Bank of America NT & SA vs. Court of Appeals

A final order that disposes of the case as to one defendant, while leaving the action to proceed against another, is a several judgment under Section 4, Rule 36 of the Rules of Court; the remedy against it is appeal, and certiorari under Rule 65 cannot substitute for a lost appeal. Where the causes of action against the defendants are distinct and severable, dismissal of the complaint against one does not bar the action against the other.

IBAA was established under a Memorandum of Agreement dated March 25, 1974 executed by First Insular Bank of Cebu, Bank of Asia, and Bank of America NT & SA; Dai-Ichi Kangyo Bank later acquired 10% of its issued capital stock. The agreement contained a stipulation that none of the parties would sell their shares in the consolidated bank to any other party without first offering the shares proportionately to the other two or their nominees. BA was one of the original parties to that agreement.

On July 19, 1978, a class action was commenced in the SEC against BA, Andrew Gotianun, and six unknown defendants said to be Gotianun’s relatives and identified as Mario Doe, Danilo Doe, etc. The complaint described Gotianun, his relatives, and their corporations as owning and controlling the Family Savings Bank and referred to them collectively as the “Family Savings Bank Group.” Manuel Escaler, IBAA’s Corporate Secretary, was included as a nominal party. About 40 persons, including Potenciano Ilusorio and Conrado Alcantara, allegedly constituting a majority of the successors in interest of the former Bank of Asia and calling themselves the ASIA GROUP, brought the suit in their own behalf and in behalf of all other IBAA stockholders similarly situated, averring that the subject matter was of common interest and the stockholders were too numerous to be brought before the Commission.

In the complaint, BA was charged with violating the March 25, 1974 Agreement stipulating that none of the parties shall sell their shares in the consolidated bank to any other party without first offering the shares proportionately to the other two or their nominees. Gotianun and his Family Savings Bank Group were accused of inducing BA to sell to them, despite awareness of the agreement, and of purchasing BA’s IBAA shares in complete disregard of it. The complaint alleged that the illicit transfer made all defendants except Escaler liable for actual, moral, and exemplary damages and attorney’s fees in the aggregate sum of not less than P16,000,000.00. Answers were filed and trial commenced.

During the proceedings, SEC Associate Commissioner Sixto de Guzman issued three orders challenged before the SC: an Order dated September 17, 1979, which indefinitely prohibited the Vice Chairman of the IBAA Board from exercising the chairman’s functions and presiding over meetings in the latter’s absence, restricted the Executive Vice President’s duties, suspended board resolutions that would increase or change group representation, required prior consultation with and/or approval by the Commission for movements of officers, directors, and executive committee members, and recognized the continuing validity of the March 25, 1974 Memorandum of Agreement; a temporary restraining order issued ex parte on July 19, 1978 preventing enforcement of the sale and exercise of rights thereunder; and an ex parte Order dated December 17, 1979 abolishing the IBAA board and creating a management committee with the same composition except that the four BA directors were replaced.

The SC issued on April 21, 1980 an injunctive writ, upon bonds of P1 million each posted by BA and Gotianun, forbidding Commissioner de Guzman to give continued effect and force to the July 19, 1978 TRO and directing him to return to Gotianun all the certificates of stock covering the IBAA shares in dispute for the purpose of registration of the sale in Gotianun’s name in the corporate books, save that no subsequent sale or assignment of his rights by virtue thereof may be made without prior approval of the SC. After some time, a joint motion dated September 25, 1985 was filed with the SEC in Case No. 1613 by the ASIA Group and Gotianun praying for dismissal of the complaint against Gotianun in toto and with prejudice and of Gotianun’s counterclaim against plaintiffs in toto and with prejudice, without pronouncements as to costs and attorney’s fees. The joint motion stipulated that plaintiffs reserved their right to pursue all causes of action against BA, contending that BA and Gotianun were sued on different causes of action—BA for violation of contract and Gotianun for tort—and that they were not indispensable parties to the distinct causes of action; plaintiffs waived their cause of action for rescission/annulment of the sale of IBAA shares by BA to Gotianun, while Gotianun reserved his cross-claim against BA. On the same date, separate motions were filed with the SC praying for dismissal of G.R. Nos. 51651 and 51678, and another joint motion by Gotianun and the ASIA Group prayed for dismissal of G.R. No. 53493, all on the ground that the parties had settled amicably the dispute in SEC Case No. 1613 and rendered the proceedings moot and academic. The joint motion in G.R. No. 53493 stipulated that the ASIA Group waived and renounced absolutely and irrevocably the restriction imposed by the SC’s April 21, 1980 Resolution that Gotianun may not sell or assign the disputed IBAA shares without prior approval of the SC, and recognized Gotianun’s right to enjoy and dispose of the shares without other limitations than those established by law. The SC dismissed G.R. Nos. 51651, 51678, and 53493 as prayed for by Resolution dated October 1, 1985.

