Singapore Airlines Limited vs. The Court of Appeals and Philippine Airlines

A third-party complaint is independent of and separate and distinct from the plaintiff's complaint; an appeal by one party does not inure to the benefit of a non-appealing party, and a third-party defendant that did not raise a defense below cannot assert it for the first time on appeal to challenge the final judgment on the principal complaint. Where the damage is the natural and probable consequence of the separate tortious acts of two quasi-delict tortfeasors, their liability is joint and several, and contribution between them is pro-rata.

Sancho Rayos was an overseas contract worker whose renewed contract with the Arabian American Oil Company (Aramco) covered April 16, 1980 to April 15, 1981. Under Aramco policy, employees returning to Dhahran, Saudi Arabia from Manila could claim reimbursement for excess baggage of up to 50 kilograms if properly supported by receipt. Philippine Airlines (PAL) acted as Singapore Airlines' (SIA) handling agent.

Sancho Rayos was an overseas contract worker with a renewed contract with the Arabian American Oil Company (Aramco) for the period April 16, 1980 to April 15, 1981. Under Aramco policy, employees returning to Dhahran, Saudi Arabia from Manila were allowed to claim reimbursement for excess baggage of up to 50 kilograms, provided the claim was properly supported by receipt. In April 1980, Rayos took a Singapore Airlines (SIA) flight to report for his new assignment, carrying 50 kilograms of excess baggage for which he paid P4,147.50. Aramco reimbursed that amount upon presentation of the excess baggage ticket.

In December 1980, Rayos learned that he was one of several employees being investigated by Aramco for fraudulent claims. He immediately asked his wife Beatriz in Manila to seek written confirmation from SIA that he had indeed paid for 50 kilograms of excess baggage. On December 10, 1980, SIA's manager Johnny Khoo notified Beatriz that SIA could not issue the requested certification because its records showed that only three kilograms were entered as excess and accordingly charged. SIA issued the requested certification only on April 8, 1981, after its investigation of the anomaly and after Beatriz, assisted by a lawyer, threatened to sue. On April 14, 1981, Aramco gave Rayos his travel documents without a return visa, and his employment contract was not renewed.

On August 5, 1981, the Rayos spouses, convinced that SIA was responsible for the non-renewal of Rayos's employment contract with Aramco, sued SIA for damages. SIA claimed that it was not liable because the tampering was committed by its handling agent, Philippine Airlines (PAL), and it filed a third-party complaint against PAL. PAL countered that its personnel did not collect any charges for excess baggage, that it had no participation in the tampering of any excess baggage ticket, and that if any tampering was made, it was done by SIA's personnel.

The trial court found that Rayos's excess baggage ticket was tampered with by PAL employees and that the fraud was the direct and proximate cause of the non-renewal of Rayos's contract with Aramco. The record also showed that SIA had been informed of the anomaly in December 1980 but issued the certification only on April 8, 1981, a few days before the expiration of Rayos's contract, and that Rayos's performance with Aramco had been constantly "highly regarded" by the manager of Aramco's equipment services department.

• Scope of Appeal: Petitioner SIA argued that PAL could not validly assail for the first time on appeal the trial court's decision sustaining the validity of the Rayos spouses' complaint against SIA if PAL did not raise that issue in the lower court.
• Limited Issue on Appeal: Petitioner maintained that the Court of Appeals should have restricted its ruling to SIA's right to seek reimbursement from PAL, because that was the only issue raised by SIA in its third-party complaint against PAL.
• Third-Party Complaint Finality: Petitioner cited Firestone Tire and Rubber Company of the Philippines vs. Tempongko and argued that a third-party complaint is separate and distinct from the principal complaint, so an appeal by one party does not inure to the benefit of a non-appealing party.
• PAL's Sole Liability: Petitioner argued that PAL should be solely liable for the satisfaction of the judgment.

• No Valid Claim Against SIA: Respondent PAL claimed that the Rayos spouses had no valid claim against SIA because the non-renewal of Rayos's contract with Aramco was due to his inefficiency or unsatisfactory performance, not the alleged tampering of his excess baggage ticket.
• Denial of Participation: Respondent countered that its personnel did not collect any charges for excess baggage, that it had no participation in the tampering of any excess baggage ticket, and that if any tampering was made, it was done by SIA's personnel.

• Third-Party Complaint and Scope of Appeal: Whether PAL, as third-party defendant, may for the first time on appeal challenge the trial court's judgment sustaining the Rayos spouses' claim against SIA when PAL did not raise that issue in the lower court.
• Effect of SIA's Answer: Whether SIA's answer to the main complaint inured to the benefit of PAL, allowing PAL to avail of SIA's defenses against the Rayos spouses.
• Liability for Contribution: Whether PAL is solely liable to SIA for the entire judgment or whether SIA and PAL, as joint tortfeasors, are liable for contribution pro-rata.

