Tan Quiombing vs. Court of Appeals

A solidary creditor may sue alone for the recovery of the entire obligation without joining the other solidary creditor as a co-plaintiff; the other solidary creditor is not an indispensable party, and non-joinder does not warrant dismissal.

Nicencio Tan Quiombing and Dante Biscocho, as First Party, and spouses Francisco and Manuelita Saligo, as Second Party, were parties to a Construction and Service Agreement for the construction of a house. Under that agreement, Quiombing and Biscocho jointly and severally bound themselves to construct the house, while the Saligos agreed to pay the contract price. The dispute implicated the Civil Code provisions on solidary obligations and the Rules of Court on compulsory joinder of indispensable parties.

On August 30, 1983, Nicencio Tan Quiombing and Dante Biscocho, as First Party, jointly and severally bound themselves to construct a house for spouses Francisco and Manuelita Saligo, as Second Party, for the contract price of P137,940.00, which the Saligos agreed to pay.

On October 10, 1984, Quiombing and Manuelita Saligo entered into a second written agreement under which Manuelita acknowledged the completion of the house and undertook to pay the balance of the contract price in the manner prescribed in that agreement. On November 19, 1984, Manuelita signed a promissory note for P125,363.50 representing the amount still due from her and her husband, payable on or before December 31, 1984, to Nicencio Tan Quiombing.

On October 9, 1986, Quiombing filed a complaint for recovery of the said amount, plus charges and interests, which the private respondents had acknowledged and promised to pay but had not, despite repeated demands, as the balance of the contract price for the construction of their house.

Instead of filing an answer, the Saligos moved to dismiss the complaint on February 4, 1987, contending that Biscocho was an indispensable party and therefore should have been included as a co-plaintiff. The trial court initially denied the motion but subsequently reconsidered and granted it, dismissing the complaint without prejudice to the filing of an amended complaint to include the other solidary creditor as a co-plaintiff. Rather than file the amended complaint, Quiombing appealed to the Court of Appeals.

The factual matters material to the Supreme Court’s analysis were that the Saligos had acknowledged completion of the house in the second agreement and had agreed to pay the balance of the contract price, that the promissory note represented the amount still due from them, and that the second agreement was based on the original Construction and Service Agreement and was merely a part thereof.

• Solidary Creditor’s Right to Sue Alone: Petitioner argued that as a solidary creditor he could act by himself alone in the enforcement of his claim against the private respondents.
• Amounts Payable Only to Petitioner: Petitioner maintained that the amounts due were payable only to him under the second agreement, where Biscocho was not mentioned at all.
• Reversible Error in Dismissal: Petitioner claimed that the trial and respondent courts committed reversible error and misread the applicable laws in dismissing his complaint.
• Prematurity of Breach Defense: Petitioner argued that it was premature to consider the possibility that the private respondents might plead breach of contract in their answer.

• Indispensable Party: The private respondents moved to dismiss the complaint, contending that Biscocho was an indispensable party and therefore should have been included as a co-plaintiff.
• Reciprocal Obligations and Potential Breach: The Court of Appeals sustained the trial court and held that it was not correct at that point to assume that Quiombing and Biscocho were solidary obligees only; as they had also assumed the reciprocal obligation of constructing the house, they should also be considered obligors of the private respondents under the contract, and if the answer should allege a breach of the agreement, the trial court could not decide the dispute without the involvement of Biscocho, whose rights would necessarily be affected since he was part of the First Party.
• Second Agreement Based on Original: The Court of Appeals declared that the second agreement referred to the Construction and Service Agreement as its basis and specifically stated that it was merely a “part of the original agreement.”

• Solidary Creditor Suing Alone: Whether one of the two solidary creditors may sue by himself alone for the recovery of amounts due to both of them without joining the other creditor as a co-plaintiff.
• Dismissal for Non-Joinder: Whether the defendant is entitled to the dismissal of the complaint on the ground of non-joinder of the second creditor as an indispensable party.
• Indispensable Party Status: Whether the second solidary creditor is an indispensable party.

