Boston Equity Resources, Inc. vs. Court of Appeals

A creditor may proceed against a surviving solidary debtor alone without impleading the estate of the deceased solidary debtor, as Article 1216 of the Civil Code grants the creditor the option to demand payment from any one, some, or all solidary debtors simultaneously, and Section 6, Rule 86 of the Rules of Court—which provides for filing claims against the estate of a deceased solidary debtor—is merely procedural and cannot be construed to defeat this substantive right by making it mandatory to proceed against the estate first.

Petitioner Boston Equity Resources, Inc. extended a loan to spouses Manuel and Lolita Toledo evidenced by a promissory note wherein they bound themselves "jointly and severally" to pay the obligation. Manuel Toledo died on July 13, 1995. On December 24, 1997, petitioner filed a complaint for sum of money with prayer for preliminary attachment against the spouses, naming Manuel as a defendant despite his prior death. Respondent Lolita Toledo filed an answer, later amended to allege Manuel's death, and participated in pre-trial and trial proceedings without raising the issue of jurisdiction over Manuel's person. After petitioner rested its case and respondent was given time to file a demurrer, respondent instead filed a motion to dismiss claiming the trial court lacked jurisdiction over Manuel's person and failed to implead the estate of Manuel as an indispensable party.

• The Loan and Promissory Note: Petitioner Boston Equity Resources, Inc. extended a loan to spouses Manuel and Lolita Toledo evidenced by a promissory note stating that they "jointly and severally" promised to pay the sum of ₱1,400,000.00, with both spouses signing as "MAKER" and "CO-MAKER" respectively.
• Manuel Toledo's Death: Manuel Toledo died on 13 July 1995, as evidenced by a death certificate. At the time of his death, no case had yet been filed against him by petitioner.
• Filing of the Complaint: On 24 December 1997, petitioner filed a complaint for sum of money with prayer for writ of preliminary attachment against "spouses Manuel and Lolita Toledo," naming Manuel as defendant despite his prior death.
• Responsive Pleadings and Substitution: Respondent Lolita Toledo filed an Answer on 19 March 1998. On 7 May 1998, she filed a Motion for Leave to Admit Amended Answer alleging Manuel's death. Petitioner filed a motion to require disclosure of Manuel's heirs, and on 18 January 2000, filed a Motion for Substitution praying that Manuel be substituted by his children. The trial court granted the substitution in an Order dated 9 October 2000.
• Pre-Trial and Trial Proceedings: Pre-trial was conducted and on 18 July 2001, the trial court issued a pre-trial order setting the dates of hearing. Petitioner presented its evidence and rested its case. The trial court admitted petitioner's exhibits.
• Cancellation of Hearings and Demurrer Period: The reception of respondent's evidence was cancelled upon agreement of the parties on 26 May 2004. On 24 September 2004, counsel for respondent was given fifteen days within which to file a demurrer to evidence.
• Motion to Dismiss: On 7 October 2004, instead of filing a demurrer, respondent filed a Motion to Dismiss citing: (1) failure to implead an indispensable party (the estate of Manuel); (2) lack of jurisdiction over Manuel's person pursuant to Section 5, Rule 86 of the Revised Rules of Court; (3) error in ordering substitution of Manuel by his heirs; and (4) that the case must also be dismissed against Lolita Toledo in accordance with Section 6, Rule 86.
• RTC Orders: The trial court denied the motion to dismiss in an Order dated 8 November 2004, holding it was filed out of time under Section 1, Rule 16 (filed six years after the amended answer), and that the attack on jurisdiction was barred by estoppel by laches. The motion for reconsideration was denied on 22 December 2004.
• Prior Motion to Dismiss: Respondent had earlier filed a motion to dismiss on the ground of unenforceability under the Statute of Frauds, which was denied by the trial court.
• Multiple Postponements: Records showed respondent filed several motions for postponement and sought subpoenas for her witness Gina M. Madulid, resulting in multiple cancellations of hearings before the filing of the second motion to dismiss.

• Impropriety of Certiorari: Certiorari is not the proper remedy to assail the denial of a motion to dismiss, as the order is merely interlocutory and does not finally dispose of the case; the proper remedy is an appeal after final judgment.
• Dilatory Nature of Motion: The motion to dismiss was filed six years and five months after respondent filed her amended answer and after petitioner had already rested its case, constituting a clear ploy to delay the proceedings and warranting denial under Section 1, Rule 16.
• Estoppel by Laches: Respondent actively participated in proceedings for six years without raising the issue of jurisdiction over Manuel's person, and therefore should be barred by estoppel by laches from raising it belatedly.
• Indispensable Party: The estate of Manuel is not an indispensable party because the obligation is solidary; under Article 1216 of the Civil Code, petitioner has the option to proceed against the surviving debtor alone.
• Interpretation of Rule 86: Section 6, Rule 86 of the Rules of Court is merely procedural and directory, not mandatory; it cannot be construed to repeal Article 1216 of the Civil Code, which is substantive law.
• Misjoinder: The inclusion of Manuel was not a misjoinder of party but a case against a person already deceased; the remedy is dismissal of the case against Manuel only, not against respondent.

