merit. It must be stressed that in resolving a petition for certiorari, the CA is not proscribed from reviewing the evidence on record. Under Section 9 of Batas Pambansa Blg. 129, as amended by R.A. No. 7902, the CA is empowered to pass upon the evidence, if and when necessary, to resolve factual issues. 27 If it appears that the Labor Arbiter and the NLRC misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had been properly appreciated, the factual findings of such tribunals cannot be given great respect and finality. 28 Inexplicably, the Labor Arbiter and the NLRC ignored the documentary evidence which respondent appended to his pleadings showing that he was an employee of petitioner PPI; they merely focused on the January 7, 1998 letter of employment and Section 21 of the General Conditions of Employment. Petitioner PPI applied for the issuance of an AEP to respondent before the DOLE. In said application, PPI averred that respondent is its employee. To show that this was the case, PPI appended a copy of respondent's employment contract. The DOLE then granted the application of PPI and issued the permit. It bears stressing that under the Omnibus Rules Implementing the Labor Code, one of the requirements for the issuance of an employment permit is the employment contract. Section 5, Rule XIV (Employment of Aliens) of the Omnibus Rules provides: SECTION 1. Coverage. This rule shall apply to all aliens employed or seeking employment in the Philippines and the present or prospective employers. SECTION 2. Submission of list. All employers employing foreign nationals, whether resident or non-resident, shall submit a list of nationals to the Bureau indicating their names, citizenship, foreign

36 | C i v P r o Rule 1-5

and local address, nature of employment and status of stay in the Philippines. SECTION 3. Registration of resident aliens. All employed resident aliens shall register with the Bureau under such guidelines as may be issued by it. SECTION 4. Employment permit required for entry. No alien seeking employment, whether as a resident or non-resident, may enter the Philippines without first securing an employment permit from the Ministry. If an alien enters the country under a non-working visa and wishes to be employed thereafter, he may only be allowed to be employed upon presentation of a duly approved employment permit. SECTION 5. Requirements for employment permit applicants. The application for an employment permit shall be accompanied by the following: (a) Curriculum vitae duly signed by the applicant indicating his educational background, his work experience and other data showing that he possesses technical skills in his trade or profession. (b) Contract of employment between the employer and the principal which shall embody the following, among others: 1. That the non-resident alien worker shall comply with all applicable laws and rules and regulations of the Philippines; 2. That the non-resident alien worker and the employer shall bind themselves to train at least two (2) Filipino understudies for a period to be determined by the Minister; and 3. That he shall not engage in any gainful employment other than that for which he was issued a permit. IcAaSD (c) A designation by the employer of at least two (2) understudies for every alien worker. Such understudies must be the most ranking regular employees in the section or department for which the expatriates are being hired to insure the actual transfer of technology.

Under Section 6 of the Rule, the DOLE may issue an alien employment permit based only on the following: (a) Compliance by the applicant and his employer with the requirements of Section 2 hereof; (b) Report of the Bureau Director as to the availability or nonavailability of any person in the Philippines who is competent and willing to do the job for which the services of the applicant are desired; (c) His assessment as to whether or not the employment of the applicant will redound to the national interest; (d) Admissibility of the alien as certified by the Commission on Immigration and Deportation; (e) The recommendation of the Board of Investments or other appropriate government agencies if the applicant will be employed in preferred areas of investments or in accordance with the imperative of economic development. Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise, petitioner PPI would not have filed an application for a Permit with the DOLE. Petitioners are thus estopped from alleging that the PCIJ, not petitioner PPI, had been the employer of respondent all along. We agree with the conclusion of the CA that there was an employeremployee relationship between petitioner PPI and respondent using the four-fold test. Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. It is the so-called "control test" which constitutes the most important index of the existence of the employer-employee relationship that is, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished. Stated otherwise, an employer-employee relationship exists where the person for whom the services are performed

