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Domingo v.

Scheer
DOCTRINE: The High Court explained that the non-joinder of an indispensable
party is not a ground for the dismissal of an action. Section 7, Rule 3 of the Rules, as
amended, requires indispensable parties to be joined as plaintiffs or defendants.
The joinder of indispensable parties is mandatory. Without the presence of
indispensable parties to the suit, the judgment of the court cannot attain real
finality. Strangers to a case are not bound by the judgment rendered by the court.
The absence of an indispensable party renders all subsequent actions of the court
null and void. There is lack of authority to act not only of the absent party but also
as to those present. The responsibility of impleading all the indispensable parties
rests on the petitioner or plaintiff.
This is a petition for review under Rule 45 of the Rules of Court, as amended, of the
Decision1 of the Court of Appeals in CA-G.R. SP No. 71094 granting the
respondents petition for certiorari and prohibition annulling the order of arrest
issued by the petitioner, and permanently enjoining her from deporting the
respondent from the Philippines.
FACTS: Respondent Herbert Markus Emil Scheer, a native of Ochsenfurt, Germany,
was a frequent visitor of the Philippines. On July 18, 1986, his application for
permanent resident status was granted. The Bureau of Immigration and Deportation
(BID) issued in favor of the respondent Alien Certificate of Registration No. B-396907
dated September 16, 1987 and Immigration Certificate of Residence No. 256789
dated February 24, 1988. The Commissioner stated that the granting of the petition
would redound to the benefit of the Filipino people. During his sojourn in the
Philippines, the respondent married widowed Edith delos Reyes with whom he had
two daughters. They had a son, Herbert Scheer, Jr., but he passed away on
November 13, 1995. They resided in Puerto Princesa City, Palawan, where the
respondent established and managed the Bavaria Restaurant. On May 21, 1991, he
was appointed Confidential Agent by then NBI Director Alfredo S. Lim.
In a Letter dated June 29, 1995, Vice Consul Jutta Hippelein informed the Philippine
Ambassador to Bonn, Germany, that the respondent had police records and
financial liabilities in Germany.
The Department of Foreign Affairs received from the German Embassy in Manila
Note Verbale No. 369/95 dated July 26, 1995, informing it that the respondent was
wanted by the German Federal Police; that a warrant of arrest had been issued
against him; and that the respondent will be served with an official document
requesting him to turn over his German passport to the Embassy which was
invalidated on July 2, 1995. The Embassy requested the Department of Foreign
Affairs to inform the competent Philippine authorities of the matter. The BOC
thereafter issued a Summary Deportation Order dated September 27, 1997.
When the respondent was apprised of the deportation order, he forthwith aired his
side to then BID Commissioner Leandro T. Verceles. The Commissioner allowed the
respondent to remain in the Philippines, giving the latter time to secure a clearance
and a new passport from the German Embassy. Then Presidential Assistant
Teodorico K. Imperial wrote a Testimonial dated November 24, 1995, in behalf of the