• Third-Party Complaint and Scope of Appeal: No. A third-party complaint is independent of and separate and distinct from the plaintiff's complaint; an appeal by one party does not inure to the benefit of a non-appealing party, and PAL could not raise a new defense for the first time on appeal.
• Effect of SIA's Answer: No. Although a third-party defendant may set up defenses available to the third-party plaintiff, PAL could not benefit because its defenses were contradictory to SIA's and it did not plead the no-valid-claim defense in its answer.
• Liability for Contribution: No. PAL is not solely liable; SIA and PAL were separate tortfeasors under Article 2176, their liability was joint and several under Article 2194, and contribution between them was pro-rata.

• Third-Party Complaint and Scope of Appeal: The Court applied Firestone. A third-party complaint is a procedural device by which a third party neither a party nor privy to the plaintiff's claim may be brought into the case by the defendant, acting as third-party plaintiff, to enforce a right for contribution, indemnity, subrogation, or other relief. It is independent of and separate and distinct from the plaintiff's complaint. The court renders two judgments: one on the plaintiff's complaint and one on the third-party complaint. Failure of any party to appeal the judgment against him makes it final and executory; an appeal by one party does not inure to the benefit of another who has not appealed. Here, the judgment between the Rayos spouses and SIA had become final and was satisfied. PAL, in its appeal from the third-party judgment, could not attack the final principal judgment by arguing that the Rayoses had no valid claim against SIA. PAL had not raised that issue below; in the lower court it disclaimed liability and imputed tampering to SIA's personnel. It changed theory only on appeal, which cannot be allowed.

• Effect of SIA's Answer: A third-party defendant is allowed to set up in its answer defenses that the third-party plaintiff has or may have to the plaintiff's claim. But PAL could not benefit from that principle. SIA's defense was that the tampering was committed by PAL, not SIA; PAL's defense was that it had no participation and that SIA's personnel did the tampering. Their defenses were contradictory, not common. The rule that a third-party defendant may benefit from a victory by the third-party plaintiff against the plaintiff applies only when their defenses are non-contradictory. PAL could have raised the no-valid-claim defense indirectly by adopting it if SIA had raised it in its answer to the main complaint, or directly by stating in its answer to SIA's third-party complaint that both SIA and PAL were blameless. It did neither. The fear of collusion was misplaced because SIA's position against the Rayos claim was transparent from the beginning, and PAL was aware of it. The complaint and third-party complaint are separate cases, not analogous to several defendants with a common cause of action where one defendant's answer may inure to the benefit of another. A third-party defendant aggrieved by allegations in the main complaint should also answer the main complaint.

• Liability for Contribution: The trial court found that PAL's tampering was the proximate cause of the non-renewal, but it failed to consider that SIA's delayed transmittal of the certification was the immediate cause. SIA knew of the anomaly in December 1980 but issued the certification only on April 8, 1981, a few days before Rayos's contract expired. The investigation could not have lasted four months because the information could be verified by comparing duplicate excess baggage tickets kept by the Rayoses and PAL. The Rayoses had to secure counsel and threaten a damage suit before SIA issued the certification, which strengthened the suspicion that SIA did not act in utmost good faith. The effect became apparent when Rayos's contract was not renewed despite his performance being constantly "highly regarded." Under Moran's view, in an action upon a tort, the defendant may file a third-party complaint against a joint tortfeasor for contribution. The non-renewal was the natural and probable consequence of the separate tortious acts of SIA and PAL. Under Article 2176, Rayos was entitled to compensation; under Article 2194, the responsibility of two or more tortfeasors liable for a quasi-delict is joint and several; and under Article 1217, sharing between solidary debtors is pro-rata. Thus, PAL should contribute one-half of the amount SIA paid, not totally indemnify SIA.