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reserves the right to control not only the end to be achieved but also the means to be used in reaching such end. 29 We quote with approval the following ruling of the CA: [T]here is, indeed, substantial evidence on record which would erase any doubt that the respondent company is the true employer of petitioner. In the case at bar, the power to control and supervise petitioner's work performance devolved upon the respondent company. Likewise, the power to terminate the employment relationship was exercised by the President of the respondent company. It is not the letterhead used by the company in the termination letter which controls, but the person who exercised the power to terminate the employee. It is also inconsequential if the second letter of employment executed in the Philippines was not signed by the petitioner. An employer-employee relationship may indeed exist even in the absence of a written contract, so long as the four elements mentioned in the Mafinco case are all present. 30 The settled rule on stipulations regarding venue, as held by this Court in the vintage case of Philippine Banking Corporation v. Tensuan, 31 is that while they are considered valid and enforceable, venue stipulations in a contract do not, as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules of Court in the absence of qualifying or restrictive words. They should be considered merely as an agreement or additional forum, not as limiting venue to the specified place. They are not exclusive but, rather permissive. If the intention of the parties were to restrict venue, there must be accompanying language clearly and categorically expressing their purpose and design that actions between them be litigated only at the place named by them. 32 In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no other court save ," "particularly," "nowhere else but/except ," or words of equal import were stated in the contract. 33 It cannot be said that the court of arbitration in London is an exclusive venue to bring forth any complaint arising out of the employment contract. Petitioners contend that respondent should have filed his Complaint in his place of permanent residence, or where the PCIJ holds its

principal office, at the place where the contract of employment was signed, in London as stated in their contract. By enumerating possible venues where respondent could have filed his complaint, however, petitioners themselves admitted that the provision on venue in the employment contract is indeed merely permissive. Petitioners' insistence on the application of the principle of forum non conveniens must be rejected. The bare fact that respondent is a Canadian citizen and was a repatriate does not warrant the application of the principle for the following reasons: First. The Labor Code of the Philippines does not include forum non conveniens as a ground for the dismissal of the complaint. 34 Second. The propriety of dismissing a case based on this principle requires a factual determination; hence, it is properly considered as defense. 35 Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals, 36 this Court held that: . . . [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its decision. . .. Admittedly, all the foregoing requisites are present in this case. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 76563 is AFFIRMED. This case is REMANDED to the Labor Arbiter for disposition of the case on the merits. Cost against petitioners. SO ORDERED.

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G.R. No. 115838. July 18, 2002.] CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE CASTRO, petitioners, vs. COURT OF APPEALS and FRANCISCO ARTIGO, respondents. SYNOPSIS Petitioners Constante and Corazon Amor de Castro were co-owners of four lots located in Cubao, Quezon City. In a letter dated January 24, 1984, they authorized respondent Francisco Artigo to act as real estate broker in the sale of these properties for the amount of P23,000,000.00 at a 5% commission. It was private respondent who first found Times Transit Corporation as a prospective buyer of two lots. Sometime in May 1985, the sale was consummated. Artigo received P48,893.76 as commission. However, he felt aggrieved because according to him, his total commission should be P352,500.00 which is 5% of the agreed price of P7,050,000. Thus, he sued the petitioners in order to collect the unpaid balance of his broker's commission. Petitioners, on the other hand, argued that private respondent was selfishly asking more than what he truly deserved as commission to the prejudice of other agents who were more instrumental in the consummation of the sale. The trial court ruled in favor of private respondent and it was affirmed in toto by the Court of Appeals. Hence, this petition. The petition was bereft of merit. A contract of agency which is not contrary to law, public order, public policy, morals or good custom is a valid contract, and constitutes the law between the parties. The contract of agency entered into by Constante with Artigo was the law between them and both were bound to comply with its terms and conditions in good faith. The mere fact that "other agents" intervened in the consummation of the sale and were paid their respective commissions cannot vary the terms of the contract of agency. In any event, the Court found that the 5% real estate broker's commission was reasonable and within the standard practice in the real estate industry for transactions of this nature. SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; INDISPENSABLE PARTY; ELUCIDATED. An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had. The joinder of indispensable parties is mandatory and courts cannot proceed without their presence. Whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop the trial and order the inclusion of such party. 2. ID.; ID.; MANDATORY JOINDER OF INDISPENSABLE PARTIES; NOT APPLICABLE IN CASE AT BAR. [T]he rule on mandatory joinder of indispensable parties is not applicable to the instant case. There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to sell the properties of the De Castros for P23 million at a 5 percent commission. The authority was on a first come, first serve basis. . . . Constante signed the note as owner and as representative of the other co-owners. Under this note, a contract of agency was clearly constituted between Constante and Artigo. Whether Constante appointed Artigo as agent, in Constante's individual or representative capacity, or both, the De Castros cannot seek the dismissal of the case for failure to implead the other coowners as indispensable parties. The De Castros admit that the other co-owners are solidarily liable under the contract of agency, citing Article 1915 of the Civil Code, which reads: "Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency." 3. CIVIL LAW; OBLIGATIONS AND CONTRACTS; AGENCY; AGENT MAY RECOVER THE WHOLE COMPENSATION FROM ANY ONE OF THE CO-PRINCIPALS. The solidary liability of the four co-owners, however, militates against the De Castros' theory that the other coowners should be impleaded as indispensable parties. A noted commentator explained Article 1915 thus "The rule in this article applies even when the appointments were made by the principals in separate acts, provided that they are for the same transaction. The solidarity arises from the common interest of the principals, and not from the act of constituting the agency. By virtue of this solidarity, the agent can recover from any principal the whole compensation and indemnity owing to him by the others. The parties, however,

