HON. GUILLERMO E. TORRES, AS PRESIDING JUDGE OF THE COURT OF FIRST INSTANCE OF RIZAL, BRANCH VIII, THE PROVINCIAL SHERIFF OF THE PROVINCE OF RIZAL, JAIME E. LAICO AND LUZ LOS BA…

Torres versus Laico

The Case

This is a petition brought by the spouses Jaime Laico and Luz Los Banos against Judge Guillermo Torres, the Provincial Sheriff of Rizal, and Marta Chivi, to review a decision of the Court of Appeals that had annulled, on grounds of grave abuse of discretion, all the proceedings taken by the trial court on the Laicos' cross-claim against Chivi. The case matters because it fixes the life and death of a cross-claim: a purely defensive cross-claim, one that can prosper only if the plaintiff's complaint succeeds, cannot survive the dismissal with prejudice of that complaint, and any judgment rendered on it afterward is void for lack of jurisdiction.

Procedural History

The Sierras filed a complaint for repurchase against Chivi and the Laicos in the Court of First Instance of Rizal. The Laicos answered, counterclaimed against the Sierras, and filed a cross-claim against Chivi. The Sierras and the Laicos then entered into a compromise, which the trial court approved, and on the same day the court dismissed with prejudice the complaint as against the Laicos and the Laicos' counterclaim against the Sierras. Chivi was not notified. The court later set the cross-claim for pre-trial; only the Laicos and their counsel appeared, so the court declared Chivi in default and allowed the Laicos to present evidence on the cross-claim. The court then rendered judgment against Chivi for 15,000 pesos and issued a writ of execution, under which the sheriff levied on Chivi's properties and set a public auction.

Chivi went to the Court of Appeals on certiorari and prohibition with preliminary injunction, seeking to annul the order allowing ex parte evidence, the judgment on the cross-claim, and the writ of execution and levy, and to prohibit further proceedings. The Court of Appeals gave due course, issued a preliminary injunction, and rendered a decision declaring null and void all the proceedings on the cross-claim and all orders, decisions, writs and processes issued in connection therewith, and restraining the judge and sheriff from further proceeding. The Laicos moved for reconsideration; while it was pending Chivi died and was substituted by Angelina Chivi, and the motion was denied. Hence this appeal by certiorari to the Supreme Court.

Facts

On the first of January 1955 the spouses Isidro Sierra and Antonia Magtaas sold a parcel of land to Marta Chivi for 10,800 pesos, representing that the land was unregistered and that a pre-war free patent application over it had not been approved and no patent issued. Chivi would not have bought had the land been patented, because it would then be subject to repurchase. The parties agreed that the price would not be fully paid until the land was registered. At the Sierras' instance Chivi filed an application for registration. While it was pending, on the twenty-fourth of May 1958, she sold her rights and interests to the Laicos for 25,647 pesos, stipulating that should she fail to secure and transfer title to them, she would return twice that amount. To induce the sale the Sierras showed the Laicos a petition withdrawing their free patent application, and the Laicos continued the registration proceeding in substitution of Chivi.

In December 1959 the Laicos discovered, and in January 1960 Chivi learned, that a free patent title had been issued to Isidro Sierra as early as the twenty-sixth of February 1932. The Laicos saw the Sierras, who executed on the seventeenth of January 1960 another deed of sale in their favor. The Laicos withdrew their registration application and instead sought reconstitution of Sierra's title. On the fourteenth of June 1960, however, the Sierras sued Chivi and the Laicos, praying to be allowed to repurchase under the Public Land Act. The Laicos filed a cross-claim against Chivi for twice the price paid, alleging that Chivi would be liable on the warranty should the plaintiffs obtain a favorable judgment.

