De Leon vs. Asombrado-Llacuna

Where the indispensable party whose inclusion is ordered has already been dissolved and lost its juridical personality, remand for its impleader is an exercise of futility, and dismissal of the complaint is proper — the non-joinder of indispensable parties rule yields to the reality that only natural or juridical persons may be parties in a case.

Lourdes S. Asombrado-Llacuna purchased Lot 39 of Block 4 at No. 62 St. Mary, Provident Village, Marikina City from Provident Securities Corporation (Prosecor), the developer of the subdivision project known as Provident Village. The subject property was originally titled under TCT No. 186004 in the name of Eusebio L. Lopez, Jr. Despite full payment and execution of a Deed of Absolute Sale dated May 27, 1986, Prosecor failed to deliver the title, which remained under Lopez's name. Prosecor was eventually dissolved. Provident Savings Bank (PSB), a separate banking institution, executed an Assignment of Mortgage over the subject property on May 11, 1993, through its then-President Atty. Roberto F. De Leon. PSB was dissolved on June 30, 1996, and Atty. De Leon had resigned as PSB's president sometime in the mid-1990s.

Lourdes S. Asombrado-Llacuna purchased Lot 39 of Block 4 at No. 62 St. Mary, Provident Village, Marikina City from Provident Securities Corporation (Prosecor) on July 5, 1983. The subject property was originally titled under TCT No. 186004 in the name of Eusebio L. Lopez, Jr. A Deed of Absolute Sale dated May 27, 1986 was executed by Prosecor, represented by Romulo M. Dimayuga and Manolo B. Llacuna (Lourdes' husband), in favor of Lourdes. Lourdes and her family have lived on the subject property from the time of acquisition to the present. Despite full payment and execution of the Deed of Absolute Sale, Prosecor failed to deliver the title, which remained under Lopez's name. Prosecor was eventually dissolved.

On May 11, 1993, an Assignment of Mortgage involving the subject property was executed by Provident Savings Bank (PSB), represented by Atty. Roberto F. De Leon as President, assigning PSB's rights and interests over the real estate mortgage covering the subject property to J.M. Tuason & Co., Inc. Atty. De Leon resigned as PSB's president sometime in the mid-1990s, and PSB was dissolved on June 30, 1996.

In February 2012, Lourdes acquired a certified true copy of TCT No. 186004 from the Registry of Deeds of Marikina City and discovered an annotation regarding the Assignment of Mortgage between PSB and J.M. Tuason & Co., Inc. Upon learning of the assignment, Lourdes did not cause the annotation of an adverse claim on the title. She thereafter obtained counsel, and on September 13 and 20, 2012, demand letters were sent to Atty. De Leon asking him to deliver TCT No. 186004 within five days. Atty. De Leon did not respond.

On September 21, 2012, Lourdes filed a complaint before the HLURB against Atty. De Leon and PSB, praying for delivery of TCT No. 186004, moral damages of ₱500,000, attorney's fees of ₱200,000, and costs of suit. In his answer, Atty. De Leon moved for dismissal on grounds of lack of jurisdiction, failure to state a cause of action, and prescription and laches. In her position paper, Lourdes attached the judicial affidavit of her husband Manolo, who alleged that Prosecor and PSB shared the same Chairman and President. The HLURB Arbiter found that the complaint was not filed against an indispensable party — Prosecor — and that no evidence proved PSB was Prosecor's successor-in-interest. The HLURB Board of Commissioners affirmed this dismissal on June 16, 2016.

• Exhaustion of Administrative Remedies: Petitioner argued that the CA should have dismissed Lourdes' petition for review because Lourdes failed to exhaust administrative remedies, specifically the appeal to the Office of the President under HLURB Resolution No. 851, series of 2009, before resorting to judicial intervention.
• Failure to Implead Indispensable Party: Petitioner maintained that under Section 25 of P.D. No. 957, the obligation to deliver title falls upon the owner or developer — Prosecor — which should have been impleaded as an indispensable party-defendant. He contended that Lourdes intentionally omitted to implead Prosecor despite ample opportunity, rendering any order for its inclusion futile.
• No Privity of Contract / Not Real Party-in-Interest: Petitioner argued that there is no privity of contract between Lourdes and PSB, and no evidence shows PSB is the successor-in-interest of Prosecor. As such, neither PSB nor Atty. De Leon, as PSB's former President, are real parties-in-interest against whom the case may be prosecuted.
• Prescription and Laches: Petitioner contended that Lourdes' cause of action, based on the 1986 Deed of Absolute Sale, had prescribed under Article 1144 of the Civil Code, which provides a ten-year prescriptive period for actions upon a written contract, and is barred by laches, the complaint having been filed 26 years after execution of the deed.

