Silahis International Hotel, Inc. vs. Court of Appeals and Pacific Wide Holdings, Inc.

A final and executory judgment on a contractual obligation is immutable and cannot be nullified on the ground that a subsequent transferee of the subject property is not impleaded, because a non-party to the contract is not an indispensable party to the specific performance action, and the non-joinder of an indispensable party is not a ground for dismissal or nullification of the action, the proper remedy being to allow intervention in the execution stage.

On 23 December 1999, Silahis International Hotel, Inc. (SIHI) and the Philippine Amusement and Gaming Corporation (PAGCOR) entered into a Contract of Lease over the second and third stories of SIHI’s Grand Boulevard Hotel for PAGCOR’s casino operations. Under paragraph 4 of the contract, PAGCOR was obligated to pay a restoration cost: an initial deposit of P2,250,000 was retained by SIHI, and the balance would be determined by a mutually acceptable independent appraiser based on the premises’ original make-up. The lease was terminated effective July 2006. SIHI demanded payment of restoration cost, which PAGCOR did not satisfy, prompting SIHI to file a complaint for specific performance. After full trial, the RTC ordered PAGCOR to pay restoration cost following an appraisal process; the Court of Appeals affirmed with modifications, and that decision became final and executory on 25 May 2012. Meanwhile, Pacific Wide Holdings, Inc. acquired the hotel in a tax delinquency sale in November 2007 — more than a year after the lease ended — but obtained its transfer certificates of title only in October 2013. During execution of the final judgment, Pacific Wide sought to claim the restoration cost as the new owner, leading to a series of orders and a petition for certiorari before the Court of Appeals that ultimately nullified the final RTC decision.

The Lease Contract and Restoration Cost Obligation: On 23 December 1999, SIHI and PAGCOR executed a Contract of Lease over the second and third stories of SIHI’s Grand Boulevard Hotel for PAGCOR’s casino operations, effective 15 March 2000 for a four-year period. Paragraph 4 required PAGCOR to pay the restoration cost: a P2.25 million deposit was retained by SIHI, and the parties were to hire a mutually acceptable independent appraiser to determine the fair and reasonable restoration cost based on the premises’ original make-up. Any excess above the deposit would be paid by PAGCOR; any shortfall would be remitted to PAGCOR. The lease was renewed for one year on 15 June 2004 and continued on a month-to-month basis. By letter dated 1 April 2006, SIHI notified PAGCOR that the lease would terminate effective July 2006 and demanded payment of P115,200,000.00 as restoration cost. The parties never finalized the appointment of appraisers under the contractual procedure.

The Litigation for Specific Performance: On 10 July 2006, SIHI filed a Complaint for Specific Performance with the RTC of Manila, Branch 15 (Civil Case No. 06-115429). The RTC Decision of 27 December 2006 ruled in SIHI’s favor, designating Asian Appraisal, Inc. as the independent appraiser, with the parties directed to comply with paragraph 4 upon receipt of the appraisal report. On appeal, the CA in its 3 May 2012 Decision (CA-G.R. CV No. 90451) affirmed with modifications: it deleted the designation of Asian Appraisal and directed PAGCOR to nominate its appraiser through the bidding process under R.A. 9184, while SIHI was to select its appraiser under its own company rules; the appraisers were to submit a joint appraisal report within two months, after which the parties would comply with the restoration cost provisions within ten days. The 2012 CA Decision attained finality on 25 May 2012. During execution proceedings, SIHI and PAGCOR agreed to fix the restoration cost at P102,114,040.00.

Pacific Wide’s Acquisition and Intervention Attempt: On 7 November 2007, Pacific Wide purchased the Grand Boulevard Hotel at a tax delinquency sale for P106,650,000.00 — more than a year after the lease was terminated and seven years before it registered its title. Legal controversies over the sale delayed the final deed of sale until 19 September 2013, and transfer certificates of title were issued only on 23 October 2013. While execution was pending, Pacific Wide filed a Verified Motion to Award Restoration Cost to Successor-in-Interest, asserting that as the new registered owner it automatically succeeded to SIHI’s rights under the lease and was entitled to the restoration cost. The RTC denied the motion in its Orders of 21 February 2014 and 24 April 2014 and approved the agreed quantum, directing PAGCOR to pay SIHI. A Writ of Execution issued on 25 February 2014 was later set aside upon PAGCOR’s motion, with the RTC directing SIHI to file a monetary claim before the COA pursuant to Administrative Circular No. 10-2000.