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may, by express agreement, negate this solidary responsibility. The solidarity does not disappear by the mere partition effected by the principals after the accomplishment of the agency. If the undertaking is one in which several are interested, but only some create the agency, only the latter are solidarily liable, without prejudice to the effects of negotiorum gestio with respect to the others. And if the power granted includes various transactions some of which are common and others are not, only those interested in each transaction shall be liable for it." When the law expressly provides for solidarity of the obligation, as in the liability of co-principals in a contract of agency, each obligor may be compelled to pay the entire obligation. The agent may recover the whole compensation from any one of the co-principals, as in this case. Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary debtors. DaACIH 4. ID.; ID.; ID.; CONTRACT OF AGENCY IS THE LAW BETWEEN PARTIES; 5% REAL ESTATE BROKER'S COMMISSION IS WITHIN THE STANDARD PRACTICE IN THE REAL ESTATE INDUSTRY. A contract of agency which is not contrary to law, public order, public policy, morals or good custom is a valid contract, and constitutes the law between the parties. The contract of agency entered into by Constante with Artigo is the law between them and both are bound to comply with its terms and conditions in good faith. The mere fact that "other agents" intervened in the consummation of the sale and were paid their respective commissions cannot vary the terms of the contract of agency granting Artigo a 5 percent commission based on the selling price. . . . In any event, we find that the 5 percent real estate broker's commission is reasonable and within the standard practice in the real estate industry for transactions of this nature. 5. ID.; ID.; PAYMENT; RECEIPT OF PARTIAL PAYMENT OF COMMISSION BY AN AGENT NEITHER AMOUNTS TO A WAIVER OF THE BALANCE NOR PUTS HIM IN ESTOPPEL; CASE AT BAR. Artigo's acceptance of partial payment of his commission neither amounts to a waiver of the balance nor puts him in estoppel. This is the import of Article 1235 which was explained in this wise: "The word accept, as used in Article 1235 of the Civil Code, means to take as satisfactory or sufficient, or agree to an incomplete or irregular performance. Hence, the mere receipt of a partial payment is not equivalent to the required acceptance of performance as would extinguish the whole

obligation." There is thus a clear distinction between acceptance and mere receipt. In this case, it is evident that Artigo merely received the partial payment without waiving the balance. Thus, there is no estoppel to speak of. 6. ID.; LACHES; ELUCIDATED. Laches means the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. 7. ID.; ID.; APPLIES ONLY IN THE ABSENCE OF STATUTORY PRESCRIPTIVE PERIOD. The De Castros admit that Artigo's claim was filed within the ten-year prescriptive period. The De Castros, however, still maintain that Artigo's cause of action is barred by laches. Laches does not apply because only four years had lapsed from the time of the sale in June 1985. Artigo made a demand in July 1985 and filed the action in court on May 29, 1989, well within the ten-year prescriptive period. This does not constitute an unreasonable delay in asserting one's right. The Court has ruled, "a delay within the prescriptive period is sanctioned by law and is not considered to be a delay that would bar relief." In explaining that laches applies only in the absence of a statutory prescriptive period, the Court has stated "Laches is recourse in equity. Equity, however, is applied only in the absence, never in contravention, of statutory law. Thus, laches, cannot, as a rule, be used to abate a collection suit filed within the prescriptive period mandated by the Civil Code." Clearly, the De Castros' defense of laches finds no support in law, equity or jurisprudence. 8. ID.; MODES OF ACQUIRING OWNERSHIP; PRESCRIPTION OF ACTIONS; ACTIONS UPON A WRITTEN CONTRACT MUST BE BROUGHT WITHIN TEN YEARS FROM THE TIME THE RIGHT OF ACTION ACCRUES. Actions upon a written contract, such as a contract of agency, must be brought within ten years from the time the right of action accrues. The right of action accrues from the moment the breach of right or duty occurs. From this moment, the creditor can institute the action even as the ten-year prescriptive period begins to run. cEATSI