• Solidary Creditor Suing Alone: Yes. Under Article 1212 of the Civil Code, each solidary creditor may do whatever may be useful to the others, and suing for the recovery of the contract price is a useful act that Quiombing could do by himself alone.
• Dismissal for Non-Joinder: No. Since Quiombing as a solidary creditor could sue alone, the inclusion of Biscocho as a co-plaintiff would have been a useless formality; non-joinder did not warrant dismissal.
• Indispensable Party Status: No. Biscocho need not be included as a co-plaintiff, because Quiombing as a solidary creditor can enforce payment alone, and as a solidary debtor may alone be held liable for any possible breach of contract; Biscocho’s participation was not necessary, much less indispensable.

• Solidary Creditor Suing Alone: The Court distinguished a joint obligation from a solidary obligation. In a joint obligation, each debtor is liable only for a proportionate part of the debt, and each creditor is entitled only to a proportionate part of the credit. In a solidary obligation, each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. The essence of active solidarity is the authority of each creditor to claim and enforce the rights of all, with the resulting obligation of paying every one what belongs to him; there is no merger, much less a renunciation of rights, but only mutual representation. Thus, the question of who should sue the private respondents was a personal issue between Quiombing and Biscocho in which the spouses Saligo had no right to interfere. It did not matter who between them filed the complaint because the private respondents were liable to either of the two as a solidary creditor for the full amount of the debt. Full satisfaction of a judgment obtained against them by Quiombing would discharge their obligation to Biscocho, and vice versa; hence, it was not necessary for both Quiombing and Biscocho to file the complaint. Inclusion of Biscocho as a co-plaintiff, when Quiombing was competent to sue by himself alone, would be a useless formality. Article 1212 provides that each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter; suing for the recovery of the contract price is certainly a useful act that Quiombing could do by himself alone. Under Article 1214, the debtor may pay any of the solidary creditors, but if any demand, judicial or extrajudicial, has been made by any one of them, payment should be made to him. Accordingly, whatever amount is awarded against the debtor must be paid exclusively to Quiombing. If Quiombing eventually collects the amount due from the solidary debtors, Biscocho may later claim his share thereof, but that decision is for him alone to make; it will affect only the petitioner as the other solidary creditor and not the private respondents, who have absolutely nothing to do with the matter. As far as the private respondents are concerned, payment of the judgment debt to the complainant will be considered payment to the other solidary creditor even if the latter was not a party to the suit.

• Dismissal for Non-Joinder: Section 7, Rule 3 of the Rules of Court mandates the inclusion of indispensable parties, providing that parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. Indispensable parties are those with such an interest in the controversy that a final decree would necessarily affect their rights, so that the court cannot proceed without their presence. Necessary parties are those whose presence is necessary to adjudicate the whole controversy, but whose interests are so far separable that a final decree can be made in their absence without affecting them. According to Justice Jose Y. Feria, where the obligation of the parties is solidary, either one of the parties is indispensable, and the other is not even necessary (now proper) because complete relief may be obtained from either. Therefore, although Biscocho signed the original Construction and Service Agreement, he need not be included as a co-plaintiff in the complaint filed by Quiombing against the private respondents. The complaint could have been filed alone by Quiombing. Regarding the possibility that the private respondents might plead breach of contract in their answer, the Court agreed that it was premature to consider this conjecture at that stage. The possibility seemed remote since the private respondents had actually acknowledged the completion of the house in the second agreement, where they also agreed to pay the balance of the contract price. At any rate, the allegation, if made and proved, could still be enforceable against Quiombing alone as one of the solidary debtors, subject to his right of recourse against Biscocho. The Court of Appeals was correct in ruling that the second agreement was based on the original Construction and Service Agreement, and so too was the promissory note later signed by Manuelita Saligo since it was for the amount owing on the construction cost; however, this matter was not important in view of the conclusion that the complaint could have been filed alone by Quiombing.

• Indispensable Party Status: The Court held that Biscocho need not be included as a co-plaintiff. Quiombing as a solidary creditor can by himself alone enforce payment of the construction costs by the private respondents, and as a solidary debtor may by himself alone be held liable for any possible breach of contract that may be proved by the private respondents. In either case, the participation of Biscocho is not at all necessary, much less indispensable.

• Solidary Obligation — A solidary obligation is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. This differs from a joint obligation, in which each debtor is liable only for a proportionate part of the debt, and each creditor is entitled only to a proportionate part of the credit. The Court applied this distinction to hold that Quiombing, as a solidary creditor, could demand the entire unpaid contract price from the Saligos without joining Biscocho.