Proceedings before the Commission on Audit: SIHI filed its Petition Ad Cautelam with the COA (COA CP Case No. 2014-167). Pacific Wide moved to intervene. While the COA case was pending, Pacific Wide filed a Petition for Certiorari before the CA (CA-G.R. SP No. 136085) on 4 July 2014, assailing the RTC Orders that denied its Verified Motion. The CA granted the petition in its 30 June 2015 Decision, ruling that Pacific Wide was an indispensable party, nullifying the 2006 RTC Decision as modified by the 2012 CA Decision, and remanding the case to the RTC to implead Pacific Wide as party-plaintiff. Relying on the CA’s nullification, the COA dismissed SIHI’s Petition Ad Cautelam in Decision No. 2017-015 dated 16 February 2017, holding that it had jurisdiction only over liquidated money claims and that without a final court adjudication, SIHI’s claim was not liquidated.

Pacific Wide’s Subsequent Withdrawal: In August 2019, Pacific Wide filed Notices of Withdrawal in both Supreme Court cases, accompanied by a Waiver, Release, and Quitclaim dated 20 August 2019, expressly relinquishing any claim to the restoration cost.

G.R. No. 223865 (First SIHI Petition):

• Error in Nullifying Final Judgment: SIHI maintained that the 2006 RTC Decision as modified by the 2012 CA Decision had become final and executory, immutable, and beyond reopening or relitigation, and that the CA gravely erred in declaring it null and void.
• Intervention Not Allowed After Judgment: SIHI argued that Pacific Wide’s intervention was procedurally improper because, under Rule 19, Section 2 of the Rules of Court, a motion to intervene may be allowed only before the trial court renders judgment, and the case was already in the execution stage.
• Pacific Wide Not an Indispensable Party: SIHI insisted that Pacific Wide was not a party to the Contract of Lease, was not an assignee of the restoration cost, and was not a successor-in-interest with respect to SIHI’s contractual rights. There was no stipulation pour autrui in Pacific Wide’s favor, and the obligation to pay restoration cost was a personal contractual obligation of PAGCOR to SIHI that accrued before Pacific Wide acquired the property.

G.R. No. 230631 (Second SIHI Petition):

• Grave Abuse of Discretion by the COA: SIHI asserted that the COA acted with grave abuse of discretion in dismissing its Petition Ad Cautelam because the 2012 CA Decision was final and executory, and the COA could not disregard a binding court judgment. The COA’s delay pending the CA’s nullification of the RTC decision was unjustified.

G.R. No. 223865 (Pacific Wide as Respondent):

• Successor-in-Interest to Restoration Cost: Pacific Wide countered that as the registered owner of the leased property, it was SIHI’s successor-in-interest and automatically entitled to the restoration cost, because under the lease PAGCOR committed to restore the property by paying the restoration cost, and payment to SIHI — who no longer owned the property — would make restoration legally impossible.
• Indispensable Party Status: Pacific Wide argued that it stood to be directly prejudiced if not allowed to participate in the adjudication of who was entitled to the restoration cost, making its joinder mandatory.

G.R. No. 230631 (PAGCOR, COA, and Pacific Wide as Respondents):

• Failure to Exhaust Remedies: Pacific Wide and the COA pointed out that SIHI failed to file a motion for reconsideration of the COA Decision, a plain, speedy, and adequate remedy, and therefore the special civil action for certiorari was unavailable.
• No Liquidated Claim: PAGCOR and the COA maintained that the COA acted within its jurisdiction because its authority over money claims against government agencies covers only liquidated claims. The 2015 CA Decision had nullified the 2006 RTC Decision as modified, leaving no final and executory court adjudication upon which a liquidated claim could be based.
• Pacific Wide’s Entitlement (initially): Pacific Wide reiterated in its Comment before the COA and this Court that it was entitled to the restoration cost as successor-in-interest, although it later withdrew this position.

• Nullification of Final Judgment: Whether the Court of Appeals erred in nullifying the 2006 RTC Decision as modified by the 2012 CA Decision on the ground that Pacific Wide was an indispensable party.
• COA’s Denial of the Money Claim: Whether the Commission on Audit acted with grave abuse of discretion in dismissing SIHI’s Petition Ad Cautelam for lack of a liquidated money claim.