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9. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL; PETITION FOR REVIEW ON CERTIORARI; SUPREME COURT IS NOT THE PROPER VENUE TO CONSIDER A FACTUAL ISSUE. It is not the function of this Court to re-examine the evidence submitted by the parties, or analyze or weight the evidence again. This Court is not the proper venue to consider a factual issue as it is not a trier of facts. In petitions for review on certiorari as a mode of appeal under Rule 45, a petitioner can only raise questions of law. . . . We find no reason to depart from this principle. The trial and appellate courts are in a much better position to evaluate properly the evidence. Hence, we find no other recourse but to affirm their finding on the actual purchase price. 10. CIVIL LAW; DAMAGES; LEFT TO THE SOUND DISCRETION OF THE TRIAL COURT AND IF WELL EXERCISED, WILL NOT BE DISTURBED ON APPEAL; APPLIED IN CASE AT BAR. Law and jurisprudence support the award of moral damages and attorney's fees in favor of Artigo. The award of damages and attorney's fees is left to the sound discretion of the court, and if such discretion is well exercised, as in this case, it will not be disturbed on appeal. Moral damages may be awarded when in a breach of contract the defendant acted in bad faith, or in wanton disregard of his contractual obligation. On the other hand, attorney's fees are awarded in instances where "the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim." There is no reason to disturb the trial court's finding that "the defendant's lack of good faith and unkind treatment of the plaintiff in refusing to give his due commission deserve censure." This warrants the award of P25,000.00 in moral damages and P45,000.00 in attorney's fees. The amounts are, in our view, fair and reasonable. Having found a buyer for the two lots, Artigo had already performed his part of the bargain under the contract of agency. The De Castros should have exercised fairness and good judgment in dealing with Artigo by fulfilling their own part of the bargain paying Artigo his 5 percent broker's commission based on the actual purchase price of the two lots. IaHSCc DECISION CARPIO, J p:

The Case Before us is a Petition for Review on Certiorari 1 seeking to annul the Decision of the Court of Appeals 2 dated May 4, 1994 in CA-G.R. CV No. 37996, which affirmed in toto the decision 3 of the Regional Trial Court of Quezon City, Branch 80, in Civil Case No. Q-89-2631. The trial court disposed as follows: SacTCA "WHEREFORE, the Court finds defendants Constante and Corazon Amor de Castro jointly and solidarily liable to plaintiff the sum of: ETCcSa a) b) c) d) P303,606.24 representing unpaid commission; P25,000.00 for and by way of moral damages; P45,000.00 for and by way of attorney's fees; To pay the cost of this suit.

Quezon City, Metro Manila, December 20, 1991." The Antecedent Facts On May 29, 1989, private respondent Francisco Artigo ("Artigo" for brevity) sued petitioners Constante A. De Castro ("Constante" for brevity) and Corazon A. De Castro ("Corazon" for brevity) to collect the unpaid balance of his broker's commission from the De Castros. 4 The Court of Appeals summarized the facts in this wise: ". . .. Appellants 5 were co-owners of four (4) lots located at EDSA corner New York and Denver Streets in Cubao, Quezon City. In a letter dated January 24, 1984 (Exhibit "A-1", p. 144, Records), appellee 6 was authorized by appellants to act as real estate broker in the sale of these properties for the amount of P23,000,000.00, five percent (5%) of which will be given to the agent as commission. It was appellee who first found Times Transit Corporation, represented by its president Mr. Rondaris, as prospective buyer which desired to buy two (2) lots only, specifically lots 14 and 15. Eventually, sometime in May of 1985, the sale of lots 14 and 15 was consummated. Appellee received from appellants P48,893.76 as commission.

