Carandang vs. Heirs of De Guzman

A co-owner suing to recover co-owned property need not join all other co-owners as co-plaintiffs, as the suit is presumed to be filed for the benefit of all; thus, the non-joinder of other co-owners does not warrant the dismissal of the action. Furthermore, payment by a third person gives rise to a presumption that the debtor is indebted to the payer for the amount paid, placing the burden on the debtor to prove any contrary agreement.

Arcadio Carandang and Quirino de Guzman were stockholders and corporate officers of Mabuhay Broadcasting System (MBS), holding 46% and 54% equities, respectively. When MBS increased its capital stock in 1983 and 1989, the Carandangs subscribed to portions of these increases totaling ₱336,375.00. De Guzman paid for these subscriptions using four checks, three of which were drawn from a joint account with his wife, Milagros. De Guzman subsequently demanded reimbursement, claiming the payments were loans. The Carandangs refused, asserting a pre-incorporation agreement where de Guzman allegedly agreed to shoulder Carandang's subscriptions at no cost in exchange for Arcadio Carandang's technical expertise and equipment.

• Corporate Relationship and Subscriptions: Petitioners Arcadio and Maria Luisa Carandang and respondent's predecessor Quirino de Guzman were stockholders and officers of MBS. When MBS increased its capital stock in 1983 and 1989, the Carandangs subscribed to the increases totaling ₱336,375.00.
• Third-Party Payment: De Guzman paid the Carandangs' subscriptions using four checks, three of which were drawn from a joint account with his wife, Milagros.
• Demand and Refusal: On March 31, 1992, de Guzman demanded payment of ₱336,375.00. The Carandangs refused, invoking a pre-incorporation agreement where de Guzman allegedly agreed to pay for their subscriptions without cost in exchange for Arcadio Carandang's technical expertise and equipment.
• Death of the Plaintiff: De Guzman filed a collection suit on June 5, 1992. The case was submitted for decision before the RTC on June 4, 1998. De Guzman died on February 19, 1999, before the RTC promulgated its decision. No formal substitution of heirs was effected, and no court order for their appearance was issued.

• Validity of Judgment: The RTC decision is void for failure to comply with Section 16, Rule 3 of the Rules of Court, as no formal substitution of heirs was effected after Quirino de Guzman's death, depriving the court of jurisdiction over the heirs.
• Indispensable Party: Milagros de Guzman is an indispensable party because the subscription payments were made from her joint account; her non-inclusion as a party-plaintiff warrants dismissal for failure to state a cause of action.
• Existence of Loan: Respondents failed to prove the existence of a loan; payment by a third party does not automatically constitute a loan and may be attributable to generosity or a mutual agreement, specifically the alleged pre-incorporation agreement.
• Nature of Liability: There is no basis to hold the petitioners jointly and severally liable, as the obligation is not one required by law to be solidary.

• Waiver of Jurisdiction: The heirs of de Guzman expressly waived any objection to the court's jurisdiction over their persons by actively participating in the appeal and espousing the lower courts' rulings.
• Real Party in Interest: Quirino de Guzman is a real party in interest because the funds used were conjugal; under the Family Code and Civil Code, a spouse may institute an action to recover or protect conjugal property without joining the other spouse.
• Presumption of Debt: Payment by a third party creates a presumption of debt under Articles 1236 and 1237 of the Civil Code; the burden rests on the Carandangs to prove the alleged pre-incorporation agreement as an exception.
• Conjugal Liability: The liability is chargeable against the conjugal partnership property, not a joint and solidary personal obligation of the spouses.

• Substitution of Parties: Whether the RTC decision is void for failure to comply with the rule on substitution of deceased parties.
• Indispensable Party: Whether Milagros de Guzman is an indispensable party whose non-inclusion warrants the dismissal of the action.
• Existence of Loan: Whether respondents sufficiently proved the existence of a loan arising from the payment of petitioners' stock subscriptions.
• Nature of Liability: Whether the liability of the petitioner-spouses is joint and solidary.

• Substitution of Parties: The RTC decision is valid. Jurisdiction over the person of the parties may be waived expressly or impliedly. The heirs of de Guzman expressly waived the jurisdictional defect by claiming and embracing the court's jurisdiction without objection. Moreover, the case had already been submitted for decision before de Guzman's death, so no further proceedings requiring counsel's appearance were conducted.
• Indispensable Party: Milagros de Guzman is not an indispensable party. In a co-ownership, any co-owner may bring an action for the recovery of co-owned property without joining all other co-owners, as the suit is presumed filed for the benefit of all. Because the credit was presumed conjugal, Quirino and Milagros were co-owners; thus, Quirino could sue alone. Only the suing co-owner is indispensable; the others are not even necessary parties.
• Existence of Loan: The loan was sufficiently proven. Payment by a third person gives rise to a presumption that the debtor is indebted to the payer for the amount paid, pursuant to Articles 1236 and 1237 of the Civil Code. The burden shifted to the Carandangs to prove the pre-incorporation agreement as an exception, which they failed to do because Arcadio Carandang's testimony was stricken for refusing cross-examination, other witnesses lacked personal knowledge, and the Carandangs' own testimonies contradicted the agreement. The alleged judicial admission in the Reply was ambiguous and expressly denied the core allegations of the agreement.
• Nature of Liability: The liability is not joint and solidary but chargeable against the conjugal partnership property. Spouses sued for the enforcement of an obligation entered into by them are impleaded in their capacity as representatives of the conjugal partnership, not as independent debtors; thus, either may be sued for the whole amount chargeable to the conjugal partnership.

