Case Title: Topic:

Lafarge Cement Phil. v. Continental Cement Solidary Obligations

Date: November 23, 2004

Ponente: Panganiban
Nature of the Case: Impleading of new parties by defendants in their counterclaims
Petitioner: Lafarge Cement Philippines, Inc., Luzon Continental Land Corporation, Continental operating Corporation, Philip Roseberg
Respondent: Continental Cement Corporation, Gregory T. Lim, Anthony A. Mariano
Doctrine:
Obligations may be classified as either joint or solidary. "Joint" or "jointly" or "conjoint" means mancum or mancomunada or pro rata obligation; on the other hand, "solidary
obligations" may be used interchangeably with "joint and several" or "several." Thus, petitioners' usage of the term "joint and solidary" is confusing and ambiguous.

The ambiguity in petitioners' counterclaims notwithstanding, respondents' liability, if proven, is solidary. This characterization finds basis in Article 1207 of the Civil Code,
which provides that obligations are generally considered joint, except when otherwise expressly stated or when the law or the nature of the obligation requires solidarity.
However, obligations arising from tort are, by their nature, always solidary. However, obligations arising from tort are, by their nature, always solidary.

[…]

In a "joint" obligation, each obligor answers only for a part of the whole liability; in a "solidary" or "joint and several" obligation, the relationship between the active and the
passive subjects is so close that each of them must comply with or demand the fulfillment of the whole obligation. The fact that the liability sought against the CCC is for
specific performance and tort, while that sought against the individual respondents is based solely on tort does not negate the solidary nature of their liability for tortuous
acts alleged in the counterclaims. Article 1211 of the Civil Code is explicit on this point:

"Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions."

The solidary character of respondents' alleged liability is precisely why credence cannot be given to petitioners' assertion. According to such assertion, Respondent CCC
cannot move to dismiss the counterclaims on grounds that pertain solely to its individual co-debtors. In cases filed by the creditor, a solidary debtor may invoke defenses
arising from the nature of the obligation, from circumstances personal to it, or even from those personal to its co-debtors. Article 1222 of the Civil Code provides:

"A solidary debtor may, in actions filed by the creditor, avail itself of all defenses which are derived from the nature of the obligation and of those which are personal to him,
or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof only as regards that part of the debt for which the latter
are responsible."

The act of Respondent CCC as a solidary debtor -- that of filing a motion to dismiss the counterclaim on grounds that pertain only to its individual co-debtors -- is therefore
allowed.
Relevant Provisions:

Article 1207, NCC. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right
to demand, or that each one of the latter is bound to render, entire compliance with the prestations. There is a solidary liability only when the obligation expressly so states,
or when the law or the nature of the obligation requires solidary.

Article 1211, NCC. Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions.
Article 1222, NCC. A solidary debtor may, in actions filed by the creditor, avail itself of all defenses which are derived from the nature of the obligation and of those which are
personal to him, or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof only as regards that part of the debt
for which the latter are responsible.
Facts:
- On August 11, 1998, Petitioner Lafarge Cement Philippines, Inc. (Lafarge) and Respondent Continental Cement Corporation (CCC) executed a Letter of Intent in which
Lafarge would buy CCC’s cement business. At the time of the transaction, CCC had an ongoing case in the Supreme Court: Asset Privatization Trust v. CA and CCC.
- Anticipating that an unfavorable judgment would have deleterious effects on the transaction, the parties agreed to retaining a portion of the purchase price
(P117,020,846.84) to be paid to Asset Privatization Trust should the case be decided in the latter’s favor.
- The case was decided in Asset Privatization Trust’s favor. Lafarge refused to deliver the payment, causing CCC to file with the RTC a “Complaint with Application for
Preliminary Attachment” against Lafarge. The Complaint included compelling Lafarge to deliver the payment.
- Lafarge moved to dismiss the Complaint on grounds of forum shopping, as CCC had allegedly made the same claim with the same parties in a case filed with the
International Chamber of Commerce. The RTC denied such motion, prompting Lafarge to elevate the case to the CA.
- While the appeal was pending in the CA, Lafarge filed an “Answer and Compulsory Counterclaim ad Cautelam”, praying by way of compulsory counterclaim for the
actual damages, exemplary damages, moral damages and attorney’s fees against CCC, its President Gregory T. Lim, and its corporate secretary Anthony A. Mariano.
Lafarge alleged that CCC, through Lim and Mariano, filed the baseless complaint in the International Chamber of Commerce and procured the Writ of Attachment in
bad faith. Relying on Sapugay vs. CA, Lafarge prayed that both Lim and Mariano be held “jointly and solidarily” liable with CCC.
- On behalf of Lim and Mariano, CCC moved to dismiss the compulsory counterclaims.
- The RTC dismissed Lafarge’s counterclaims, declaring the non-compulsory nature of said counterclaims. It later clarified that it was dismissing the counterclaims
impleading Lim and Mariano, even if said counterclaims included CCC.
Issue 1: WON the RTC gravely erred in ruling that Ratio:
- (i) Lafarge’s' counterclaims against Lim and Mariano are not compulsory (i) Counterclaims may either be permissive or compulsory. The former “does not
- (ii) Sapugay v. Court of Appeals is inapplicable here arise out of or is not necessarily connected with the subject matter of the opposing
- (iii) Lafarge violated the rule on joinder of causes of action. party's claim”; the latter “rises out of or is necessarily connected with the transaction
- YES to all or occurrence constituting the subject matter of the opposing party's claim and does
not require for its adjudication the presence of third parties of whom the court
cannot acquire jurisdiction.” The former is essentially an independent claim that can
be a separate filing; the latter MUST be set up in the same action or face a permanent
bar by way of res judicata.