• Exhaustion of Administrative Remedies Not Applicable: Respondent argued that the doctrine of exhaustion of administrative remedies does not apply because the issue she raised is purely a question of law, and there is no other plain, speedy, and adequate remedy available.
• Failure to Implead Indispensable Party Not Ground for Dismissal: Respondent countered that the CA did not err in setting aside the HLURB decisions because failure to implead indispensable parties is not a ground for dismissal of an action.
• Prescription and Laches: Respondent argued that the issues of prescription and laches were never raised before the CA and thus should not be considered. She nonetheless alleged that her cause of action had not prescribed because she only discovered the Assignment of Mortgage in 2012, and that she never slept on her rights because she had requested delivery of the title as soon as the Deed of Absolute Sale was executed in 1986.

• Exhaustion of Administrative Remedies: Whether the CA erred in not dismissing Lourdes' petition for review for failure to exhaust administrative remedies before the Office of the President.
• Indispensable Party and Remand: Whether the CA erred in setting aside the HLURB dismissal and ordering remand for inclusion of Prosecor as an indispensable party-defendant.
• Cause of Action / Real Party-in-Interest: Whether Lourdes has a cause of action against PSB and Atty. De Leon for delivery of the title.
• Prescription and Laches: Whether Lourdes' cause of action has prescribed and is barred by laches.

• Exhaustion of Administrative Remedies: No. The CA correctly did not dismiss the petition, the issue raised being purely legal — whether dismissal for failure to implead an indispensable party was correct — which falls within a recognized exception to the doctrine.
• Indispensable Party and Remand: The CA erred in ordering remand. While non-joinder of indispensable parties is not a ground for dismissal, remand for inclusion of Prosecor was futile because Prosecor had been dissolved and lost its juridical personality; only natural or juridical persons may be parties in an HLURB case.
• Cause of Action / Real Party-in-Interest: No cause of action exists against PSB or Atty. De Leon. No evidence showed PSB assumed Prosecor's obligations; even assuming PSB were a successor, PSB had also been dissolved. Atty. De Leon, as a former corporate officer, cannot be held personally liable for corporate obligations absent fraud or illegal act.
• Prescription and Laches: The issues of prescription and laches will be better resolved in the appropriate proceedings, not in this petition for review on certiorari.

• Exhaustion of Administrative Remedies: The doctrine of exhaustion of administrative remedies admits recognized exceptions, one of which is where the question involved is purely legal and will ultimately have to be decided by the courts of justice. The main issue Lourdes raised before the CA — whether the HLURB's dismissal anchored on failure to implead an indispensable party was correct — was purely legal in character. The CA therefore correctly declined to dismiss the petition on exhaustion grounds, the non-observance of the doctrine having been justified by this exception.

• Indispensable Party and Remand: The Court agreed with the CA that the non-joinder of indispensable parties is not a ground for outright dismissal; the remedy is to implead the missing party, and dismissal follows only if the plaintiff refuses to comply with a court order for joinder. However, the CA erred in ordering remand for inclusion of Prosecor because Prosecor had already been dissolved. Under Section 8, Rule 3 of HLURB Resolution No. 980 (2019 HLURB Rules of Procedure), only natural or juridical persons may be parties in an HLURB case. A dissolved corporation loses its juridical personality and can no longer be impleaded; no reliefs can be had against it. Ordering the inclusion of a non-existent juridical person is an exercise in futility. The Court therefore found the dismissal of the HLURB case proper.

• Cause of Action / Real Party-in-Interest: Lourdes has no cause of action against PSB because no evidence — apart from unsubstantiated allegations of "insider information" — demonstrated that PSB assumed Prosecor's obligations. Under Section 25 of P.D. No. 957, the obligation to issue and deliver title falls upon the owner or developer, which is Prosecor, not PSB. Even assuming arguendo that PSB were Prosecor's successor-in-interest, PSB had likewise been dissolved and could no longer be made a party. As for Atty. De Leon, he was merely acting as President of PSB, which itself had no obligation to deliver the title. Under established corporate law doctrine, a corporation possesses a legal personality separate and distinct from its officers, and corporate officers are generally not personally liable for corporate obligations. The legal fiction of separate personality may be disregarded only if used to perpetrate fraud, evade obligations, or circumvent statutes — circumstances not present here. No proof of fraud or bad faith was adduced against Atty. De Leon.

• Prescription and Laches: The Court declined to resolve the issues of prescription and laches in this petition, finding that they would be better addressed in the appropriate proceedings. The Court noted that Lourdes may still avail of other judicial remedies to acquire the title and have it definitively declared as hers, but a petition for review on certiorari before the Supreme Court is not the proper remedy for obtaining the ultimate reliefs prayed for.

