Asian Construction and Devt Corp (ACDC) v CA and Monark Equipment Corp (MEC) Callejo, Sr. J.

| 2005 Facts: 1. 2001, MEC filed a complaint for sum of money with damages against ACDC (in RTC Quezon); 2. MEC alleged that ACDC leased and bought for certain equipment which it failed to pay; items are: Lease of Generator sets and mobile floodlighting systems (March to July, 1998); debt amounted to 4.3M; Lease of other various equipment for ACDCs power plant in Quezon (July to Aug 1998); that it had a balance of 456k Purchase of various equipment parts for 237k but again, ACDC failed to pay; In sum, MEC wanted around 5M, attorneys fees and costs of litigation; 3. ACDC filed a motion to file and admit answer with third-party complaint against Becthel Overseas Corp (Becthel); its special and affirmative defences: Its answer to MEC: it admitted the 5M debt for the equipment; but such equipment was used by ACDC in the construction project of Becthel and it was not yet paid of its services which resulted to the non-payment of the rentals of the leased equipment; In its third-party complaint: that Becthel contracted the services of ACDC for construction using the leased equipment from MEC; that ACDC leased the equipment so it could use the same for the contracted work; and that Becthel needs to be impleaded for contribution, indemnity, subrogation or other reliefs to off-set or to pay the amount of money claim by MEC in the amount of 456k; it asks for 500k attorneys fees; and prays for the dismissal of the complaint and that Becthel be ordered to pay 456k plus interest and attorneys fees; 4. MEC opposed the 3rd party complaint against Becthel; it said: ACDC already admitted its 5M debt; That the transactions between it and ACDC is independent from the transaction between ACDC and Becthel; Also, the allowance of the 3rd party complaint would result in undue delay in disposing of the case; 5. MEC then filed a motion for summary judgment saying that there was no genuine issue as to the obligation of ACDC to MEC for 5M; The only issue for the trial court is the amount of attorneys fees and litigation costs; Naturally, ACDC opposed this saying there was a genuine issue: with respect to the amount of 5M being claimed by MEC and that it had a 3rd party complaint against Becthel In connection with the reliefs sought against it which had to be litigated; 6. MEC replied that the demand in ACDCs special and affirmative defences partook of the nature of a negative pregnant and that there was a need for a hearing on its claim for damages; 7. RTC denied ACDCs 3rd party complaint; It ordered ACDC to pay the 5M plus interest; 8. CA affirmed, it said; Since MEC had prayed for judgment on the pleadings, it has waived its claim for damages other than the 5M; hence, there was no longer a genuine issue to be resolved by the RTC which necessitated trial; 3rd party complaint not allowed because the transaction between ACDC and Becthel did not arise out of the same transaction on which MECs claim was based; Issues: 1. 2. 1.

W/N a 3rd party complaint is proper; NO. W/N judgment on the pleadings is proper. YES 3rd party complaint not allowed in this case:

Section 11, Rule 6 of the Rules of Court provides: Sec. 11. Third (fourth, etc.)-party complaint. A third (fourth, etc.) party complaint is a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third (fourth, etc.) party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponents claim. Purpose of Section 11, Rule 6 is to permit a defendant to assert an independent claim against a 3rd party which, otherwise, would assert in another action, thus preventing multiplicity of suits; All the rights of the parties concerned would then be adjudicated in one proceeding; This is a rule of procedure and does not create a substantial right; Neither does it abridge, enlarge, or nullify the substantial rights of any litigant; Right to file a 3rd party complaint rests in the discretion of the trial court; The third-party complaint is actually independent of, separate and distinct from the plaintiffs complaint, such that were it not for the rule, it would have to be filed separately from the original complaint;

Pre-requisite to exercise of such right: That some substantive basis for a 3rd party complaint be found to exist, whether the basis be one of indemnity, subrogation, contribution or other substantive right; The bringing of a third-party defendant, when proper: If 3rd party defendant would be liable to the plaintiff or to the defendant or both for all or part of the plaintiffs claim against the original defendant, although the third-party defendants liability arises out of another transaction

