SPS. PONCIANO VS. HON. PARENTELA, JR.

G.R NO. 133284, MAY 9, 2000

FACTS:
On June 13, 1995, private respondents Ildefonso and Leonora Clamosa filed a complaint for a sum of
money and damages with the Regional Trial Court of Trece Martires City, Branch 23, against petitioners
Claro and Gloria Ponciano for unpaid cost of labor and materials incurred by them in repairing petitioner's
house in San Roque, Cavite. Petitioners filed a motion to dismiss the complaint for failure to state a cause
of action, but the same was denied by the trial court in its Order dated September 21, 1995.
On October 18, 1995, petitioners filed their answer with compulsory counterclaim, claiming that they have
paid the total contract price agreed upon; that despite this, the work of private respondents was defective;
and that private respondents abandoned the renovation before it was completed. Petitioners asserted that
they are entitled to be paid P250,000 to complete the renovation, and damages.
On August 23, 1996, upon motion of private respondents, the trial court ordered that petitioners
counterclaim be stricken off from the record for failure to comply with Administrative Circular No. 04-94,
which requires an affidavit of non-forum shopping for all initiatory pleadings in all courts. Petitioners filed a
motion for reconsideration dated September 17, 1996, arguing, among others, that since their counterclaim
is compulsory in nature, it is not an initiatory pleading and therefore, does not fall within the scope of
Administrative Circular No. 04-94. However, on October 17, 1996, the trial court denied petitioners' motion
for reconsideration.
Petitioners questioned the trial court's orders before this Court by means of a special civil action
for certiorari. On February 10, 1997, the Court's Second Division denied the petition for lack of merit.
Thereafter, petitioners filed an "Answer with Amended Compulsory Counterclaim," wherein the amendment
consisted of the addition of a certification under oath in compliance with the Administrative Circular No. 04-
94. Initially, the trial court admitted such answer in its July 9, 1997 Order. However, after the filing of a
motion for reconsideration by private respondents, the court reconsidered its action and expunged the
amended compulsory counterclaim from the records. After its denial, petitioners filed the present special
civil action for certiorari under Rule 65, assailing the trial court's orders denying admission of their amended
compulsory counterclaim. They assert that they should be permitted to re-file their compulsory counterclaim
provided that they comply with such circular
ISSUE:
Whether or not an answer which asserts a compulsory counterclaim must include a certificate of non-forum
shopping.
RULING:
No. provisions of Administrative Circular No. 04-94 do not apply to compulsory counterclaims.
Administrative Circular No. 04-94 was issued by this Court in order to prevent the undesirable practice of
forum-shopping, which exists when, as a result of an adverse opinion in one forum, a party seeks a
favorable opinion (other than by appeal or certiorari) in another, or when he institutes two or more actions
or proceedings grounded on the same cause, on the chance that one or the other court would make a
favorable disposition.
In the case at bar, there is no doubt that the counterclaims pleaded by petitioners in their answers are
compulsory in nature. The filing of a separate action by petitioners would only result in the presentation of
the same evidence as in Civil Case No. TM-601. Proceeding from our ruling in Santo Tomas University
Hospital, petitioners need not file a certification of non-forum shopping since their claims are not initiatory
in character, and therefore, are not covered by the provisions of Administrative Circular No. 04-94.
WHEREFORE, the December 9, 1997 and March 17, 1998 Orders of Branch 23 of the Regional Trial Court
of Trece Martires City in Civil Case No. TM-601 are hereby SET ASIDE. The trial court is ORDERED to
ADMIT petitioners' answer with compulsory counterclaim.
EASTERN ASSURANCE & SURETY CORP. VS. HON. CUI
GR NO. L-54452, JULY 20, 1981

FACTS:
Transunion Corporation and Rey M. Pan doing business under the name of Pan Phil. Trading entered into
a dealership agreement for the sale of merchandise. Pursuant thereto Pan Phil. Trading had to file a P
20,000 surety bond and it complied by presenting a surety bond of Eastern Assurance & Surety
Corporation.

Transunion filed a complaint (Civil Case No. 115385, CFI, Manila) against Rey M. Pan, Pan Phil. Trading
and Eastern Assurance & Surety Corporation for the full payment of merchandise delivered in the amount
of P 10,841.54.