• Active Solidarity — The essence of active solidarity consists in the authority of each creditor to claim and enforce the rights of all, with the resulting obligation of paying every one what belongs to him; there is no merger, much less a renunciation of rights, but only mutual representation. The Court relied on this doctrine to conclude that the question of who should sue the private respondents was a personal issue between Quiombing and Biscocho, and that either solidary creditor could enforce the full obligation.

• Indispensable Party — Indispensable parties are those with such an interest in the controversy that a final decree would necessarily affect their rights, so that the court cannot proceed without their presence. Necessary parties are those whose presence is necessary to adjudicate the whole controversy, but whose interests are so far separable that a final decree can be made in their absence without affecting them. The Court held that Biscocho was not an indispensable party because complete relief could be obtained from either solidary creditor, and his participation was not necessary.

• Compulsory Joinder of Indispensable Parties — Section 7, Rule 3 of the Rules of Court requires the joinder of parties in interest without whom no final determination can be had of an action. The Court ruled that this rule did not require the joinder of Biscocho, since he was not an indispensable party to Quiombing’s suit for recovery of the contract price.

• Payment to Solidary Creditor — Under Article 1214 of the Civil Code, the debtor may pay any of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by any one of them, payment should be made to him. The Court applied this provision to hold that whatever amount is awarded against the Saligos must be paid exclusively to Quiombing, and that payment to him would discharge the obligation as to Biscocho.

• Right of Recourse Among Solidary Debtors — If the private respondents proved a breach of contract, the liability could be enforced against Quiombing alone as one of the solidary debtors, subject to his right of recourse against Biscocho. Similarly, if Quiombing collected the judgment amount, Biscocho could later claim his share, but that matter affected only the solidary creditors and not the private respondents.

• “Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter.” — This is Article 1212 of the Civil Code, quoted by the Court as the statutory basis for allowing Quiombing to sue alone; the Court characterized the suit for recovery of the contract price as a useful act.
• “The essence of active solidarity consists in the authority of each creditor to claim and enforce the rights of all, with the resulting obligation of paying every one what belongs to him; there is no merger, much less a renunciation of rights, but only mutual representation.” — This passage defines active solidarity and supports the holding that either solidary creditor may enforce the entire obligation without joining the other.
• “Indispensable parties are those with such an interest in the controversy that a final decree would necessarily affect their rights, so that the court cannot proceed without their presence. Necessary parties are those whose presence is necessary to adjudicate the whole controversy, but whose interests are so far separable that a final decree can be made in their absence without affecting them.” — This is the Court’s canonical formulation of indispensable and necessary parties, applied to conclude that Biscocho was not an indispensable party.
• “We hold that, although he signed the original Construction and Service Agreement, Biscocho need not be included as a co-plaintiff in the complaint filed by the petitioner against the private respondents.” — This is the Court’s direct ruling on the core issue, resolving that non-joinder of the other solidary creditor did not justify dismissal.

• Wyoga Gas and Oil Corp. vs. Schrack, I Fed. Rules Service, 292, cited in I Moran 191, 1979 Ed. — Cited in support of the definition of indispensable parties and necessary parties; the Court used that definition to hold that Biscocho was not an indispensable party to Quiombing’s complaint.

• Article 1212, Civil Code — Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter. The Court applied this provision to hold that Quiombing’s suit for recovery of the contract price was a useful act that he could perform alone.
• Article 1214, Civil Code — The debtor may pay any of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by any one of them, payment should be made to him. The Court applied this provision to hold that whatever amount is awarded against the Saligos must be paid exclusively to Quiombing, and that such payment would discharge the obligation as to Biscocho.
• Section 7, Rule 3, Rules of Court — Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. The Court applied this provision to hold that Biscocho was not an indispensable party and therefore need not be joined as a co-plaintiff.
• Section 8, Rule 3, Rules of Court — Cited in footnote as the basis for the observation that necessary parties are now called proper parties under the 1964 amendments of the Rules of Court. This supported the distinction between indispensable and proper parties in the Court’s analysis.

Narvasa (Chairman), Gancayco, Grino-Aquino, and Medialdea, JJ., concur.