December 2, 2013
Ponente: Carpio, J
FACTS
According to Rebecca Pacaña-Contreras and Rosalie Pacaña, children of Lourdes Teves Pacaña and Luciano Pacaña, their family had been operating a water supply business, known as Rovila Water Supply, from their residence in Cebu for a long time already.
Subsequently, one of their trusted employees, Lilia, allegedly hid business records, burned and ransacked the family files, posted security guards and barred the members of the Pacaña family from operating their business, and claimed ownership over the family business through an SEC-registered corporation named "Rovila Water Supply, Inc."
In forming Rovila Water Supply, Inc., Lilia, et al. allegedly used the name of Lourdes (the mother of the petitioners) 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 Pacaña residence.
Thereafter, Lilia, et al. used the Pacaña family’s receipts and the deliveries and sales were made to appear as those of Rovila Inc. Using this scheme, Lilia, et al. fraudulently appropriated the collections and payments.
Upon discovery of this modus, Rebecca and Rosalie filed an action in their own names for accounting and damages against herein respondents. Their parents, Lourdes and Luciano, who were the owners of the family business, did not file any action. Lourdes and Luciano died during the pendency of the suit.
Respondents filed a motion to dismiss on the ground that the RTC had no jurisdiction over an intra-corporate controversy. Motion was denied. They later filed another motion to dismiss on the ground of failure to state a cause of action. The respondents contended that the deceased Lourdes and Luciano were the real parties in interest in the case. As such, Rebecca and Rosalie were not the real parties in interest to institute and prosecute the case and that they did not have a valid cause of action against herein respondents. Motion was denied for having been filed out of time.
Respondents filed an appeal before the CA, which reversed the RTC ruling. According to the CA, Rebecca and Rosalie were indeed not the real parties in interest because: (a) they filed the complaint as mere attorneys-in-fact of their parents, and (b) they had no legal right to institute the action in behalf of their parents because they have not yet been declared heirs at the time the action was filed.
Hence, the instant petition.
RULING
Petition granted. CA ruling reversed. Rebecca and Rosalie are ordered impleaded as parties-plaintiffs. Case remanded to the RTC for trial.
Whether the CA erred when it reversed the RTC ruling and granted the respondents’ second motion to dismiss based on failure to state a cause of action. – YES.
Respondents' second motion to dismiss based on failure to state a cause of action should have been denied because it was filed out of time, and thus was deemed to have been waived. As per the records, this motion was filed after an Answer had been filed and after the conclusion of the pre-trial. There was therefore no reason for the CA to have granted it.
Also, contrary to the respondents' assertion that they made a passing allegation (read: affirmative defense) in their Answer that the Pacaña sisters were not the real parties-in-interest in the case, such an assertion was nonetheless not supported by any evidence.
It is basic that the respondents had the duty to prove by substantial evidence their positive assertions. Clearly, other than the respondents’ bare allegations, the CA had no basis to rule, without proof, that the respondents alleged the grounds for dismissal as affirmative defenses in their Answer.
Assuming that the respondents filed their second motion to dismiss in a timely manner and proved it by substantial evidence, is “failure to state a cause of action” the proper ground to invoke against the Pacaña sisters for not being the real parties-in-interest? – YES.
Preliminarily, based on the history and development of the ground "fails to state a cause of action" in the 1940, 1964 and the present 1997 Rules of Court, a suit that is not brought in the name of the real party in interest is dismissible on the ground that the complaint "fails to state a cause of action."
However, note should be made that unlike the 1940 and 1964 rules where it was possible to file a motion to dismiss based on failure to state a cause of action at any stage of the proceedings, the present 1997 rules now state that a motion to dismiss based on this same ground should be filed "within the time for but before filing the answer to the complaint or pleading asserting a claim" or else it shall be deemed waived.
As applied in the present case, it was wrong for the CA to have granted the motion to dismiss and justify its decision by saying that such a motion may be raised at any time during the proceedings.
Also, the CA's reliance on the case of Dabuco v. CA is misguided because: (a) in Dabuco, the grounds for dismissal were raised as affirmative defenses in the Answer which is in stark contrast to the present case, and (b) the Dabuco case focuses on lack of cause of action, which is different from failure to state a cause of action. Failure to state a cause of action refers to the insufficiency of the pleading, and is a ground for dismissal under Rule 16 of the Rules of Court. On the other hand, lack of cause of action refers to a situation where the evidence does not prove the cause of action alleged in the pleading.
Whether Rebecca and Rosalie should be impleaded as parties in the case. – YES.
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.
As applied in the present petition, the issue of whether or not the Pacana sisters are real parties-in-interest is no longer important because such an issue is considered to have been waived by the respondents' failure to invoke it as an affirmative defense. Nonetheless, the Court proceeded to discuss their standing as indispensable parties.
At the inception of the present case, both the spouses Lourdes and Lucio Pacaña 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.
Since the complaint was instituted by their children, the proper remedy is to implead Lourdes and Lucio as indispensable parties. But this is impossible to do now, given that both the elderly Pacañas are already dead. Upon their death, however, their ownership and rights over their properties were transmitted to their heirs, including Rebecca and Rosalie.
Given that the outcome of the present case has a bearing on the hereditary rights of Rebecca and Rosalie, the two are therefore deemed indispensable parties themselves who should be impleaded as parties-plaintiffs.