respondent addressed to Commissioner Verceles. Nonetheless, the respondent,


through counsel, filed on December 5, 1995 an Urgent Motion for Reconsideration of
the Summary Deportation Order of the Board of Commissioners.
However, the BOC did not resolve the respondents motion. The respondent was
neither arrested nor deported.
Meanwhile, on February 15, 1996, the District Court of Straubing rendered a
Decision dismissing the criminal case against the respondent for physical injuries.
The German Embassy in Manila, thereafter, issued a temporary passport to the
respondent.
In a Letter dated March 1, 1996, the respondent informed Commissioner Verceles
that his passport had been renewed following the dismissal of the said criminal
case. He reiterated his request for the cancellation of the Summary Deportation
Order dated September 27, 1995 and the restoration of his permanent resident
status. Subsequently, on March 12, 1996, the German Embassy issued to the
respondent a regular passport, to expire on March 11, 2006.
The BOC still failed to resolve the respondents Urgent Motion for Reconsideration.
Commissioner Verceles did not respond to the respondents March 1, 1996 Letter.
The respondent remained in the Philippines and maintained his business in Palawan.
On March 20, 1997, the Department of Labor and Employment approved his
application for Alien Employment Registration Certificate as manager of the Bavaria
Restaurant in Puerto Princesa City.
In the meantime, petitioner Immigration Commissioner Andrea T. Domingo assumed
office. She wrote the German Embassy and inquired if the respondent was wanted
by the German police. On April 12, 2002, the German Embassy replied that the
respondent was not so wanted. At about midnight on June 6, 2002, Marine
operatives and BID agents apprehended the respondent in his residence on orders
of the petitioner. He was whisked to the BID Manila Office and there held in custody
while awaiting his deportation. Despite entreaties from the respondents wife21 and
his employees, the petitioner refused to release the respondent.
Shocked at the sudden turn of events, the respondent promptly communicated with
his lawyer. The latter filed with the BID a motion for bail to secure the respondents
temporary liberty. On June 11, 2002, the respondents counsel filed with the Court of
Appeals a petition for certiorari, prohibition and mandamus with a prayer for
temporary restraining order and writ of preliminary injunction, to enjoin the
petitioner from proceeding with the respondents deportation. The respondent
(petitioner therein) alleged, inter alia, that his arrest and detention were premature,
unjust, wrongful, illegal and unconstitutional, effected without sufficient cause and
without jurisdiction or with grave abuse of discretion. He asserted that there was no
speedy remedy open to him in the ordinary course of law and that his Urgent Motion
for Reconsideration of the Summary Deportation Order of the BOC had not yet been
resolved despite the lapse of more than six years. The respondent averred that he
was a fully documented alien, a permanent resident and a law-abiding citizen.

In a parallel development, the respondent procured a letter from the National


Bureau of Investigation (NBI) in Puerto Princesa City certifying that he had no
pending criminal record. The Puerto Princesa City Philippine National Police (PNP)
also issued a certification that the respondent had no pending criminal or
derogatory records in the said office.
Meanwhile, on June 26, 2002, the Court of Appeals issued a status quo order
restraining the petitioner from deporting the respondent on a bond of P100,000.00.
On July 18, 2002, the BOC issued an Omnibus Resolution dated June 14, 2002,
pendente lite denying the respondents Urgent Motion for Reconsideration, Motion
for Bail/Recognizance, and the Letter dated June 11, 2002.
The Court of Appeals ruled that the German Embassys subsequent issuance of
passport to the respondent before the BOCs issuance of its Omnibus Resolution had
mooted the September 27, 1995 Summary Deportation Order, as well as the arrest
and detention of the respondent. According to the court, it made no sense to require
the respondent to leave the country and thereafter re-apply for admission with the
BOC. Furthermore, since the grounds cited by the BOC in its Summary Deportation
Order no longer existed, there was no factual and legal basis to disqualify the
respondent from staying in the country.
ISSUE: Whether or not the BOC is an indispensable party
HELD: We agree with the petitioners contention that the BOC was an indispensable
party to the respondents petition for certiorari, prohibition and mandamus in the
Court of Appeals. The respondent was arrested and detained on the basis of the
Summary Deportation Order of the BOC. The petitioner caused the arrest of the
respondent in obedience to the said Deportation Order. The respondent, in his
Memorandum, prayed that the CA annul not only the Summary Deportation Order of
the BOC but also the latters Omnibus Resolution, and, thus, order the respondents
immediate release. The respondent also prayed that the CA issue a writ of
mandamus for the immediate resolution of his Urgent Motion for Reconsideration.
The said motion had to be resolved by the BOC as the order sought to be resolved
and reconsidered was issued by it and not by the petitioner alone. The powers and
duties of the BOC may not be exercised by the individual members of the
Commission.44
Section 7, Rule 3 of the Rules of Court, as amended, requires indispensable parties
to be joined as plaintiffs or defendants. The joinder of indispensable parties is
mandatory. Without the presence of indispensable parties to the suit, the judgment
of the court cannot attain real finality.45 Strangers to a case are not bound by the
judgment rendered by the court.46 The absence of an indispensable party renders
all subsequent actions of the court null and void. Lack of authority to act not only of
the absent party but also as to those present.47 The responsibility of impleading all
the indispensable parties rests on the petitioner/plaintiff.48
However, the non-joinder of indispensable parties is not a ground for the dismissal
of an action. 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.49 If the
petitioner/plaintiff refuses to implead an indispensable party despite the order of