• Waiver of Jurisdiction Over the Person — Jurisdiction over the person of the parties, unlike jurisdiction over the subject matter, may be waived expressly or impliedly through voluntary appearance or failure to object. The heirs of a deceased party waive the lack of formal substitution by actively participating in the proceedings and failing to object to the court's jurisdiction.
• Co-owners as Parties in Recovery Suits — In suits to recover co-owned properties, all co-owners are real parties in interest. However, any one co-owner may bring an action for recovery without joining the others, as the suit is presumed filed for the benefit of all. Only the suing co-owner is an indispensable party; the other co-owners are neither indispensable nor necessary parties. (Note: This applies only to co-owners as plaintiffs; as defendants, all co-owners are indispensable parties).
• Presumption of Debt from Third-Party Payment — When a third person pays the obligation of another, a presumption arises that the debtor is indebted to the third person for the amount paid, pursuant to Articles 1236 and 1237 of the Civil Code. Any contrary agreement, such as a donation or a prior arrangement excusing reimbursement, must be proven by the party asserting it.
• Conjugal Partnership Liability — For marriages governed by conjugal partnership of gains, an obligation entered into by the husband and wife is chargeable against the conjugal partnership. When sued for enforcement, spouses are impleaded as representatives of the conjugal partnership, not as independent debtors; thus, the concept of joint and solidary liability between them does not apply, and the liability is satisfied from conjugal partnership funds.

• "Lack of jurisdiction over the person, being subject to waiver, is a personal defense which can only be asserted by the party who can thereby waive it by silence."
• "In suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party thereto."
• "If indeed a Mr. 'A' decides to pay for a Mr. 'B’s' obligation, the presumption is that Mr. 'B' is indebted to Mr. 'A' for such amount that has been paid. This is pursuant to Articles 1236 and 1237 of the Civil Code..."

• Vda. de Haberer v. Court of Appeals — Cited regarding the general rule that failure to substitute a deceased party renders subsequent proceedings void for lack of jurisdiction over the legal representatives; distinguished in this case because the heirs waived the defect.
• Docena v. Lapesura — Followed to support the rule that a spouse may defend or institute an action for the recovery of conjugal property without being joined by the other spouse.
• Baloloy v. Hular and Adlawan v. Adlawan — Followed to establish that in a co-ownership, co-owners may bring actions for the recovery of co-owned property without joining all other co-owners.
• Alipio v. Court of Appeals — Followed to support the ruling that spouses sued for conjugal obligations are impleaded as representatives of the conjugal partnership and their liability is chargeable to conjugal assets, not joint and solidary personal liability.

• Section 16, Rule 3, Rules of Court — Requires counsel to inform the court of a party's death and provide the legal representative's details. Held not strictly controlling where heirs waive jurisdiction or where no further proceedings requiring counsel's appearance occur after death.
• Section 2, Rule 3, Rules of Court — Defines real parties in interest. Applied to determine that Quirino de Guzman, as co-owner of the credit, is a real party in interest.
• Section 7, Rule 3, Rules of Court — Defines indispensable parties. Applied to clarify that a non-suing co-owner is not an indispensable party in a recovery suit.
• Section 9, Rule 3, Rules of Court — Governs non-joinder of necessary parties. Applied to show that even if the spouse were a necessary party, dismissal would not be warranted.
• Section 11, Rule 3, Rules of Court — States that non-joinder of parties is not a ground for dismissal of the action.
• Article 487, Civil Code — Provides that any co-owner may bring an action for ejectment, which jurisprudence extends to all kinds of actions for recovery of possession or property. Applied to allow Quirino de Guzman to sue alone for the conjugal credit.
• Articles 1236 and 1237, Civil Code — Govern third-party payment of obligations. Applied to create a presumption of debt in favor of the third-party payer, shifting the burden to the debtor to prove any contrary stipulation.
• Article 108, Family Code / Article 147, Civil Code — Provide that the conjugal partnership is governed by the rules on the contract of partnership. Applied in conjunction with Art. 1811 CC to establish co-ownership of conjugal credits.
• Article 116, Family Code / Article 160, Civil Code — Establish the presumption that property acquired during marriage is conjugal. Applied to presume the credit extended to the Carandangs was conjugal property.

Artemio V. Panganiban (CJ), Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, Romeo J. Callejo, Sr.