• Nullification of Final Judgment: The 2015 CA Decision erroneously nullified the 2006 RTC Decision as modified by the 2012 CA Decision. Pacific Wide is not an indispensable party to the specific performance action between SIHI and PAGCOR. The suit was based solely on the Contract of Lease to which only SIHI and PAGCOR were parties. Pacific Wide was not a party to the contract, there was no stipulation conferring rights upon it, and it was not even the owner of the leased property when the lease was terminated and the right to restoration cost accrued. The issues resolved — whether SIHI was entitled to restoration cost from PAGCOR and how the amount would be determined — did not require Pacific Wide’s presence for a complete determination. Even assuming Pacific Wide were indispensable, its non-joinder is not a ground to dismiss or nullify an action; the settled rule is that the proper remedy is to implead the indispensable party, not to annul the proceedings. Moreover, a motion for intervention may exceptionally be allowed after judgment, particularly when it only affects execution. The final and executory 2012 CA Decision was binding and immutable and could not be altered by any court, including the Supreme Court. The 2015 CA Decision was therefore reversed, and the 2006 RTC Decision as modified by the 2012 CA Decision was reinstated.

• COA’s Denial of the Money Claim: The COA did not act with grave abuse of discretion. SIHI failed to file a motion for reconsideration before the COA, which is a condition precedent for resorting to the extraordinary remedy of certiorari under Rule 65, as a motion for reconsideration provides the tribunal the opportunity to correct itself. On the merits, the COA correctly applied its limited jurisdiction over money claims against government agencies, which extends only to liquidated claims — those determined or readily determinable from receipts, invoices, and court-adjudicated amounts. At the time SIHI filed its Petition Ad Cautelam, there was no final and executory court decision because the 2015 CA Decision had nullified the earlier judgment; thus, no liquidated claim existed. However, with the reversal of the 2015 CA Decision and the reinstatement of the final and executory 2012 CA Decision, SIHI’s claim is now liquidated and within the COA’s jurisdiction. The COA case was remanded for immediate resolution.

• Indispensable Party — An indispensable party is one without whom no final determination can be had of an action, and who stands to be injured or benefited by the outcome. The test is whether the party has such an interest in the controversy that a final decree would necessarily affect its rights, such that the courts cannot proceed without its presence. Here, Pacific Wide was not an indispensable party because its rights were not affected by the determination of PAGCOR’s contractual obligation to SIHI, a contract to which Pacific Wide was a stranger.

• Non-Joinder of Indispensable Party Not a Ground for Nullification or Dismissal — Non-joinder of an indispensable party does not warrant dismissal of the action or nullification of a final judgment. The proper remedy is to implead the indispensable party; the proceedings are not rendered void for want of jurisdiction. The appellate court’s nullification of a final trial court decision on this ground was therefore erroneous.

• Intervention After Judgment — While Rule 19, Section 2 of the Rules of Court generally requires that a motion to intervene be filed before rendition of judgment, jurisprudence permits intervention after judgment in exceptional cases, particularly when the intervention affects only the execution or implementation of the judgment rather than the merits of the cause of action.

• Immutability of Final Judgments — A final and executory judgment is immutable and unalterable; it may no longer be modified in any respect, even if the modification is meant to correct an erroneous conclusion of fact or law, except only for clerical errors or the most compelling of circumstances. Once a judgment attains finality, it becomes binding and beyond the reach of courts to alter.

• Liquidated Claim Requirement for COA Jurisdiction — The Commission on Audit’s jurisdiction to examine, audit, and settle money claims against the government, its subdivisions, agencies, and instrumentalities, under Section 2, Article IX-D of the Constitution and Section 26 of Presidential Decree No. 1445, covers only liquidated claims — those determined or readily determinable from receipts, invoices, and other documents, including court-adjudicated claims. A claim based on a court decision that is not yet final and executory is not liquidated and cannot be acted upon by the COA.

• Motion for Reconsideration as Prerequisite to Certiorari — A special civil action for certiorari under Rule 65 will not lie unless the petitioner has availed itself of a motion for reconsideration, which is the plain, speedy, and adequate remedy that gives the public respondent an opportunity to correct itself. The filing of a motion for reconsideration is a condition precedent, and failure to do so generally renders the petition dismissible.

• "An indispensable party is one who stands to be injured or benefited by the outcome of the petition. He has an interest in the controversy that a final decree would necessarily affect his rights, such that the courts cannot proceed without his presence." — Reiterating the definition from Heirs of Dinglasan v. Ayala Corp, this passage anchors the ruling that Pacific Wide, a non-party to the lease, was not indispensable.

