Haystack: Eastern Assurance vs. Cui (GR 54452, 20 July 1981)

Eastern Assurance vs. Cui
[G.R. No. 54452. July 20, 1981.]
Second Division, Abad Santos (J): 3 concur, 1 designated to sit in division as 1 is on official leave

Facts: On 21 April 1977, 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 P20,000 surety bond and it complied by presenting a surety bond of Eastern Assurance & Surety Corporation.

On 15 May 1978, Transunion filed a complaint before the Court of First Instance of Manila (Civil Case 15385, Branch XXV) against Rey M. Pan, Pan Phil Trading and Eastern Assurance & Surety Corporation for the full payment of merchandise delivered in the amount of P10,841.54. After Eastern Assurance & Surety Corporation had filed its Answer with Crossclaim, it filed a motion to file a third-party complaint against Loreta B. Pan, wife of Rey M. Pan (in light of an Indemnity Agreement executed by the Pan spouses in favor of the surety company). On 24 July 1978, the Judge (Hon. Emeterio C. Cui) granted the motion and admitted the third-party complaint. Subsequently, Loreta Pan filed a motion to dismiss the third-party complaint on the ground that venue was improperly laid (as per paragraph 7 of the Indemnity Agreement). Notwithstanding the opposition of the surety company, the judge in his order dated 30 October 1978, peremptorily dismissed the third-party complaint on the ground that the motion to dismiss was "well-taken," without elaborating. A motion to reconsider the order of dismissal was denied in a similar fashion. Hence, the petition to review on certiorari.

The Supreme Court granted the petition, and rescinded the order of the judge dismissing the third-party complaint; with cost against respondents.

1. Paragraph 7 of the Indemnity Agreement (Waiver of Venue of Action)
Paragraph 7 of the Indemnity Agreement reads “We [meaning Rey M. Pan and Loreta B. Pan] hereby agree that any question which may arise between the Company and the undersigned by reason of this document and which has to be submitted to the court of justice, shall be brought before the court of competent jurisdiction of Quezon City, waiving for this purpose any other proper venue."

2. Rationale of Paragraph 7; No sanctity of contract to uphold
Paragraph 7 of the Indemnity Agreement was imposed on the Pan spouses by the 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 uphold. But even it is assumed that paragraph 7 of the Indemnity Agreement created a reciprocal obligation, it does not necessarily follow that it is applicable to the present situation.

3. Third party complaint ancillary to main action; Prescriptions on jurisdiction and venue may not apply
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. Since the trial court had acquired jurisdiction over the complaint, it necessarily follows that it likewise had jurisdiction over the third-party complaint which is but an incident thereof. This must be so because jurisdiction over the main case embraces all incidental matters arising therefrom and connected therewith. A contrary rule would result in 'split jurisdiction' which is not favored, and in multiplicity of suits, a situation obnoxious to the orderly administration of justice. The court acquired jurisdiction over the third-party complaint, provided it had jurisdiction over the main case, for the reason that the third-party complaint is but a continuation thereof, its purpose being to seek 'contribution, indemnity, subrogation or any other relief, in respect to his opponent's claim.” (See case of Republic vs. Central Surety & Insurance Co. [1968])

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