BA opposed the joint motion in SEC Case No. 1613 by opposition dated October 4, 1985, contending that dismissal of the complaint against Gotianun and of Gotianun’s counterclaim should not be granted unless the complaint and Gotianun’s cross-claim were also dismissed as against BA. BA argued that by moving for dismissal, plaintiffs had effectively conceded that the subject sale was lawful and valid and not tainted with legal infirmities; that if the sale was valid against Gotianun, it must likewise be valid against the seller BA, the transaction being a single, indivisible sales transaction by which Gotianun acquired ownership from BA; and that plaintiffs’ causes of action against BA and Gotianun were not distinct, separate, and independent. BA also pointed out that if the complaint against Gotianun were dismissed and the case against BA allowed to proceed, Gotianun would be an indispensable party, because if plaintiffs’ right of first refusal were found violated, the sale would have to be annulled or declared invalid, the shares reverted to BA, and the purchase price returned by BA to Gotianun. The SEC overruled the opposition. By Order dated October 29, 1985, the SEC granted the joint motion and dismissed with prejudice the complaint against Gotianun and his counterclaims against the plaintiffs in SEC Case No. 1613, leaving the action to proceed only as between the ASIA Group and BA; it found the joint motion not contrary to law, morals, good customs, and public policy and declared that since the SC had dismissed G.R. Nos. 51651, 51678, and 53493 as moot and academic because the parties had settled amicably, it had no other alternative but to grant the joint motion. BA moved for reconsideration, which was denied by Order dated January 22, 1986.

BA then filed with the CA a petition for certiorari under Rule 65 praying for invalidation of the Orders of October 29, 1985 and January 22, 1986 in SEC Case No. 1613. The ASIA Group moved to dismiss the petition, contending that the orders sought to be annulled had long become final and that the SEC had acted in accordance with law. The CA dismissed the petition by Resolution dated January 8, 1987. BA is before the SC on an appeal by certiorari under Rule 45 from the CA judgment.

• Common Cause of Action and Indispensable Party: BA argued that it and Gotianun were sued under a common cause of action and were indispensable parties in SEC Case No. 1613.
• Waiver and Benefit of Dismissal: BA maintained that the ASIA Group could not waive its right to proceed against Gotianun without likewise waiving its right to proceed against BA, and that the benefit of the dismissal of the proceedings against Gotianun must necessarily extend to and inure to the benefit of BA.
• Validity and Indivisibility of Sale: BA argued that the dismissal of the complaint against Gotianun effectively conceded that the subject sale was lawful and valid and not tainted with legal infirmities; if the sale was valid against Gotianun, it must likewise be valid against the seller BA, because it was a single, indivisible sales transaction by which Gotianun acquired ownership from BA.
• Distinct Causes of Action: BA contended that plaintiffs’ causes of action against BA and Gotianun were not distinct, separate, and independent, and that if the complaint against Gotianun were dismissed while the case against BA proceeded, Gotianun would be an indispensable party.

• Finality and Validity of SEC Orders: The ASIA Group countered that the orders sought to be annulled had long become final and that the SEC had acted in accordance with law.

• Final Order and Remedy: Whether the SEC Order of October 29, 1985 was a final order appealable to the SEC en banc and then to the CA, such that BA’s Rule 65 certiorari was improper.
• Several Judgment and Distinct Causes of Action: Whether the SEC properly dismissed the complaint against Gotianun while leaving the action to proceed against BA because the causes of action were distinct and severable.
• Indispensable Party: Whether Gotianun was an indispensable party whose dismissal required dismissal of the action against BA.

