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

Eastern Assurance vs. Cui
GR 54452, 20 July 1981
Second Division
Abad Santos (J)

Facts: In 1977, Transunion Corporation and Rey M. Pan (doing business as 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 the other hand, an Indemnity Agreement was executed by the Pan spouses in favor of the surety company.

In 1978, Transunion filed a complaint before the Court of First Instance (Manila) against Rey Pan, Pan Phil Trading and the surety company for the full payment of merchandise delivered (P10,841.54). After the surety company 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 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.” On 24 July 1978, the Judge granted the motion and admitted the third-party complaint. Notwithstanding the opposition of the surety company to the motion of Loreta Pan to dismiss the third-party complaint, the judge in his 30 October 1978 order peremptorily dismissed the third-party complaint on the ground that the motion to dismiss was “well-taken,” without elaboration. A motion to reconsider the order of dismissal was denied in a similar fashion. Hence, the petition to review on certiorari.

Issue: Whether the Court in Manila has jurisdiction in dismissing the third-party complaint, in light of the stipulation in Paragraph 7 of the Indemnity Agreement between Loreta Pan and the surety company, which requires that issues should be submitted before the competent court in Quezon City.

Held: 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. 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 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.

Comments (required in assignment): The prevailing law on family relations during the promulgation of this case (1981) was the New Civil Code (not the Family Code, which was enacted 1987), and the presumed property regime during that time, in the absence of any proof to the contrary, was a conjugal partnership of gains (not yet the Absolute Community in the Family Code). The spouse herein is not sued jointly with the husband but is made the respondent in a third-party complaint by the surety company; recognizing that the single proprietorship belongs to the husband and not necessarily to the conjugal partnership. Under the present rules (Rule 3, Section 4), the “husband and wide shall sue or be sued jointly, except as provided by law,” reflecting the paradigm shift.

Although the present rules (Rule 4, Section 4 [b]) provide that the Rule on Venue does not apply “…where the parties have validly agreed in writing before the filing of the action on the exclusive venue thereof,” the same principle as enunciated in the case as to third-party complaints would remain to apply as a third-party complaint is ancillary to the main action. The implication that the third party complaint cannot be initiated in another venue pursuant to stipulation to a contract between the defendant and a third person may be inferred from the requirement of a certification against forum shopping in Rule 7, Section 5 of the 1997 Rules on Civil Procedure, as such requirement does not only apply to complaints but other initiatory pleadings.

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