the court, the latter may dismiss the complaint/petition for the petitioner/plaintiffs
failure to comply therefor.50 The remedy is to implead the non-party claimed to be
indispensable.51 In this case, the CA did not require the respondent (petitioner
therein) to implead the BOC as respondent, but merely relied on the rulings of the
Court in Vivo v. Arca,52 and Vivo v. Cloribel.53 The CAs reliance on the said rulings
is, however, misplaced. The acts subject of the petition in the two cases were those
of the Immigration Commissioner and not those of the BOC; hence, the BOC was not
a necessary nor even an indispensable party in the aforecited cases.
The Non-joinder of an Indispensable Party is not a Ground for the Dismissal of the
Petition
The Court may be curing the defect in this case by adding the BOC as partypetitioner. The petition should not be dismissed because the second action would
only be a repetition of the first.54 In Salvador, et al., v. Court of Appeals, et al., we
held that this Court has full powers, apart from that power and authority which is
inherent, to amend the processes, pleadings, proceedings and decisions by
substituting as party-plaintiff the real party-in-interest. The Court has the power to
avoid delay in the disposition of this case, to order its amendment as to implead the
BOC as party-respondent. Indeed, it may no longer be necessary to do so taking into
account the unique backdrop in this case, involving as it does an issue of public
interest. After all, the Office of the Solicitor General has represented the petitioner
in the instant proceedings, as well as in the appellate court, and maintained the
validity of the deportation order and of the BOCs Omnibus Resolution. It cannot,
thus, be claimed by the State that the BOC was not afforded its day in court, simply
because only the petitioner, the Chairperson of the BOC, was the respondent in the
CA, and the petitioner in the instant recourse. In Alonso v. Villamor, we had the
occasion to state:
There is nothing sacred about processes or pleadings, their forms or contents. Their
sole purpose is to facilitate the application of justice to the rival claims of
contending parties. They were created, not to hinder and delay, but to facilitate and
promote, the administration of justice. They do not constitute the thing itself, which
courts are always striving to secure to litigants. They are designed as the means
best adapted to obtain that thing. In other words, they are a means to an end. When
they lose the character of the one and become the other, the administration of
justice is at fault and courts are correspondingly remiss in the performance of their
obvious duty.

LAPERAL V. CA
FACTS: In Civil Case No. Q-34907 in the Court of First Instance of Rizal, Quezon
City, Atty. Filoteo T. Banzon sought recovery of attorney's fees from Oliverio Laperal,
Laperal Development Corporation, and Imperial Development Corporation for
professional services rendered by him.
On April 8, 1983, the case was decided on the basis of a Compromise Agreement
reading in part as follows:
Atty. Filoteo Banzon by this agreement, does hereby voluntarily and freely waive,
forfeit, or consider as fully paid any and all other claims of money or otherwise that
he may have against the defendants, in all cases in the Philippines that he may
have handled for the defendants in the past, including whatever money claims he
may have in the above-entitled case outside of this agreement, inclusive of
representation fees, representation expenses, appearance fees, or retainers fees, or
other forms of attorneys fees and, hereby re-affirm that he will undertake upon his
professional oath and standing, to protect the interest of the defendants in all
unfinished appealed cases that the herein plaintiff had appeared in the past in
representation of the defendants, without any further renumeration or attorneys
fees, representation fees, appearance fees and expenses in connection therewith.
On May 19, 1987, Banzon filed a complaint against Oliverio Laperal. Laperal
Development Corporation. Imperial Development Corporation, Sunbeams
Convenience Foods, Inc. and Vicente Acsay for: 1) the annulment of the aforequoted
portion of the Compromise Agreement; 2) the collection of attorney's fees for his
services in the cases of: a) Imperial Development Corporation vs. Aover, b)
Republic vs. Sunbeams Convenience Foods, Inc., et al., and c) Laperal Development
vs. Ascario Tuazon and Ascario Tuazon v. Judge Maglalang, et al.; 3) the recovery of