• "The rule is now settled that the non-joinder of an indispensable party is not a ground for the dismissal of an action. Where an indispensable party is not impleaded in a case, the remedy is not to dismiss the case, but to implead the said party." — This directly refutes the CA’s nullification of a final judgment on the ground of non-joinder.

• "The remedy of certiorari inherently requires the filing of a motion for reconsideration, which is the tangible representation of the opportunity given to the office [public respondent] to correct itself. Unless it is filed, there could be no occasion to rectify. Worse, the remedy of certiorari would be unavailing." — Emphasizing the mandatory character of the motion for reconsideration before resort to certiorari.

• "The universal rule that where the State gives its consent to be sued by private parties either by general or special law, it may limit claimant’s action only up to the completion of proceedings anterior to the stage of execution and that the power of the Court ends when the judgment is rendered, since government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments, is based on obvious considerations of public policy." — From Roxas v. Republic Real Estate Corp, explaining the rationale for requiring COA approval before money judgments against the government may be satisfied.

• Heirs of Dinglasan v. Ayala Corp, 858 Phil. 686 (2019) — Followed for the definition of an indispensable party and the test of interest necessary to require joinder.
• Divinagracia v. Parilla, 755 Phil. 783 (2015) — Relied upon for the settled rule that non-joinder of an indispensable party is not a ground for dismissal; the remedy is to implead the party, not to annul the proceedings.
• Pinlac v. Court of Appeals, 457 Phil. 527 (2003) — Cited for the principle that intervention may be allowed even after judgment in exceptional cases, particularly when it pertains only to execution.
• Johnson & Johnson (Phils.), Inc. v. Court of Appeals, 330 Phil. 856 (1996) — Applied for the doctrine that a final and executory judgment is immutable and beyond alteration by any court.
• Maritime Industry Authority v. Commission on Audit, 750 Phil. 288 (2015) — Referred to for the limited scope of review in a special civil action for certiorari and the requirement of grave abuse of discretion.
• Euro-Med Laboratories, Phil., Inc. v. Province of Batangas, 527 Phil. 623 (2006) — Followed for the definition of liquidated claims as those determined or readily determinable from receipts, invoices, and similar documents, and for the COA’s jurisdiction over such claims.
• Roxas v. Republic Real Estate Corp, 786 Phil. 163 (2016) — Applied for the rule that money claims against the government based on court decisions must first be filed with the COA before execution, and that COA jurisdiction covers court-adjudicated liquidated claims.
• Philtranco Service Enterprises, Inc. v. Philtranco Workers Union-Association of Genuine Labor Organizations, 728 Phil. 99 (2014) — Relied upon for the requirement that a motion for reconsideration is a prerequisite to the filing of a petition for certiorari.

• Section 7, Rule 3, Rules of Court — Defines indispensable parties as those without whom no final determination can be had of an action. Applied to determine that Pacific Wide was not indispensable because the controversy between SIHI and PAGCOR could be fully resolved on the contract alone.
• Section 19, Rule 3, Rules of Court — Provides that in case of transfer of interest, the action may be continued by or against the original party unless the court orders substitution or joinder. Used to support the conclusion that even if SIHI’s interest in the property transferred to Pacific Wide, the latter did not automatically become an indispensable party; the original party could continue the action.
• Section 2, Rule 19, Rules of Court — States that a motion to intervene may be filed at any time before rendition of judgment by the trial court. Discussed alongside jurisprudence that recognizes exceptions allowing intervention after judgment.
• Section 2, Article IX-D, 1987 Constitution — Mandates the COA to examine, audit, and settle all accounts pertaining to government revenues, receipts, expenditures, and uses of funds and property. Constructed as the constitutional basis for the COA’s exclusive original jurisdiction over money claims against the government.
• Section 26, Presidential Decree No. 1445 (Government Auditing Code of the Philippines) — Grants the COA authority to examine, audit, and settle all debts and claims of any sort due from or owing to the government. Read together with the Constitution to require that claims be liquidated before the COA may act.
• Administrative Circular No. 10-2000 — Directs judges to exercise caution in issuing writs of execution against government agencies to satisfy money judgments and requires that money claims be first submitted to the COA. Applied to justify the RTC’s order for SIHI to file its claim with the COA.

Leonen (Acting Chief Justice), Caguioa, Lazaro-Javier, Inting, Zalameda, M. Lopez, Gaerlan, Rosario, Dimaampao, Marquez, and Kho, Jr., JJ., concurred. Chief Justice Gesmundo and Justice Hernando were on official leave; Justice J. Lopez was on leave.