After Eastern Assurance & Surety Corporation had filed its Answer with cross-claim, it filed a motion to file
a third-party complaint against Loreta B. Pan, wife of Rey M. Pan. The reason given in the motion is that
movant has a legal right against Loreta B. Pan. It appears that in consideration of the surety bond, the Pan
spouses executed an Indemnity Agreement in favor of Eastern Assurance & Surety Corporation.

The respondent judge granted the motion and admitted the third- party complaint. Subsequently, Loreta B.
Pan filed a motion to dismiss the third-party complaint on the ground that venue was improperly laid. She
invoked paragraph 7 of the Indemnity Agreement.

The respondent judge in his order, peremptorily dismissed the third-party complaint on the ground that the
motion to dismiss was "well-taken." The respondent judge, may his tribe vanish, did not elaborate. A motion
to reconsider the order of dismissal was denied in a similar fashion.

ISSUE:
Whether or not the respondent judge erred in dismissing the third-party complaint.
RULING:
Yes. Petition is hereby granted by the Court despite the comment of the respondent judge to the petition
for review that in dismissing the third-party complaint he had to uphold the policy of upholding the sanctity
of contracts in preference to the policy against multiplicity of suits.

What the respondent judge and even petitioner's counsel failed to perceive is that paragraph 7 of the
Indemnity Agreement was imposed on the Pan spouses by the petitioner surety company for its benefit and
convenience and therefore the latter could waive the provision by filing its complaint, not in Quezon City,
but in Manila. There is, therefore, no sanctity of contract to hold.

But even if we assume that paragraph 7 of the Indemnity Agreement created a reciprocal obligation, it does
not necessarily follow that it is applicable to the present situation.

It has to be remembered that a third-party complaint is but ancillary to the main action and is a
procedural device to avoid multiplicity of suits. Because of its nature the prescriptions on
jurisdiction and venue applicable to ordinary suits may not apply. Thus a third-party complaint has
to yield to the jurisdiction and venue of the main action. This view is supported by our decision in
Republic vs. Central Surety & Insurance Co., G.R. L-27802, Oct. 26, 1968.
FIRESTONE TIRE & RUBBER CO. VS. TEMPONGKO
27 SCRA 418, March 28, 1969

FACTS:

In a collection action instituted in the City Court of Manila, defendant in the course of the presentation of
his evidence, obtained leave to file a third-party complaint against the third-party defendant. After proper
proceedings, the City Court rendered judgment on the original complaint in favor of plaintiff, and on the
third-party complaint in favor of defendant, as third-party plaintiff.

Only the third-party defendant appealed in due course from the judgment rendered against him in the third-
party complaint.

When the records were elevated to the CFI of Manila, plaintiff filed a Motion to Remand Case to the lower
court, for execution of its judgment against defendant, alleging in substance that by virtue of defendant's
failure to appeal, its judgment against defendant had become final and executory and was in no way
affected by the appeal filed by third party defendant from the judgment in favor of defendant in the third-
party complaint.

The CFI overruled defendant's opposition to plaintiff's motion and issued an Order granting the motion for
the remand of the case to the City Court for execution of its decision against defendant, directing that
thereafter the records be sent back to it "for trial de novo insofar as the third-party plaintiff and the third-
party defendant are concerned.

The Court a quo, therefore, correctly issued its order for execution of the judgment on the principal
complaint in favor of plaintiff on the strength of this Court's ruling in Singh vs. Liberty Insurance Corporation,
this Court similarly disposed of an identical case:

It is true, as appellant claims that an appeal from the decision of an inferior court (Municipal Court)
operates to vacate said decision, thereafter the case to stand trial de novo in the Court of First
Instance, but it seems obvious that this applies only to the party who had taken the appeal. As
against other parties adversely affected by the decision who did not appeal, the decision must be
deemed to have become final and executory. A contrary view would lead to indefensible result.

ISSUE:

Whether or not plaintiff’s judgment in the MTC against defendant who in turned obtained judgment for
reimbursement against the third-party defendant be deemed to have been final an executory.

RULING:

Yes. In this case, the court renders judgment on the principal complaint in favor of plaintiff against defendant
and renders another judgment on the third-party complaint in favor of defendant as third-party plaintiff,
ordering the third-party defendant to reimburse the defendant whatever amount said defendant is ordered
to pay plaintiff in the case. Failure of any of said parties in such a case to appeal the judgment as against
him makes such judgment final and executory. By the same token, an appeal by one party from such
judgment does not inure to the benefit of the other party who has not appealed nor can it be deemed to be
an appeal of such other party from the judgment against him.

