Pacaña-Contreras v. Rovila Water Supply, Inc.
G.R. No. 168979 | December 2, 2013
Facts:
Petitioners Rebecca Pacaña-Contreras and Rosalie Pacaña, children of Lourdes Teves Pacaña
and Luciano Pacaña, filed the present case against Rovila Inc., Earl, Lilia, Dalla and Marisa for
accounting and damages. 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.
Petitioners alleged that Lilia, a former trusted employee in the family business, 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. She then claimed ownership over
the family business through a corporation named "Rovila Water Supply, Inc." (Rovila Inc.) Upon
inquiry with the 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.
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
Pacaña residence. Thereafter, the respondents used the Pacaña family's 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.
Procedural History:
RTC: 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.
During the pendency of the case, Lourdes died and the petitioners amended their complaint, with
leave of court. They still attached to their amended complaint the sworn declaration with SPA,
but the caption of the amended complaint remained the same. Later on, Luciano also died.
The respondents filed their Answer. The petitioners' sister, Lagrimas Pacaña-Gonzales, filed a
motion for leave to intervene and her answer-in-intervention was granted by the trial court. At
the subsequent pre-trial, the respondents manifested to the RTC that a substitution of the parties
was necessary in light of the deaths of Lourdes and Luciano. They further stated that they would
seek the dismissal of the complaint because the petitioners are not the real parties in interest
to prosecute the case. The pre-trial pushed through as scheduled and the RTC directed the
respondents to put into writing their earlier manifestation. The RTC issued a pre-trial order
where one of the issues submitted was whether the complaint should be dismissed for failure to
comply with Section 2, Rule 3 of the Rules of Court which requires that every action must be
prosecuted in the name of the real party in interest.
CA: 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.
CA Ruling: 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, 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.
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.
Hence, the instant petition.
Issues:
1. 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.
2. 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?
3. Whether Rebecca and Rosalie should be impleaded as parties in the case.
Ruling:
1. 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.
2. 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.
3. 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.
WHEREFORE, the petition is GRANTED. The decision dated January 27, 2005 and the
resolution dated June 6, 2005 of the Court of Appeals in CA-G.R. SP No. 71551 are
REVERSED and SET ASIDE. The heirs of the spouses Luciano and Lourdes Pacaña, except
herein petitioners and Lagrimas Pacaña-Gonzalez, are ORDERED IMPLEADED as parties-
plaintiffs and the RTC is directed to proceed with the trial of the case with DISPATCH.