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It was then that the rift between the contending parties soon emerged. Appellee apparently felt short changed because according to him, his total commission should be P352,500.00 which is five percent (5%) of the agreed price of P7,050,000.00 paid by Times Transit Corporation to appellants for the two (2) lots, and that it was he who introduced the buyer to appellants and unceasingly facilitated the negotiation which ultimately led to the consummation of the sale. Hence, he sued below to collect the balance of P303,606.24 after having received P48,893.76 in advance. On the other hand, appellants completely traverse appellee's claims and essentially argue that appellee is selfishly asking for more than what he truly deserved as commission to the prejudice of other agents who were more instrumental in the consummation of the sale. Although appellants readily concede that it was appellee who first introduced Times Transit Corp. to them, appellee was not designated by them as their exclusive real estate agent but that in fact there were more or less eighteen (18) others whose collective efforts in the long run dwarfed those of appellee's, considering that the first negotiation for the sale where appellee took active participation failed and it was these other agents who successfully brokered in the second negotiation. But despite this and out of appellants' "pure liberality, beneficence and magnanimity", appellee nevertheless was given the largest cut in the commission (P48,893.76), although on the principle of quantum meruit he would have certainly been entitled to less. So appellee should not have been heard to complain of getting only a pittance when he actually got the lion's share of the commission and worse, he should not have been allowed to get the entire commission. Furthermore, the purchase price for the two lots was only P3.6 million as appearing in the deed of sale and not P7.05 million as alleged by appellee. Thus, even assuming that appellee is entitled to the entire commission, he would only be getting 5% of the P3.6 million, or P180,000.00." Ruling of the Court of Appeals The Court of Appeals affirmed in toto the decision of the trial court. First. The Court of Appeals found that Constante authorized Artigo to act as agent in the sale of two lots in Cubao, Quezon City. The handwritten authorization letter signed by Constante clearly

established a contract of agency between Constante and Artigo. Thus, Artigo sought prospective buyers and found Times Transit Corporation ("Times Transit" for brevity). Artigo facilitated the negotiations which eventually led to the sale of the two lots. Therefore, the Court of Appeals decided that Artigo is entitled to the 5% commission on the purchase price as provided in the contract of agency. Second. The Court of Appeals ruled that Artigo's complaint is not dismissible for failure to implead as indispensable parties the other co-owners of the two lots. The Court of Appeals explained that it is not necessary to implead the other co-owners since the action is exclusively based on a contract of agency between Artigo and Constante. Third. The Court of Appeals likewise declared that the trial court did not err in admitting parol evidence to prove the true amount paid by Times Transit to the De Castros for the two lots. The Court of Appeals ruled that evidence aliunde could be presented to prove that the actual purchase price was P7.05 million and not P3.6 million as appearing in the deed of sale. Evidence aliunde is admissible considering that Artigo is not a party, but a mere witness in the deed of sale between the De Castros and Times Transit. The Court of Appeals explained that, "the rule that oral evidence is inadmissible to vary the terms of written instruments is generally applied only in suits between parties to the instrument and strangers to the contract are not bound by it." Besides, Artigo was not suing under the deed of sale, but solely under the contract of agency. Thus, the Court of Appeals upheld the trial court's finding that the purchase price was P7.05 million and not P3.6 million. Hence, the instant petition. The Issues According to petitioners, the Court of Appeals erred in I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO IMPLEAD INDISPENSABLE PARTIES-IN-INTEREST;

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II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND THAT ARTIGO'S CLAIM HAS BEEN EXTINGUISHED BY FULL PAYMENT, WAIVER, OR ABANDONMENT; III. IV. CONSIDERING INCOMPETENT EVIDENCE; GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY; AN AWARD OF MORAL DAMAGES AND