• Doctrine of Exhaustion of Administrative Remedies — This doctrine requires that before a party may seek judicial intervention, it must first exhaust all available administrative remedies, allowing administrative agencies to carry out their functions within their specialized competence. The doctrine admits exceptions, including where the question involved is purely legal and will ultimately have to be decided by the courts of justice. The Court applied this doctrine by confirming that Lourdes' failure to appeal to the Office of the President was excused because the issue she raised before the CA was purely legal.

• Non-Joinder of Indispensable Parties — The non-joinder of indispensable parties is not a ground for dismissal of an action. The remedy is to implead the non-party claimed to be indispensable, by order of the court on motion or on its own initiative. Dismissal follows only if the plaintiff refuses to comply with a court order directing joinder. The Court applied this rule but found that where the indispensable party has been dissolved and lost its juridical personality, remand for its impleader is futile and dismissal is proper.

• Separate Juridical Personality of Corporations — A corporation is vested with a legal personality separate and distinct from those acting for and in its behalf. Obligations incurred by the corporation acting through its directors, officers, and employees are the corporation's sole liabilities. A director, officer, or employee is generally not personally liable for corporate obligations. This fiction may be disregarded only if used to perpetrate fraud, an illegal act, or to evade an existing obligation. The Court applied this doctrine to hold that Atty. De Leon, as former PSB President, could not be held personally liable for Prosecor's failure to deliver the title.

• "Settled is the rule that the non-joinder of indispensable parties is not a ground for the dismissal of an action. The remedy, instead, is to implead the non-party claimed to be indispensable." — This passage articulates the controlling rule on non-joinder of indispensable parties, distinguishing the remedy of impleader from outright dismissal, and forms the doctrinal basis for the Court's analysis of whether remand or dismissal was proper.

• "In this case, Prosecor may no longer be impleaded in the HLURB case because it lost its juridical personality from the time it was dissolved." — This sentence states the decisive rationale for reversing the CA's remand order: a dissolved corporation cannot be impleaded as a party, rendering the CA's directive to include Prosecor an exercise in futility.

• "A director, officer or employee of a corporation is generally not held personally liable for obligations incurred by the corporation." — This formulation of the separate juridical personality doctrine was applied to shield Atty. De Leon from personal liability for Prosecor's failure to deliver the title, absent any showing of fraud or illegal act.

• Department of Finance vs. Dela Cruz, Jr., 767 Phil. 611 (2015) — Cited as controlling authority for the doctrine of exhaustion of administrative remedies and its enumerated exceptions, particularly the exception for purely legal questions. The Court followed this precedent to sustain the CA's refusal to dismiss on exhaustion grounds.

• Collao, Jr. vs. Albania, G.R. No. 228905, July 15, 2020 — Cited as controlling authority for the rule that non-joinder of indispensable parties is not a ground for dismissal and that the proper remedy is impleader. The Court followed this precedent but distinguished its application where the indispensable party had been dissolved.

• Heirs of Fe Tan Uy vs. International Exchange Bank, 703 Phil. 477 (2013) — Cited as authority for the doctrine of separate juridical personality of corporations and the general rule that corporate officers are not personally liable for corporate obligations. The Court applied this precedent to absolve Atty. De Leon of personal liability.

• Section 25, Presidential Decree No. 957 — Provides that the owner or developer shall deliver the title of the lot or unit to the buyer upon full payment. The Court cited this provision to establish that the obligation to deliver the title rested on Prosecor as the owner/developer, not on PSB or Atty. De Leon.

• Article 1144, Civil Code — Provides that actions upon a written contract must be brought within ten years from the time the right of action accrues. Petitioner invoked this provision to argue prescription, though the Court declined to resolve the issue in this petition.

• Section 8, Rule 3, HLURB Resolution No. 980 (2019 HLURB Rules of Procedure) — Provides that only natural or juridical persons who claim an interest in the subject matter may be parties in a case before the HLURB. The Court applied this provision to hold that Prosecor, having been dissolved, could no longer be impleaded as it had lost its juridical personality.

• Section 18, Republic Act No. 11232 — Provides that a private corporation commences its corporate existence and juridical personality from the date the SEC issues the certificate of incorporation, for the period stated in the articles of incorporation, unless sooner dissolved. The Court cited this provision to support the conclusion that a dissolved corporation loses its juridical personality and can no longer be made a party.

Gesmundo, C.J. (Chairperson), Caguioa, Inting, and Dimaampao, JJ., concurred.