• Final Order and Remedy: Yes. The SEC Order of October 29, 1985 finally disposed of the case as between the ASIA Group and Gotianun, leaving nothing more for the SEC to adjudicate as to them; it was appealable, and certiorari under Rule 65 was not the proper remedy.
• Several Judgment and Distinct Causes of Action: Yes. The SEC properly rendered a several judgment under Section 4, Rule 36; the ASIA Group’s cause against BA for breach of the right of first refusal was distinct from its cause against Gotianun for inducing the sale with knowledge of the agreement.
• Indispensable Party: No. Gotianun was not indispensable to the claim against BA because the causes of action were distinct and severable; BA’s remedy was not to insist that the ASIA Group continue the action against Gotianun.

• Final Order and Remedy: The SC defined a final order as one that finally disposes of a case, leaving nothing more to be done by the court or quasi-court in respect thereto. The SEC Order of October 29, 1985 was final because it disposed of the case as between the ASIA Group and Gotianun and his relatives and business partners, leaving nothing for the SEC to adjudicate as to them. The order was appealable; under Section 2, Rule 41, appeal is the remedy against a final order or judgment, not a special civil action of certiorari under Rule 65. Section 1, Rule 65 allows certiorari only if there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. BA did not appeal to the Commission en banc under Section 6, PD 902-A, and thence to the CA under Section 29, B.P. Blg. 129. No insuperable cause or inadequacy of appeal was shown. The final order became final and unalterable, and the issues resolved could not be relitigated; res adjudicata barred any attempt through certiorari. Certiorari cannot substitute for a lost appeal.
• Several Judgment and Distinct Causes of Action: The SC held that implicit in the dismissal of the action as between the ASIA and Gotianun groups, leaving the action to proceed between the ASIA Group and BA, was the proposition that the Gotianun Group’s interest was distinct and severable from BA’s, making Section 4, Rule 36 on several judgments applicable. That provision allows the court, in an action against several defendants, to render judgment against one or more of them when a several judgment is proper, leaving the action to proceed against the others. The ASIA Group’s cause against BA was BA’s violation of its contractual commitment under the March 25, 1974 Agreement not to sell its IBAA stock to any third person without first offering it to the other parties. The cause against the Gotianun Group was inducing BA to sell and actually purchasing the stock despite awareness of the agreement; if the Gotianun Group was unaware of the agreement, no cause of action could arise against it. BA’s act of selling without first offering the stock to the ASIA Group or the other parties breached the agreement and made BA liable in damages, but did not necessarily make the Gotianun Group liable unless it bought with knowledge of the prohibition. The SC cited its November 5, 1985 Resolution in G.R. No. 53543, which stated that if Gotianun was aware of the right of first refusal and there was no waiver, he could not be deemed a buyer in good faith, but if he was not aware, he could claim to be a buyer in good faith regardless of waiver. The ASIA Group’s waiver of its cause against the Gotianun Group, evidently founded on the acknowledgment that the latter had no knowledge of the right of first refusal, had no relevance and no possible effect on the ASIA Group’s right to proceed against BA for violation of that right. Thus the SEC’s order approving the compromise and dismissing the complaint against Gotianun was a several or separate judgment under Section 4, Rule 36.
• Indispensable Party: The SC stated that a plaintiff has the right to choose which of several persons to implead as defendant in, or to drop from, his complaint. None of the defendants has the right to compel the plaintiff to prosecute the action against a party if he does not wish to do so. The plaintiff will have to suffer the consequences of any error in exercising that option. For the defendant that he does not implead, or drops from the action, may well be an indispensable party, in which event the action will have to be dismissed, since no final adjudication can be had without such an indispensable party. The remedy of a co-defendant who is not dropped is not to insist that the plaintiff continue to prosecute his action against the dropped defendant, but to move for dismissal of the action against himself, or take such appropriate action as might otherwise be proper. Here, because the causes of action against BA and Gotianun were distinct and severable, Gotianun was not indispensable to the claim against BA.