• Third-Party Complaint — A procedural device by which a third party neither a party nor privy to the plaintiff's claim may be brought into the case with leave of court by the defendant, acting as third-party plaintiff, to enforce against the third-party defendant a right for contribution, indemnity, subrogation, or other relief in respect of the plaintiff's claim. It is independent of and separate and distinct from the plaintiff's complaint. The court renders two judgments in the same case: one on the plaintiff's complaint and one on the third-party complaint. Failure to appeal the judgment against a party makes it final and executory; an appeal by one party does not inure to the benefit of a non-appealing party. Applied: PAL could not use its appeal from the third-party judgment to challenge the final judgment on the principal complaint against SIA.
• Contribution Among Joint Tortfeasors in Quasi-Delict — Where two or more persons are liable for a quasi-delict, their responsibility is joint and several under Article 2194, and as between solidary debtors the sharing is pro-rata under Article 1217. A defendant in a tort action may file a third-party complaint against a joint tortfeasor for contribution. Applied: The non-renewal of Rayos's employment contract was the natural and probable consequence of the separate tortious acts of SIA and PAL; PAL was ordered to contribute one-half of the amount SIA paid to the Rayos spouses.
• Change of Theory on Appeal — A party cannot raise for the first time on appeal a defense or theory not pleaded in the lower court. Applied: PAL disclaimed liability and imputed tampering to SIA's personnel below, but on appeal argued that the Rayos spouses had no valid claim against SIA due to Rayos's inefficiency; the change of theory was not allowed.
• Inurement of Answer of Co-Defendants — The rule that the answer of some defendants may inure to the benefit of those who did not file an answer applies to several defendants sued in a single complaint stating a common cause of action; it does not apply to a third-party complaint, which is a separate and distinct action from the main complaint. Applied: SIA's answer did not inure to PAL's benefit, and PAL should have answered the main complaint if it wished to contest allegations therein.

• "The third-party complaint is, therefore, a procedural device whereby a "third party" who is neither a party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff's claim. The third-party complaint is actually independent of and separate and distinct from the plaintiff's complaint. . . . When leave to file the third-party complaint is properly granted, the Court renders in effect two judgments in the same case, one on the plaintiff's complaint and the other on the third-party complaint. When he finds favorably on both complaints, as in this case, he renders judgment on the principal complaint in favor of plaintiff against defendant and renders another judgment on the third-party complaint in favor of defendant as third-party plaintiff, ordering the third-party defendant to reimburse the defendant whatever amount said defendant is ordered to pay plaintiff in the case. Failure of any of said parties in such a case to appeal the judgment as against him makes such judgment final and executory. By the same token, an appeal by one party from such judgment does not inure to the benefit of the other party who has not appealed nor can it be deemed to be an appeal of such other party from the judgment against him." — This passage states the Court's canonical formulation of the nature and effects of a third-party complaint, including its independence from the principal complaint and the finality rule applied against PAL.
• "While the third-party defendant; would benefit from a victory by the third-party plaintiff against the plaintiff, this is true only when the third-party plaintiff and third-party defendant have non-contradictory defenses. Here, the defendant and third-party defendant had no common defense against the plaintiffs' complaint, and they were even blaming each other for the fiasco." — This passage explains why PAL could not invoke SIA's defenses against the Rayos spouses: their defenses were mutually contradictory rather than common.
• "The non-renewal of Rayos employment contract was the natural and probable consequence of the separate tortious acts of SIA and PAL. Under mandate of Article 2176 of the Civil Code, Rayos is entitled to be compensated for such damages. Inasmuch as the responsibility of two or more persons, or tort-feasors, liable for a quasi-delict is joint and several, and the sharing as between such solidary debtors is pro-rata, it is but logical, fair, and equitable to require PAL to contribute to the amount awarded to the Rayos spouses and already paid by SIA, instead of totally indemnifying the latter." — This is the ratio decidendi for the contribution ruling, applying quasi-delict and solidary liability principles to SIA and PAL.
• "SIA was informed of the anomaly in December 1980 but only issued the certification four months later or, more specifically, on April 8, 1981, a few days before the expiration of Rayos' contract." — This passage supports the finding that SIA's delayed certification was the immediate cause of the non-renewal, preventing full indemnity from PAL.

• Firestone Tire and Rubber Company of the Philippines vs. Tempongko, G.R. No. L-24399, March 28, 1969, 27 SCRA 418 — Controlling precedent. The Court held that it squarely applies and cited it for the nature of a third-party complaint as an independent and separate action, the rule that the court renders two judgments, and the rule that failure to appeal makes the judgment final while an appeal by one party does not inure to the benefit of a non-appealing party.

• Article 2176, Civil Code — Establishes liability for damages caused by fault or negligence (quasi-delict). Applied: Rayos was entitled to compensation because the non-renewal of his employment contract was the natural and probable consequence of the separate tortious acts of SIA and PAL.
• Article 2194, Civil Code — Provides that the responsibility of two or more persons liable for a quasi-delict is joint and several. Applied: SIA and PAL were jointly and severally liable to the Rayos spouses for the damages caused by their separate tortious acts.
• Article 1217, Civil Code — Provides for pro-rata sharing among solidary debtors. Applied: As between SIA and PAL, contribution was pro-rata, and PAL was ordered to pay one-half of the amount SIA actually paid to the Rayos spouses.

Feliciano, Melo, Vitug, and Francisco, JJ., concurred.