the amount of P10,000.00 that was adjudged payable to him as attorney's fees by
Ascario Tuazon in Civil Case No. 3918; and 4) the payment to him of nominal
damages and attorney's fees.
Docketed as Civil Case 50823 in Branch 92 of the Regional Trial Court of Quezon
City, this case was dismissed on the ground that the trial court had no jurisdiction to
annul the Compromise Agreement as approved by an equal and coordinate court. It
was held that the issue was cognizable by the Court of Appeals. An additional
ground was that the Compromise Agreement already covered the plaintiff's
professional services in the aforementioned cases.
On appeal, the decision was affirmed on the issue of jurisdiction. The Court of
Appeals held, however, that attorney's fees were due the private respondent in the
cases of Laperal Development Corporation v. Ascario Tuazon and Ascario Tuazon v.
Judge Maglalang and Republic v. Sunbeams Convenience Foods. Inc.
Concerning the case of Republic vs. Sunbeams Convenience Foods, Inc. (G.R. No.
50464), the Court of Appeals said:
At the time of the execution of the compromise agreement and rendition of the
judgment based thereon on April 8, 1983, the aforementioned case bearing G.R. No.
50464 was still pending in the Supreme Court. It was not, however, the subject of
the compromise agreement (Exhibits C and 2; Annex 2, answer, pp. 47-55, 65-66,
rec.). It could not have been so because Sunbeams Convenience Foods, Inc. was not
a party defendant in the second amended complaint, although reference was made
to it in the appellant's seventh cause of action for which he has rendered
professional services but for which attorney's fees were being claimed from the
herein appellee Oliverio Laperal (Exhibits A and 1). But nothing is mentioned in the
second amended complaint and in the compromise agreement (Exhibits A and 1; C
and 2) which would indicate that Sunbeams Convenience Foods, Inc. itself was a
party plaintiff therein privy to the case. Appellee Oliverio Laperal and Sunbeams
Convenience Foods, Inc. do not appear to be one and the same.
It appearing that it was the herein appellant who filed the brief for Sunbeams
Convenience Foods, Inc. in the Supreme Court on March 14, 1980 (Exhibit D), he
should be compensated for his services.
Banzon's claim for attorney's fees in the said case was also among those
enumerated in his complaint in Civil Case No. Q-34907 against Oliverio Laperal,
Laperal Development Corporation, and Imperial Development Corporation. Notably,
Sunbeams Convenience Foods, Inc. (Sunbeams, for brevity), referred to in the
complaint as "Mr. Laperal's Corporation," was not joined by name as a partydefendant. Apparently, the private respondent believed that Oliverio Laperal, being
the president of the said company, was directly obligated to him for the attorney's
fees due him for his handling of the case for Sunbeams.
ISSUE: Whether or not Sunbeams Convenience Food should have been joined as a
party defendant in order that the judgement of the lower court could legally affect it