On the twelfth of March 1964 the Sierras and the Laicos compromised: the Laicos were recognized as absolute owners, the Sierras withdrew their objection to reconstitution and would transfer the title to the Laicos, who would pay 10,000 pesos, and the Laicos would pursue their cross-claim and give the Sierras one-half of any amount recovered in excess of the purchase price. The compromise was executed without the knowledge of Chivi, and the complaint and counterclaim were dismissed with prejudice the same day, again without notice to her. The trial court then declared Chivi in default on the cross-claim and rendered judgment against her.

Issues

• Whether or not the cross-claim of the Laicos against Chivi could stand after the complaint in the same action was dismissed with prejudice.
• Whether or not the trial court committed grave abuse of discretion amounting to lack of jurisdiction in proceeding on the cross-claim after that dismissal.
• Whether or not the petition for certiorari in the Court of Appeals was barred by laches.

Applicable Provisions

Section 7 of Rule 6 defines a cross-claim:

Any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein.

The Court uses this definition to characterize the Laicos' claim against Chivi as one arising out of the same transaction as the complaint, and therefore dependent on it.

Ruling

On the first issue, the Court held that the cross-claim could not survive. The warranty undertaken by Chivi, judged by its terms and surrounding circumstances, was in respect of the transfer of ownership, not of the registered title, and the Sierras' action was for repurchase, not recovery of ownership. Even viewing the situation most favorably to the Laicos, their cross-claim was so inextricably linked with and utterly dependent upon the success of the Sierras' complaint that when the complaint was dismissed the cross-claim could not possibly survive, for the cross-claimants themselves alleged liability only should the plaintiffs obtain a favorable judgment. The warranty became functus officio, that is, spent and without further legal effect, when the Sierras transferred their patent title to the Laicos, first by the deed of sale of January 1960 and again in the settlement. The 10,000 pesos paid to the Sierras created no liability on Chivi's part, because she neither knew nor consented to the settlement, because the Laicos had already acquired the land directly from the Sierras, and because that sum was not the subject of the cross-claim. The Court quoted the governing principle:

A cross-bill, strictly speaking is one brought by a defendant in an equity suit against other defendants in the same suit, touching the matters in question in the original bill. It is considered as an auxiliary suit dependent upon the original bill, and can be sustained only on matters growing out of the original bill. There is a well-defined distinction between a cross-bill merely defensive in character, and one seeking affirmative relief. The dismissal of the original bill carries with it a purely defensive cross-bill but not one seeking affirmative relief.

On the second issue, the Court held that the dismissal of the cross-claim should have followed the dismissal of the complaint as a matter of course, without further proceeding, and that in setting the cross-claim for pre-trial, receiving evidence, and rendering judgment, the court committed such grave abuse of discretion amounting to lack of jurisdiction, correctible by certiorari. On the third issue, the Court upheld the Court of Appeals: the petition was filed only two months and seven days after the judgment, and only twelve days after the writ of execution, shorter than the periods cited by the respondents, so there was no laches. The Court added that Judge Torres should not have been made an active party-petitioner, his participation having become functus officio after he rendered judgment.

Doctrine

A cross-claim is any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter of the original action or of a counterclaim. A cross-claim purely defensive in character, one that can prosper only if the plaintiff succeeds, is an auxiliary suit dependent on the original complaint; the dismissal of the complaint carries it away, and it cannot be the subject of independent adjudication once it loses the nexus upon which its life depended. A cross-claim seeking affirmative relief, by contrast, is not carried away by that dismissal. Proceeding on a defensive cross-claim after the complaint has been dismissed with prejudice is grave abuse of discretion amounting to lack of jurisdiction, correctible by certiorari.

Disposition

The Court affirmed the judgment of the Court of Appeals, without pronouncement as to costs; the Laicos lost, and all proceedings on their cross-claim against Chivi were declared null and void.

Remember This

Memorize the line: the dismissal of the original bill carries with it a purely defensive cross-bill but not one seeking affirmative relief. Examiners use this case to test the definition of a cross-claim under Rule 6, its dependent character, and when grave abuse of discretion is correctible by certiorari.