ACCORDINGLY, the Order of the Court a quo for the execution of the decision of the City Court of Manila
in favor of plaintiff-appellee as against defendant-appellant is hereby affirmed. With costs against
defendant-appellant.
BEATRIZ VDA. DE DIOS VS. BALAGOT
20 SCRA 950, August 10, 1967

FACTS:

An action for recovery of possession of land was filed on January 24, 1963 by Beatriz G. Vda. de Dios
against Leandro Balagot, in the CFI of Rizal, Quezon City branch. Plaintiff alleged in her complaint that she
is the registered owner of 1,296 square meters of land situated in Quezon City covered by TCT No. 52577
of the Registry of Deeds of said city, issued in her name on September 6, 1960; that she had purchased
the same from J.M. Tuason & Co., then the registered owner of the land under Transfer Certificate of Title
No. 45235; that "prior to September 6, 1960 up to the present" defendant has been in possession of a
portion of about 600 square meters of said parcel of land, without the knowledge and tolerance of J. M.
Tuason & Co., and that in spite of demands on him by plaintiff and her predecessor-in-interest, defendant
has failed and refused to vacate the land and remove his house and other construction thereon.

The defendant, on February 12, 1963, filed an answer with a counterclaim. Alleged therein were that the
portion of land occupied by defendant, an area of 700 square meters, was part of the 50 quiñones of land
first owned by Telesforo Deudor in 1873; that from Pedro Deudor, successor-in-interest of Telesforo, he
bought the portion of land in question for P4,900.00 on August 80, 1950; that right after the sale, he took
possession of the land, subsequently constructing thereon a house worth P40,000.00; that pursuant to an
agreement between J. M. Tuason & Co., and the Deudor heirs dated March 16, 1953, defendant’s right to
the land has preference over the sale in favor of plaintiff; that, therefore, plaintiff should reconvey the portion
of the land involved herein to defendant or pay him P4,900.00 for the land, P40,000.00 for his house, and
P5,000.00 for attorney’s fees and damages.

Plaintiff, on February 19, 1963, answered defendant’s counterclaim. On March 14, 1963 the court set the
case for hearing on May 17, 1963. Prior to this scheduled date, however, on April 1, 1963, defendant filed
a motion for leave to file a third-party complaint, attaching the same to the motion, against J. M. Tuason &
Co. and Pedro Deudor, for payment of the value of the house and lot in case of eviction. Plaintiff opposed
it, stating that a third-party complaint to enforce the warranty of eviction should have been filed before the
time for filing the answer, citing Article 1559, Civil Code; and that the Tuason-Deudor agreement defendant
mentioned has been declared rescinded. Said defendant’s motion was denied on June 11, 1963, "for lack
of merit." From the order denying his motion for leave to file a third- party complaint, defendant appealed
to the Court of Appeals.

ISSUE:

1. Whether or not the third-party complaint is admissible or not.

2. Whether or not the order denying the admission of the third-party complaint be appealed from at
this stage of the proceedings.

RULING:

1. ADMISSION NECESSARY IF IT SEEKS ENFORCEMENT OF WARRANTY AGAINST

EVICTION. — As a rule the admission of a third-party complaint is left to the discretion of the trial
court. However, if the third-party complaint seeks to enforce a vendor’s warranty in case of eviction,
the same is required by law to be resorted to instead of being left to be filed as a separate action.
If not raised in the action for eviction, the same will not prosper and the vendor will be released
from his aforesaid warranty. It should, therefore, be admitted. In this case, the third-party complaint,
as against Pedro Deudor, seeks enforcement of the warranty against eviction. Not only does the
admission of the third- party complaint against Pedro Deudor, avoid multiplicity of suits: it is
necessary for defendant to enforce said warranty against his vendor.
2. Yes.

TIME OF FILING THIRD PARTY COMPLAINT. — A third-party complaint filed after the answer
but before trial is not late; the time limit of Article 1559 of the Civil Code does not apply thereto.
And Sec. 2 of Rule 12 of the Old Rules of Court, then applicable, provided that after service of his
answer, defendant may, with notice to plaintiff, move for leave as third-party plaintiff to file a
complaint against a third-party defendant.

ORDER DISALLOWING THE THIRD-PARTY COMPLAINT APPEALABLE. — An order

disallowing a third-party complaint which seeks to enforce a vendor’s warranty against eviction
leaves nothing further to be done in the court a quo as regards the defendant’s right to enforce the
warranty; hence, it is appealable.