HELD: YES. It is settled that a corporation is clothed with a personality separate and
distinct from that of the persons composing it. It may not generally be held liable for
the personal indebtedness of its stockholders or those of the entities connected with
it. Conversely, a stockholder cannot be made to answer for any of its financial
obligations even if he should be its president.
There is no evidence that Sunbeams and Laperal are one and the same person.
While it is true that Laperal is a stockholder, director and officer of Sunbeams, that
status alone does not make him answerable for the liabilities of the said
corporation. Such liabilities include Banzon's attorney's fees for representing it in
the case of Republic v. Sunbeams Convenience Foods, Inc.
Sunbeams should have been joined as a party-defendant in order that the judgment
of the lower court could legally affect it. But even if it was not impleaded, the court
could still validly proceed with the case because Sunbeams was not an
indespensable party but only a proper party. A proper party is one which ought to be
a party if complete relief is to be accorded as between those already parties. A
party is indespensable if no final determination can be had of an action unless it is
joined either as plaintiff or defendant.
The Compromise Agreement upon which the decision of the court was based was
between plaintiff Atty. Banzon and the defendants represented by Oliverio Laperal.
To repeat, Sunbeams was not a party to this agreement and so could not be
affected by it.
The private respondent's claim for attorney's fees in the Sunbeam case was waived
by him not by virtue of the Compromise Agreement to which Sunbeams, not being a
defendant in Civil Case No. Q-34907, could not have been a party. What militates
against his claim is his own judicial admission that he had waived his attorney's fees
for the cases he had handled from 1974 to 1981 for Oliverio Laperal and his
corporations, including those not impleaded in his complaint in Civil Case No. Q34907.
PACANA V. ROVILA
FACTS: Petitioners Rebecca Pacaa-Contreras and Rosalie Pacaa, children of
Lourdes Teves Pacaa and Luciano Pacaa, filed the present case against Rovila Inc.,
Earl, Lilia, Dalla and Marisa for accounting and damages.
The petitioners claimed that their family has long been known in the community to
be engaged in the water supply business; they operated the "Rovila Water Supply"
from their family residence and were engaged in the distribution of water to
customers in Cebu City. The petitioners alleged that Lilia was a former trusted
employee in the family business who hid business records and burned and
ransacked the family files. Lilia also allegedly posted security guards and barred the
members of the Pacaa family from operating their business. She then claimed
ownership over the family business through a corporation named "Rovila Water
Supply, Inc." (Rovila Inc.) Upon inquiry with the Securities and Exchange
Commission (SEC), the petitioners claimed that Rovila Inc. was surreptitiously

formed with the respondents as the majority stockholders. The respondents did so
by conspiring with one another and forming the respondent corporation to takeover
and illegally usurp the family business registered name.
In forming the respondent corporation, the respondents allegedly used the name of
Lourdes as one of the incorporators and made it appear in the SEC documents that
the family business was operated in a place other than the Pacaa residence.
Thereafter, the respondents used the Pacaa familys receipts and the deliveries
and sales were made to appear as those of the respondent Rovila Inc. Using this
scheme, the respondents fraudulently appropriated the collections and payments.
The petitioners filed the complaint in their own names although Rosalie was
authorized by Lourdes through a sworn declaration and special power of attorney
(SPA). The respondents filed a first motion to dismiss on the ground that the RTC
had no jurisdiction over an intra-corporate controversy.
The RTC denied the motion. On September 26, 2000, Lourdes died and the
petitioners amended their complaint, with leave of court, on October 2, 2000 to
reflect this development.
On January 23, 2002, the respondents again filed a motion to dismiss on the
grounds, among others, that the petitioners are not the real parties in interest to
institute and prosecute the case and that they have no valid cause of action against
the respondents.
The RTC denied the respondents motion to dismiss. It ruled that, save for the
grounds for dismissal which may be raised at any stage of the proceedings, a
motion to dismiss based on the grounds invoked by the respondents may only be
filed within the time for, but before, the filing of their answer to the amended
complaint. Thus, even granting that the defenses invoked by the respondents are
meritorious, their motion was filed out of time as it was filed only after the
conclusion of the pre-trial conference. Furthermore, the rule on substitution of
parties only applies when the parties to the case die, which is not what happened in
the present case.
The RTC likewise denied the respondents motion for reconsideration.
The respondents filed a petition for certiorari under Rule 65 of the Rules of Court
with the CA, invoking grave abuse of discretion in the denial of their motion to
dismiss. They argued that the deceased spouses Luciano and Lourdes, not the
petitioners, were the real parties in interest. Thus, the petitioners violated Section
16, Rule 3 of the Rules of Court on the substitution of parties.
Furthermore, they seasonably moved for the dismissal of the case and the RTC
never acquired jurisdiction over the persons of the petitioners as heirs of Lourdes
and Luciano.
The CA granted the petition and ruled that the RTC committed grave abuse of
discretion as the petitioners filed the complaint and the amended complaint as
attorneys-in-fact of their parents. As such, they are not the real parties in interest