• Grave Abuse of Discretion: The trial court committed grave abuse of discretion in denying her motion to dismiss despite discovery during trial of evidence constituting grounds for dismissal.
• Jurisdiction over the Person: The trial court never acquired jurisdiction over Manuel's person because he was already dead when the complaint was filed; jurisdiction over the person may be raised at any stage of the proceeding, even for the first time on appeal, and is not barred by estoppel by laches.
• Indispensable Party: The estate of Manuel is an indispensable party because it stands to be benefited or injured by the outcome; the claim should have been filed against the estate pursuant to Sections 5 and 6, Rule 86 of the Rules of Court.
• Solidary Obligation Procedure: Under Section 6, Rule 86, where the obligation of the decedent is solidary with another debtor, the claim must be filed against the decedent as if he were the only debtor, implying that proceedings must first be had against the estate.
• Dismissal of Entire Case: Because the trial court did not acquire jurisdiction over Manuel's person, and because the estate was not impleaded, the entire case should be dismissed, including the claim against Lolita Toledo.

• Propriety of Certiorari: Whether the Court of Appeals erred in granting certiorari to assail the trial court's interlocutory order denying the motion to dismiss.
• Timeliness of Motion to Dismiss: Whether the trial court committed grave abuse of discretion in denying respondent's motion to dismiss filed six years after her answer and after petitioner had rested its case.
• Estoppel and Jurisdiction over the Person: Whether respondent is estopped from questioning the trial court's jurisdiction over the person of Manuel Toledo.
• Indispensable Party: Whether the estate of Manuel Toledo is an indispensable party to the collection suit.
• Solidary Obligation and Rule 86: Whether Section 6, Rule 86 of the Rules of Court mandates that the claim against the surviving solidary debtor be dismissed unless filed against the estate of the deceased debtor first.
• Misjoinder and Substitution: Whether the inclusion of Manuel Toledo as defendant constitutes a misjoinder of party, and whether substitution of parties under Rule 3, Section 16 applies to a defendant already deceased at the time of filing.

• Propriety of Certiorari: Certiorari is not the proper remedy to assail the denial of a motion to dismiss, as such order is interlocutory and does not terminate or finally dispose of the case; the proper remedy is to proceed to trial and appeal the final judgment. Even assuming certiorari were proper, the trial court did not commit grave abuse of discretion.
• Timeliness of Motion to Dismiss: The trial court correctly denied the motion to dismiss as it was filed six years and five months after respondent's amended answer and after petitioner had completed the presentation of its evidence, in clear contravention of Section 1, Rule 16 requiring that a motion to dismiss be filed within the time for but before filing the answer; the filing was dilatory and intended to impede the prompt resolution of the case.
• Estoppel and Jurisdiction over the Person: The principle of estoppel by laches applies only to attacks on jurisdiction over the subject matter, not jurisdiction over the person; however, lack of jurisdiction over the person is waivable and must be raised in a motion to dismiss or answer under Section 1, Rule 9, otherwise it is deemed waived. Since respondent failed to raise the objection in her answer or initial motion to dismiss, the defense was waived.
• Indispensable Party: The estate of Manuel Toledo is not an indispensable party; an indispensable party is one in whose absence no final determination can be had of an action, but where the obligation is solidary, the creditor may proceed against the surviving debtor alone under Article 1216 of the Civil Code.
• Solidary Obligation and Rule 86: Section 6, Rule 86 of the Rules of Court merely sets up the procedure for enforcing collection against the estate of a deceased solidary debtor should the creditor choose to pursue that remedy, but it does not make such filing a condition precedent to an action against the surviving solidary debtor; a procedural rule cannot amend or defeat a substantive right granted by the Civil Code.
• Misjoinder and Substitution: The inclusion of Manuel Toledo is not a misjoinder of party under Section 11, Rule 3 because he was not a person capable of being sued at the time of filing; substitution under Section 16, Rule 3 applies only when a party dies during the pendency of the action, not when the defendant was already dead when the complaint was filed. The proper course is to dismiss the case as against Manuel for lack of jurisdiction over his person, while the case against respondent proceeds.