To determine whether or not a counterclaim is permissive or compulsory, four

questions are asked (NAMARCO v. Federation of United Namarco Distributors):

1.) Are issues of fact and law raised by the claim and by the counterclaim largely
the same?
2.) Would res judicata bar a subsequent suit on defendant's claim, absent the
compulsory counterclaim rule?
3.) Will substantially the same evidence support or refute plaintiff's claim as
well as defendant's counterclaim?
4.) Is there any logical relation between the claim and the counterclaim?
Answering all 4 in the positive means that the counterclaim is compulsory.

Issue 2: WON the RTC gravely erred in refusing to rule that CCC has no personality to
move to dismiss Lafarge's compulsory counterclaims on Lim and Mariano's behalf. –
YES
Lafarge’s counterclaims of bad faith against Lim and Mariano have with them the
exact same evidence base that the present case provides. Thus, Lafarge’s
counterclaim is compulsory by nature and must be filed within the same action.
(ii) Sapugay v. CA is applicable. The case dealt with the impleading of a new party in a
counterclaim, which was contested. The Court held thus:
“A counterclaim is defined as any claim for money or other relief which a defending
party may have against an opposing party. However, the general rule that a
defendant cannot by a counterclaim bring into the action any claim against persons
other than the plaintiff admits of an exception under Section 14, Rule 6 which
provides that 'when the presence of parties other than those to the original action is
required for the granting of complete relief in the determination of a counterclaim
or cross-claim, the court shall order them to be brought in as defendants, if
jurisdiction over them can be obtained.”
In the instant case, CCC argues that the exception only applies when “complete
relief” cannot be obtained from the parties originally impleaded in the case. The
Court rejects such a theory, stating that individual officers of a company can be
named for instances of fraud and bad faith pertaining to them. Such allegations
permit the “piercing the veil of corporate fiction” which assumes that the company is
responsible for its officer’s action.
(iii) CCC claims that Lafarge violated the rules on joinder of causes of action since the
original Complaint was for specific performance based on a contract, while the
counterclaim is based on allegations of bad faith. The Court responded that the same
rules that CCC relies on are the same rules that discourage duplicity of suits that
Lafarge’s counterclaim is in the nature of avoiding. Moreover, parties in a compulsory
counterclaim are declared real parties-in-interest that must be joined therein.
Ratio:
Obligations are either “joint” or “solidary/several/joint and several”, thus Lafrage’s
use of the term “jointly and solidarily” is ambiguous. That notwithstanding, the
liability of CCC, Lim and Mariano, if proven, would be solidary. This is due to it being
based off a tort, which automatically makes the obligation solidary. [Article 1207; tort
rule dates back to the 1912 case of Worcester v. Ocampo]
The fact that the counterclaim against CCC is for specific performance and tort, and
against Lim and Mariano only for tort, does not negate the solidary nature of the
obligation. [Article 1211]
 Article 1222 of the NCC, however, allows a solidary debtor to avail of defenses
personal to him, based on the nature of the allegations. Thus, CCC can file a motion
to dismiss the counterclaim on grounds that pertain exclusively to Lim and Mariano.

However, the filing done by CCC was on behalf of Lim and Mariano. CCC is not
authorized to do this action, being a corporate entity that cannot act on behalf of its
officers without being so authorized. Unless explicitly authorized by Lim and Mariano,
the compulsory counterclaim has no force and effect insofar as the latter two are
affected. Thus, any of the 3 respondents (CCC, Lim, and Mariano) can file a Motion to
Dismiss the counterclaim on grounds that pertain exclusively to them, but such
Motion cannot be deemed to have been filed on behalf of their co-defendants.
Dispositive Portion:
WHEREFORE, the Petition is GRANTED and the assailed Orders REVERSED. The court of origin is hereby ORDERED to take cognizance of the counterclaims pleaded in
petitioners' Answer with Compulsory Counterclaims and to cause the service of summons on Respondents Gregory T. Lim and Anthony A. Mariano. No costs.

SO ORDERED.