and cannot bring an action in their own names; thus, the complaint should be
dismissed pursuant to the Courts ruling in Casimiro v. Roque and Gonzales.
Neither are the petitioners suing as heirs of their deceased parents. Pursuant to
jurisprudence,24 the petitioners should first be declared as heirs before they can be
considered as the real parties in interest. This cannot be done in the present
ordinary civil case but in a special proceeding for that purpose. The CA agreed with
the respondents that they alleged the following issues as affirmative defenses in
their answer: 1) the petitioners are not the real parties in interest; and 2) that they
had no legal right to institute the action in behalf of their parents.
That the motion to dismiss was filed after the period to file an answer has lapsed is
of no moment. The RTC judge entertained it and passed upon its merit. He was
correct in doing so because in the pre-trial order, one of the submitted issues was
whether the case must be dismissed for failure to comply with the requirements of
the Rules of Court. Furthermore, in Dabuco v. Court of Appeals, the Court held that
the ground of lack of cause of action may be raised in a motion to dismiss at
anytime.
The CA further ruled that, in denying the motion to dismiss, the RTC judge acted
contrary to established rules and jurisprudence which may be questioned via a
petition for certiorari. The phrase "grave abuse of discretion" which was traditionally
confined to "capricious and whimsical exercise of judgment" has been expanded to
include any action done "contrary to the Constitution, the law or jurisprudence.
The petitioners filed the present petition and argued that, first, in annulling the
interlocutory orders, the CA unjustly allowed the motion to dismiss which did not
conform to the rules.
Specifically, the motion was not filed within the time for, but before the filing of, the
answer to the amended complaint, nor were the grounds raised in the answer.
Citing Section 1, Rule 9 of the Rules of Court, the respondents are deemed to have
waived these grounds, as correctly held by the RTC. Second, even if there is nonjoinder and misjoinder of parties or that the suit is not brought in the name of the
real party in interest, the remedy is not outright dismissal of the complaint, but its
amendment to include the real parties in interest. Third, the petitioners sued in their
own right because they have actual and substantial interest in the subject matter of
the action as heirs or co-owners, pursuant to Section 2, Rule 3 of the Rules of Court.
The respondents reiterated in their comment that the petitioners are not the real
parties in interest.
ISSUE: Whether the petitioners are the real parties in interest
HELD: It should be emphasized that insofar as the petitioners are concerned, the
respondents have waived the dismissal of the complaint based on the ground of
failure to state a cause of action because the petitioners are not the real parties in
interest. At this juncture, a distinction between a real party in interest and an
indispensable party is in order. In Carandang v. Heirs of de Guzman, et al., the Court
clarified these two concepts and held that "[a] real party in interest is the party who

stands to be benefited or injured by the judgment of the suit, or the party entitled to
the avails of the suit. On the other hand, an indispensable party is a party in interest
without whom no final determination can be had of an action, in contrast to a
necessary party, which is one who is not indispensable but who ought to be joined
as a party if complete relief is to be accorded as to those already parties, or for a
complete determination or settlement of the claim subject of the action. xxx If a suit
is not brought in the name of or against the real party in interest, a motion to
dismiss may be filed on the ground that the complaint states no cause of action.
However, the dismissal on this ground entails an examination of whether the parties
presently pleaded are interested in the outcome of the litigation, and not whether
all persons interested in such outcome are actually pleaded. The latter query is
relevant in discussions concerning indispensable and necessary parties, but not in
discussions concerning real parties in interest. Both indispensable and necessary
parties are considered as real parties in interest, since both classes of parties stand
to be benefited or injured by the judgment of the suit."
At the inception of the present case, both the spouses Pacaa were not impleaded
as parties-plaintiffs. The Court notes, however, that they are indispensable parties
to the case as the alleged owners of Rovila Water Supply. Without their inclusion as
parties, there can be no final determination of the present case. They possess such
an interest in the controversy that a final decree would necessarily affect their
rights, so that the courts cannot proceed without their presence. Their interest in
the subject matter of the suit and in the relief sought is inextricably intertwined with
that of the other parties.
Obviously, in the present case, the deceased Pacaas can no longer be included in
the complaint as indispensable parties because of their death during the pendency
of the case. Upon their death, however, their ownership and rights over their
properties were transmitted to their heirs, including herein petitioners, pursuant to
Article 774 in relation with Article 777 of the Civil Code.