• Aspects of Jurisdiction and Estoppel by Laches: Jurisdiction has four aspects: over the subject matter, over the parties, over the issues, and over the res. Estoppel by laches applies only to bar belated attacks on jurisdiction over the subject matter, not jurisdiction over the person of the parties. Lack of jurisdiction over the person is waivable and is deemed waived if not raised in a motion to dismiss or answer pursuant to Section 1, Rule 9 of the Rules of Court.
• Solidary Obligations and Creditor's Option: Under Article 1216 of the Civil Code, the creditor in a solidary obligation has the right to proceed against any one of the solidary debtors or some or all of them simultaneously; the choice is left to the creditor to determine against whom he will enforce collection. The death of one solidary debtor does not extinguish the creditor's right to proceed against the surviving solidary debtors.
• Rule 86, Section 6 as Procedural: Section 6, Rule 86 of the Rules of Court provides a procedure for filing claims against the estate of a deceased solidary debtor but does not make it mandatory or a condition precedent to an action against surviving solidary debtors; a procedural rule cannot diminish substantive rights granted by the Civil Code.
• Substitution of Parties vs. Dismissal: Section 16, Rule 3 of the Rules of Court (substitution of parties) applies only when a party dies during the pendency of the action; where the defendant was already dead at the time of filing, there is no party to substitute, and the proper remedy is dismissal of the case as to that defendant for lack of jurisdiction over the person.

• "Well settled is the rule that the special civil action for certiorari is not the proper remedy to assail the denial by the trial court of a motion to dismiss. The order of the trial court denying a motion to dismiss is merely interlocutory, as it neither terminates nor finally disposes of a case and still leaves something to be done by the court before a case is finally decided on the merits."
• "The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by laches is jurisdiction over the subject matter... Here, what respondent was questioning in her motion to dismiss before the trial court was that court's jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel by laches finds no application in this case."
• "Since the defense of lack of jurisdiction over the person of a party to a case is not one of those defenses which are not deemed waived under Section 1 of Rule 9, such defense must be invoked when an answer or a motion to dismiss is filed in order to prevent a waiver of the defense."
• "The estate of Manuel is not an indispensable party to the collection case, for the simple reason that the obligation of Manuel and his wife, respondent herein, is solidary... pursuant to Article 1216 of the Civil Code, petitioner may collect the entire amount of the obligation from respondent only."
• "Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over Article 1216 of the New Civil Code, the former being merely procedural, while the latter, substantive."
• "Substitution is proper only where the party to be substituted died during the pendency of the case... Here, since Manuel was already dead at the time of the filing of the complaint, the court never acquired jurisdiction over his person and, in effect, there was no party to be substituted."

• Tijam, et al. v. Sibonghanoy, et al., 131 Phil. 556 (1968) — Distinguished; held that estoppel by laches applies to jurisdiction over the subject matter, not over the person.
• Sarsaba v. Vda. de Te, G.R. No. 175910, 30 July 2009, 594 SCRA 410 — Followed; held that failure to serve summons on a deceased defendant does not render the action dismissible as to the other defendants who were validly served, and that lack of jurisdiction over the person is a personal defense that cannot be invoked by other parties.
• Manila Surety & Fidelity Co., Inc. v. Villarama, et al., 107 Phil. 891 (1960) — Followed; construed Section 6, Rule 87 (precursor to Rule 86) as merely procedural and not preventing an ordinary action against surviving solidary debtors.
• Philippine National Bank v. Asuncion, 170 Phil. 356 (1970) — Followed; reiterated that the creditor has the option whether to file or not to file a claim against the estate of the deceased solidary debtor, and that Article 1216 of the Civil Code is controlling.
• Ventura v. Militante, 374 Phil. 562 (1999) — Followed; held that a decedent does not have the capacity to be sued and may not be named a party defendant, and that substitution applies only when the party dies during the pendency of the action.

• Section 1, Rule 16, 1997 Rules of Civil Procedure — Requires that a motion to dismiss be filed within the time for but before filing the answer to the complaint; cited as basis for denying the belated motion to dismiss.
• Section 1, Rule 9, 1997 Rules of Civil Procedure — Provides that defenses and objections not pleaded in a motion to dismiss or answer are deemed waived, except for lack of jurisdiction over the subject matter, litis pendentia, res judicata, and statute of limitations; cited to establish that lack of jurisdiction over the person is waivable.
• Section 16, Rule 3, 1997 Rules of Civil Procedure — Governs substitution of parties where a party dies during the pendency of the action; construed to apply only to deaths occurring during pendency, not before filing.
• Section 11, Rule 3, 1997 Rules of Civil Procedure — States that neither misjoinder nor non-joinder of parties is ground for dismissal; distinguished from the situation where a defendant is dead ab initio and thus not a "party" capable of being misjoined.
• Section 5 and 6, Rule 86, Revised Rules of Court — Governs claims against decedents and solidary obligations of decedents; construed as procedural and not mandatory as against surviving debtors.
• Article 1216, Civil Code of the Philippines — Grants the creditor the right to proceed against any one of the solidary debtors or some or all of them simultaneously; held to be the substantive law controlling over the procedural Rule 86.

Antonio T. Carpio (Chairperson), Arturo D. Brion, Mariano C. Del Castillo, and Martin S. Villarama, Jr.