• Final Order — A final order or judgment is one that finally disposes of a case, leaving nothing more to be done by the court or quasi-court in respect thereto. It is appealable; if not appealed within the prescribed period, it becomes final and unalterable, and the issues it resolved may not be relitigated. Applied: the SEC Order of October 29, 1985 was final as between the ASIA Group and Gotianun.
• Several Judgment — Under Section 4, Rule 36, in an action against several defendants, the court may, when a several judgment is proper, render judgment against one or more of them, leaving the action to proceed against the others. Applied: the SEC order dismissing Gotianun while leaving the action against BA was a several or separate judgment because the Gotianun Group’s interest was distinct and severable from BA’s.
• Certiorari Not a Substitute for Lost Appeal — Certiorari under Rule 65 is proper only if there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law. It may not be resorted to as a substitute for a lost appeal. Applied: BA failed to appeal the final SEC order to the Commission en banc and then to the CA, so its Rule 65 petition was improper.
• Distinct and Severable Causes of Action — Where the causes of action against several defendants are distinct and severable, dismissal of the complaint against one does not bar the action against another. Applied: the ASIA Group’s cause against BA was breach of the right of first refusal, while its cause against Gotianun was inducing the sale and purchasing with knowledge of the agreement; the latter’s absence of knowledge would remove liability.
• Plaintiff’s Right to Choose Defendants; Indispensable Party — A plaintiff has the right to choose which of several persons to implead or drop from the complaint, and no defendant can compel the plaintiff to prosecute the action against a party. If the dropped defendant is indispensable, the action must be dismissed; the remedy of a co-defendant not dropped is to move for dismissal of the action against himself. Applied: Gotianun was not indispensable because the causes of action were distinct and severable.
• Res Judicata — A final order that has become final bars relitigation of the issues resolved, even through a subsequent special civil action of certiorari. Applied: the SEC Order of October 29, 1985 became final when BA did not appeal, and BA’s attempt to relitigate it through certiorari was barred.

• “The concept of a final order or judgment is well known. It is one that finally disposes of a case, leaving nothing more to be done by the court (or quasi-court) in respect thereto.” — The SC used this definition to classify the SEC Order of October 29, 1985 as final and appealable.
• “Appeal is in fact antithetical to the special civil action of certiorari.” — The SC used this to reject BA’s Rule 65 petition as a substitute for the appeal it failed to take.
• “certiorari as a special civil action may not be resorted to as a substitute for a lost appeal” — The SC applied this rule because BA did not appeal the final SEC order to the Commission en banc and then to the CA.
• “it would seem an obvious proposition that a plaintiff has the right to choose which of several persons to implead as defendant in, or to drop from, his complaint. None of the defendants has the right to compel said plaintiff to prosecute the action against a party if he does not wish to do so.” — The SC used this to explain why BA could not compel the ASIA Group to continue the action against Gotianun.

• Investments, Inc. vs. Tobacco Industries, Inc., 147 SCRA 334 (1987) — Cited for the definition of a final order or judgment.
• Pan Realty Corp. vs. C.A., G.R. No. 47726, Nov. 23, 1988 — Cited for the rule that certiorari is proper only where there is no appeal or other plain, speedy, and adequate remedy, and that certiorari cannot substitute for a lost appeal.
• Mercado vs. C.A., 162 SCRA 75 — Cited for the rule that certiorari may not substitute for a lost appeal.
• Investment, Inc. vs. C.A., G.R. No. 60036, Jan. 27, 1987 — Cited for the rule that a final judgment becomes final and executory upon expiration of the period to appeal if no appeal is perfected.
• Lim Tanhu vs. Ramolete, 66 SCRA 231 — Cited in connection with Section 7, Rule 3 on indispensable parties.

• Section 4, Rule 36, Rules of Court — Several judgments; the court may, when a several judgment is proper, render judgment against one or more defendants, leaving the action to proceed against the others. Applied: the SEC’s dismissal of Gotianun while leaving BA in the case was a several judgment.
• Section 1, Rule 65, Rules of Court — Certiorari is proper only if there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law. Applied: BA had an appeal, so certiorari was improper.
• Section 2, Rule 41, Rules of Court — Appeal is the remedy against a final order or judgment. Applied: BA should have appealed the SEC’s final order.
• Section 6, PD 902-A — An appeal may be taken from an adverse judgment or order of a Commissioner to the Commission en banc. Applied: BA did not appeal to the SEC en banc.
• Section 29, B.P. Blg. 129 — Appeal from the SEC en banc to the CA. Applied: BA did not pursue this appeal route.
• Section 7, Rule 3, Rules of Court — An indispensable party is one whose presence is necessary for a final adjudication; no final adjudication can be had without such a party. Applied: if Gotianun were indispensable, the action would have to be dismissed, but the causes of action were distinct and severable.