There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to sell the properties of the De Castros for P23 million at a 5 percent commission. The authority was on a first come, first serve basis. The authority reads in full: "24 Jan. 84 To Whom It May Concern: This is to state that Mr. Francisco Artigo is authorized as our real estate broker in connection with the sale of our property located at Edsa Corner New York & Denver, Cubao, Quezon City. Asking price P23,000,000.00 with 5% commission as agent's fee. C.C. de Castro owner & representing co-owners This authority is on a first-come First serve basis CAC" Constante signed the note as owner and as representative of the other co-owners. Under this note, a contract of agency was clearly constituted between Constante and Artigo. Whether Constante appointed Artigo as agent, in Constante's individual or representative capacity, or both, the De Castros cannot seek the dismissal of the case for failure to implead the other co-owners as indispensable parties. The De Castros admit that the other co-owners are solidarily liable under the contract of agency, 10 citing Article 1915 of the Civil Code, which reads: Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency. The solidary liability of the four co-owners, however, militates against the De Castros' theory that the other co-owners should be impleaded as indispensable parties. A noted commentator explained Article 1915 thus "The rule in this article applies even when the appointments were made by the principals in separate acts, provided that they are for the same transaction. The solidarity arises from the common interest of the principals, and not from the act of constituting the agency. By virtue of this solidarity, the agent can recover from any principal the whole compensation and indemnity owing to him by the others. The

V. SANCTIONING ATTORNEY'S FEES;

VI. NOT AWARDING THE DE CASTRO'S MORAL AND EXEMPLARY DAMAGES, AND ATTORNEY'S FEES. The Court's Ruling The petition is bereft of merit. First Issue: whether the complaint merits dismissal for failure to implead other co-owners as indispensable parties The De Castros argue that Artigo's complaint should have been dismissed for failure to implead all the co-owners of the two lots. The De Castros claim that Artigo always knew that the two lots were coowned by Constante and Corazon with their other siblings Jose and Carmela whom Constante merely represented. The De Castros contend that failure to implead such indispensable parties is fatal to the complaint since Artigo, as agent of all the four co-owners, would be paid with funds co-owned by the four co-owners. The De Castros' contentions are devoid of legal basis. An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had. 7 The joinder of indispensable parties is mandatory and courts cannot proceed without their presence. 8 Whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop the trial and order the inclusion of such party. 9 However, the rule on mandatory joinder of indispensable parties is not applicable to the instant case.

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parties, however, may, by express agreement, negate this solidary responsibility. The solidarity does not disappear by the mere partition effected by the principals after the accomplishment of the agency. If the undertaking is one in which several are interested, but only some create the agency, only the latter are solidarily liable, without prejudice to the effects of negotiorum gestio with respect to the others. And if the power granted includes various transactions some of which are common and others are not, only those interested in each transaction shall be liable for it." 11 When the law expressly provides for solidarity of the obligation, as in the liability of co-principals in a contract of agency, each obligor may be compelled to pay the entire obligation. 12 The agent may recover the whole compensation from any one of the co-principals, as in this case. Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary debtors. This article reads: Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected. Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc. 13 that ". . . solidarity does not make a solidary obligor an indispensable party in a suit filed by the creditor. Article 1216 of the Civil Code says that the creditor 'may proceed against anyone of the solidary debtors or some or all of them simultaneously.'" (Emphasis supplied) Second Issue: whether Artigo's claim has been extinguished by full payment, waiver or abandonment The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo was given "his proportionate share and no longer entitled to any balance." According to them, Artigo was just one of the agents involved in the sale and entitled to a "proportionate share" in the commission. They assert that Artigo did absolutely nothing during the

second negotiation but to sign as a witness in the deed of sale. He did not even prepare the documents for the transaction as an active real estate broker usually does. The De Castros' arguments are flimsy. A contract of agency which is not contrary to law, public order, public policy, morals or good custom is a valid contract, and constitutes the law between the parties. 14 The contract of agency entered into by Constante with Artigo is the law between them and both are bound to comply with its terms and conditions in good faith. The mere fact that "other agents" intervened in the consummation of the sale and were paid their respective commissions cannot vary the terms of the contract of agency granting Artigo a 5 percent commission based on the selling price. These "other agents" turned out to be employees of Times Transit, the buyer Artigo introduced to the De Castros. This prompted the trial court to observe: "The alleged 'second group' of agents came into the picture only during the so-called 'second negotiation' and it is amusing to note that these (sic) second group, prominent among whom are Atty. Del Castillo and Ms. Prudencio, happened to be employees of Times Transit, the buyer of the properties. And their efforts were limited to convincing Constante to 'part away' with the properties because the redemption period of the foreclosed properties is around the corner, so to speak. (tsn, June 6, 1991). xxx xxx xxx