The defendant may implead another as 3rd party defendant: 1. On an allegation of liability of the latter to the defendant for contribution, indemnity, subrogation or any other relief; 2. On the ground of direct liability of the third-party defendant to the plaintiff; or 3. The liability of the third-party defendant to both the plaintiff and the defendant; Causal connection: There must be a causal connection between the claim of the plaintiff in his complaint and a claim for contribution, indemnity or other relief of the defendant against the third-party defendant. Capayas v CFI tests: 1. Whether it arises out of the same transaction on which the plaintiffs claim is based; or whether the third-party claim, although arising out of another or different contract or transaction, is connected with the plaintiffs claim; 2. Whether the third-party defendant would be liable to the plaintiff or to the defendant for all or part of the plaintiffs claim against the original defendant, although the third-party defendants liability arises out of another transaction; and 3. Whether the third-party defendant may assert any defences which the third-party plaintiff has or may have to the plaintiffs claim. 3rd party complaint, when sufficient: It does not have to show with certainty that there will be recovery against the 3rd party defendant; sufficient that pleadings show possibility of recovery; It must allege facts which prima facie show that defendant is entitled to contribution, indemnity, subrogation or other relief from the 3rd party defendant; Common liability, the very essence for contribution: It is a payment made by each, or by any of several having a common liability of his share in the damage suffered or in the money necessarily paid by one of the parties in behalf of the other or others; The test to determine whether the claim for indemnity in a third-party complaint is, whether it arises out of the same transaction on which the plaintiffs claim is based, or the third-party plaintiffs claim, although arising out of another or different contract or transaction, is connected with the plaintiffs claim. Applied at case: Claims of MEC against ACDC arouse out of lease and sale; such are different and separate from those between Becthel and ACDC where latter used equipment for formers construction work; There is no showing in the proposed 3rd party complaint that MEC knew or approved of the used of the leased equipment by ACDC for the said project; Becthel cannot invoke any defence the petitioner had or may have against the claims of the respondent in its complaint, because the petitioner admitted its liabilities to the respondent for the amount of 5M; The barefaced fact that the petitioner used the equipment in the construction project does not provide a substantive basis for the filing of a third-party complaint against the latter. There is no causal connection between the claim of the respondent for the rental and the balance of the purchase price of the equipment and parts sold and leased to the petitioner, and the failure of Becthel to pay the balance of its account to the petitioner after the completion of the project in Quezon. SC notes: in 3rd party complaint, ACDC alleged that Becthel to pay the 456k so ACDC could pay the same to MEC; but ACDC also sought for the dismissal of MECs complaint which when granted, the 456k sought to be collected from Becthel would not be remitted to MEC after all;

Allied Bank v CA and British Airwasys v CA not applicable because of different factual issues; (ACDC cites them for its defense): In Allied: Yujuico obtained a loan from a bank (General Bank); the Central Bank ordered liquidation of the bank; In a MOA between the liquidation of the Bank and Allied, the latter acquired the receivables of Yuijuico; Allied sued Yujuico for the collection of the loan; Yuijico filed a third party complaint against CB, alleging that by tortious interference, he was prevented performing his obligations under the loan; In that case, SC allowed the third-party complaint because Yuijico sought to transfer liability for the default imputed against him by Allied to the CB (3rd party) because of its tortious interference; In British Airways, the the Court allowed the third-party complaint of British Airways against its agent, the Philippine Airlines, on the plaintiffs complaint regarding his luggage, considering that a contract of carriage was involved; In that case, Mahtani had a contract of carriage with BA for a one continuous transportation from Manila to Bombay; however, BA endorsed the Manila to Hongkong leg to PAL; Mahtani lost his luggage so he sued BA but BA wanted a 3rd party complaint against PAL; latter two were blaming each other for the loss; The SC allowed the 3rd party complaint; well-settled rule that an agent is also responsible for any negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its negligent act; CA erred in saying that BA being the principal, had no cause of action against PAL, its agent; also noted, BA and PAL members of the International Air Transport Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their relationship

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Judgment on the pleadings proper. Section 1, Rule 34 of the Rules of Court provides that the Court may render judgment on the pleadings, as follows: Section 1. Judgment on the pleadings. Where an answer fails to tender an issue, or, otherwise, admits the material allegations of the adverse partys pleading, the court may, on motion of that party, direct judgment on such pleading. However, in actions for declaration of nullity or annulment of marriage or for legal separation, the material facts alleged in the complaint shall always be proved. Considering that the petitioner admitted its liability for the principal claim of the respondent in its Answer with Third-Party Complaint, the trial court did not err in rendering judgment on the pleadings against it

DENIED. But denial of motion with leave to file 3rd party complaint is without prejudice to filing a complaint against Becthel.