Living @ Sense v. Malayan Insurance
REITERATIONFacts
The Antecedents: Petitioner Living @ Sense, Inc. (petitioner) was the main contractor for Globe Telecom's FOC Network Project. Petitioner entered into a Sub-Contract Agreement with Dou Mac, Inc. (DMI), wherein DMI was to perform underground open-trench work. As a requirement, petitioner mandated DMI to secure surety and performance bonds from respondent Malayan Insurance Company, Inc. (respondent) to cover potential failures by DMI. These bonds, each amounting to P5,171,488.00, were intended to secure the unliquidated portion of the downpayment and any loss or damage petitioner might suffer due to DMI's non-performance. Respondent bound itself jointly and severally liable with DMI under these bonds. Procedural History: During the project, the Department of Public Works and Highways issued a work-stoppage order against DMI due to unsatisfactory work. Despite this, DMI failed to implement corrective measures. Consequently, petitioner terminated the Agreement and sought indemnification from respondent for P1,040,895.34. Respondent denied the claim, asserting that DMI's liability must first be determined before respondent's surety obligation could attach. Petitioner then filed a complaint for specific performance and breach of contract against respondent. The Regional Trial Court (RTC) of Parañaque City, Branch 257, dismissed the complaint without prejudice, ruling that DMI was an indispensable party whose liability needed to be established first. The RTC later denied petitioner's motion for reconsideration. The Petition: Petitioner seeks review on certiorari of the RTC's dismissal orders, raising a pure question of law. Petitioner argues that under Article 1216 of the Civil Code, as respondent bound itself jointly and severally with DMI, it is a solidary debtor and thus directly and primarily liable. Petitioner contends that respondent's obligation is "callable on demand" and that DMI is not an indispensable party because petitioner, as the creditor, can proceed against any of the solidary debtors. Petitioner asserts that the failure to implead an indispensable party is not a ground for dismissal, but rather for impleading the party.
Issue(s)
Whether DMI is an indispensable party in the case filed by petitioner against respondent. Whether the RTC erred in dismissing the complaint for failure to implead DMI.
Ruling
The Court finds the petition meritorious. The assailed Orders of the RTC are SET ASIDE. Petitioner's complaint is ordered REINSTATED and the case remanded to the RTC for further proceedings.
Ratio Decidendi
On the issue of whether DMI is an indispensable party: The Court held that DMI is not an indispensable party. Petitioner maintains that the rule on solidary obligations permits the creditor to proceed against any of the solidary debtors. Article 1216 of the Civil Code provides that the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. In this case, respondent bound itself "jointly and severally" with DMI under the surety and performance bonds. The term "jointly and severally" expresses a solidary obligation, granting petitioner, as creditor, the right to proceed against its debtors, namely, respondent or DMI. The nature of a solidary obligation under a surety does not make the principal an indispensable party. An indispensable party is one without whom no final determination can be had of the action. The presence of indispensable parties is necessary to vest the court with jurisdiction. However, in a solidary obligation, the creditor has the option to sue any of the debtors. Therefore, the failure to implead DMI is not a ground to dismiss the case. On the issue of whether the RTC erred in dismissing the complaint: The Court ruled that even if DMI were considered an indispensable party, the RTC committed reversible error in dismissing the complaint. The proper remedy for failure to implead an indispensable party is to implead the party claimed to be indispensable, as parties may be added by order of the court at any stage of the action. Dismissal is not the appropriate recourse. Consequently, the RTC erred in holding that DMI is an indispensable party and in dismissing the complaint.
Main Doctrine
A surety who binds itself jointly and severally with the principal is not an indispensable party in an action filed by the creditor against the surety, as the creditor may proceed against any of the solidary debtors.