To accept Constante's version of the story is to open the floodgates of fraud and deceit. A seller could always pretend rejection of the offer and wait for sometime for others to renew it who are much willing to accept a commission far less than the original broker. The immorality in the instant case easily presents itself if one has to consider that the alleged 'second group' are the employees of the buyer, Times Transit and they have not bettered the offer secured by Mr. Artigo for P7 million. It is to be noted also that while Constante was too particular about the unrenewed real estate broker's license of Mr. Artigo, he did not

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bother at all to inquire as to the licenses of Prudencio and Castillo. (tsn, April 11, 1991, pp. 39-40)." 15 (Emphasis supplied) In any event, we find that the 5 percent real estate broker's commission is reasonable and within the standard practice in the real estate industry for transactions of this nature. The De Castros also contend that Artigo's inaction as well as failure to protest estops him from recovering more than what was actually paid him. The De Castros cite Article 1235 of the Civil Code which reads: Art. 1235. When the obligee accepts the performance, knowing its incompleteness and irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with. The De Castros' reliance on Article 1235 of the Civil Code is misplaced. Artigo's acceptance of partial payment of his commission neither amounts to a waiver of the balance nor puts him in estoppel. This is the import of Article 1235 which was explained in this wise: "The word accept, as used in Article 1235 of the Civil Code, means to take as satisfactory or sufficient, or agree to an incomplete or irregular performance. Hence, the mere receipt of a partial payment is not equivalent to the required acceptance of performance as would extinguish the whole obligation." 16 (Emphasis supplied) There is thus a clear distinction between acceptance and mere receipt. In this case, it is evident that Artigo merely received the partial payment without waiving the balance. Thus, there is no estoppel to speak of. The De Castros further argue that laches should apply because Artigo did not file his complaint in court until May 29, 1989, or almost four years later. Hence, Artigo's claim for the balance of his commission is barred by laches. Laches means the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. 17

Artigo disputes the claim that he neglected to assert his rights. He was appointed as agent on January 24, 1984. The two lots were finally sold in June 1985. As found by the trial court, Artigo demanded in April and July of 1985 the payment of his commission by Constante on the basis of the selling price of P7.05 million but there was no response from Constante. 18 After it became clear that his demands for payment have fallen on deaf ears, Artigo decided to sue on May 29, 1989. Actions upon a written contract, such as a contract of agency, must be brought within ten years from the time the right of action accrues. 19 The right of action accrues from the moment the breach of right or duty occurs. From this moment, the creditor can institute the action even as the ten-year prescriptive period begins to run. 20 The De Castros admit that Artigo's claim was filed within the ten-year prescriptive period. The De Castros, however, still maintain that Artigo's cause of action is barred by laches. Laches does not apply because only four years had lapsed from the time of the sale in June 1985. Artigo made a demand in July 1985 and filed the action in court on May 29, 1989, well within the ten-year prescriptive period. This does not constitute an unreasonable delay in asserting one's right. The Court has ruled, "a delay within the prescriptive period is sanctioned by law and is not considered to be a delay that would bar relief." 21 In explaining that laches applies only in the absence of a statutory prescriptive period, the Court has stated "Laches is recourse in equity. Equity, however, is applied only in the absence, never in contravention, of statutory law. Thus, laches, cannot, as a rule, be used to abate a collection suit filed within the prescriptive period mandated by the Civil Code." 22 Clearly, the De Castros' defense of laches finds no support in law, equity or jurisprudence. Third issue: whether the determination of the purchase price was made in violation of the Rules on Evidence The De Castros want the Court to re-examine the probative value of the evidence adduced in the trial court to determine whether the actual selling price of the two lots was P7.05 million and not P3.6 million. The De Castros contend that it is erroneous to base the 5

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percent commission on a purchase price of P7.05 million as ordered by the trial court and the appellate court. The De Castros insist that the purchase price is P3.6 million as expressly stated in the deed of sale, the due execution and authenticity of which was admitted during the trial. The De Castros believe that the trial and appellate courts committed a mistake in considering incompetent evidence and disregarding the best evidence and parol evidence rules. They claim that the Court of Appeals erroneously affirmed sub silentio the trial court's reliance on the various correspondences between Constante and Times Transit which were mere photocopies that do not satisfy the best evidence rule. Further, these letters covered only the first negotiations between Constante and Times Transit which failed; hence, these are immaterial in determining the final purchase price. The De Castros further argue that if there was an undervaluation, Artigo who signed as witness benefited therefrom, and being equally guilty, should be left where he presently stands. They likewise claim that the Court of Appeals erred in relying on evidence which were not offered for the purpose considered by the trial court. Specifically, Exhibits "B", "C", "D" and "E" were not offered to prove that the purchase price was P7.05 Million. Finally, they argue that the courts a quo erred in giving credence to the perjured testimony of Artigo. They want the entire testimony of Artigo rejected as a falsehood because he was lying when he claimed at the outset that he was a licensed real estate broker when he was not. Whether the actual purchase price was P7.05 Million as found by the trial court and affirmed by the Court of Appeals, or P3.6 Million as claimed by the De Castros, is a question of fact and not of law. Inevitably, this calls for an inquiry into the facts and evidence on record. This we can not do. It is not the function of this Court to re-examine the evidence submitted by the parties, or analyze or weigh the evidence again. 23 This Court is not the proper venue to consider a factual issue as it is not a trier of facts. In petitions for review on certiorari as a mode of appeal under Rule 45, a petitioner can only raise questions of law. Our pronouncement in the case of Cormero vs. Court of Appeals 24 bears reiteration:

"At the outset, it is evident from the errors assigned that the petition is anchored on a plea to review the factual conclusion reached by the respondent court. Such task however is foreclosed by the rule that in petitions for certiorari as a mode of appeal, like this one, only questions of law distinctly set forth may be raised. These questions have been defined as those that do not call for any examination of the probative value of the evidence presented by the parties. (Uniland Resources vs. Development Bank of the Philippines, 200 SCRA 751 [1991] citing Goduco vs. Court of Appeals, et al., 119 Phil. 531; Hernandez vs. Court of Appeals, 149 SCRA 67). And when this court is asked to go over the proof presented by the parties, and analyze, assess and weigh them to ascertain if the trial court and the appellate court were correct in according superior credit to this or that piece of evidence and eventually, to the totality of the evidence of one party or the other, the court cannot and will not do the same. (Elayda vs. Court of Appeals, 199 SCRA 349 [1991]). Thus, in the absence of any showing that the findings complained of are totally devoid of support in the record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this court is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties. (Morales vs. Court of Appeals, 197 SCRA 391 [1991] citing Santa Ana vs. Hernandez, 18 SCRA 973 [1966])." We find no reason to depart from this principle. The trial and appellate courts are in a much better position to evaluate properly the evidence. Hence, we find no other recourse but to affirm their finding on the actual purchase price. Fourth Issue: whether award of moral damages and attorney's fees is proper The De Castros claim that Artigo failed to prove that he is entitled to moral damages and attorney's fees. The De Castros, however, cite no concrete reason except to say that they are the ones entitled to damages since the case was filed to harass and extort money from them. Law and jurisprudence support the award of moral damages and attorney's fees in favor of Artigo. The award of damages and attorney's fees is left to the sound discretion of the court, and if such

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discretion is well exercised, as in this case, it will not be disturbed on appeal. 25 Moral damages may be awarded when in a breach of contract the defendant acted in bad faith, or in wanton disregard of his contractual obligation. 26 On the other hand, attorney's fees are awarded in instances where "the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim." 27 There is no reason to disturb the trial court's finding that "the defendants' lack of good faith and unkind treatment of the plaintiff in refusing to give his due commission deserve censure." This warrants the award of P25,000.00 in moral damages and P45,000.00 in attorney's fees. The amounts are, in our view, fair and reasonable. Having found a buyer for the two lots, Artigo had already performed his part of the bargain under the contract of agency. The De Castros should have exercised fairness and good judgment in dealing with Artigo by fulfilling their own part of the bargain paying Artigo his 5 percent broker's commission based on the actual purchase price of the two lots. WHEREFORE, the petition is denied for lack of merit. The Decision of the Court of Appeals dated May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto. SO ORDERED.

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