David vs.

Paragas (751 SCRA 648)

Facts: David, Paragas and Lobrin agreed to venture into a business in Hong Kong. They created
Olympia International, Ltd. (Olympia) under HK laws. Olympia became the exclusive general agent
in HK of PPIs pre-need plans through the General Agency Agreement. Olympia launched the ParesPares program by which planholders would earn points with cash equivalents for successfully
enlisting new subscribers. David was tasked to personally remit said amounts to PPI as he was the
only signatory authorized to transact on behalf of Olympia regarding the RCBC accounts. The state
of affairs among the partners went sour upon Lobrins discovery that David failed to remit to PPI
the 30% cash equivalent of the bonus points. The BOD stripped David of his position as a director.
It then informed RCBC of his removal. Constrained by these circumstances, David filed a complaint
for Declaratory Relief, Sum of Money and Damages before the RTC. He insisted on his entitlement
to the commissions due under the regular and Pares-Pares programs in his capacity as Principal
Agent under the General Agency Agreement with PPI. David filed the supplemental complaint,
with a manifestation that an amicable settlement was struck with Lobrin and Datoy whereby they
agreed to withdraw the complaint and counterclaims against each other. Lobrin and Olympia
through their counsel, confirmed that they had arrived at a compromise. Paragas questioned the
existence of the cited BOD resolution granting Lobrin the authority to settle the case, as well as
the validity of the agreement through an affidavit duly authenticated by the Philippine Consul,
Domingo Lucinario, Jr. He pointed to the fact that Olympia, as an entity, was never a party in the
controversy.
Issue: Whether Olympia is considered as an indispensable party
Held: Yes. An indispensable party is a party-in-interest without whom no final determination can
be had of an action, and who shall be joined either as plaintiffs or defendants. The joinder of
indispensable parties is mandatory. The presence of indispensable parties is necessary to vest the
court with jurisdiction.
Considering that David was asking for judicial determination of his rights in Olympia, it is
without a doubt, an indispensable party as it stands to be injured or benefited by the outcome of
the main proceeding. It has such an interest in the controversy that a final decree would
necessarily affect its rights. Not having been impleaded, Olympia cannot be prejudiced by any
judgment where its interests and properties are adjudicated in favor of another even if the latter
is a beneficial owner. It cannot be said either to have consented to the judicial approval of the
compromise, much less waived substantial rights, because it was never a party in the proceedings.
Moreover, Olympias absence did not confer upon the RTC the jurisdiction or authority to
hear and resolve the whole controversy.1This lack of authority on the part of the RTC which flows
from the absence of Olympia, being an indispensable party, necessarily negates any binding effect
of the subject judicially-approved compromise agreement.
Time and again, the Court has held that the absence of an indispensable party renders all
subsequent actions of the court null and void for want of authority to act, not only as to the
absent parties but even to those present.

Land Bank of the Philippines vs Cacayuran

Facts: A group of residents led by Eduardo Cacayuran sought the invalidity of two loans entered
into by the Municipality of Agoo, La Union. The first loan was for a P4,000,000.00 loan from the
Land Bank of the Philippines, the proceeds of which were used for the construction of 10 kiosks at
the Public Plaza. Another loan was for the construction of a commercial centre known as Agoo
Peoples Center. Both loans were secured by a parcel of lot located at the southeast portion of
the public plaza. Alleging that the loans were highly irregular, violative of the law and
detrimental to public interests, Cacayuran sought to invalidate the loan as a taxpayer,and
requested that he be furnished copy of the loan documents. He impleaded the municipal officers
as well as the Land Bank of the Philippines.
Issue: Whether or not the Municipality of Agoo should be impleaded in the case as an indispensable
party.
Held: Yes. Section 7, Rule 3 of the Rules of Court mandates that all indispensable parties should be
joined in a suit, viz.:

SEC. 7. Compulsory joinder of indispensable parties. Parties-in-interest without whom no final

determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is one whose interest will be affected by the courts action in the
litigation, and without whom no final determination of the case can be had. The partys interest in
the subject matter of the suit and in the relief sought are so inextricably intertwined with the
other parties that his legal presence as a party to the proceeding is an absolute necessity. In his
absence, there cannot be a resolution of the dispute of the parties before the court which is
effective, complete, or equitable. Thus, the absence of an indispensable party renders all
subsequent actions of the court null and void, for want of authority to act, not only as to the
absent parties but even as to those present.

The non-joinder of indispensable parties is not a ground for the dismissal of an action. At any
stage of a judicial proceeding and/or at such times as are just, parties may be added on the
motion of a party or on the initiative of the tribunal concerned. If the plaintiff refuses to implead
an indispensable party despite the order of the court, that court may dismiss the complaint for
the plaintiffs failure to comply with the order. The remedy is to implead the non-party claimed to
be indispensable.

LOTTE PHIL. CO., INC., petitioner, vs. ERLINDA DELA CRUZ, LEONOR MAMAUAG, LOURDES
CAUBA, JOSEPHINE DOMANAIS, ARLENE CAGAYAT, AMELITA YAM, VIVIAN DOMARAIS,
MARILYN ANTALAN, CHRISTOPHER RAMIREZ, ARNOLD SAN PEDRO, MARISSA SAN PEDRO,
LORELI JIMENEZ, JEFFREY BUENO, CHRISTOPHER CAGAYAT, GERARD CABILES, JOAN
ENRIQUEZ, JOSEPH DE LA CRUZ, NELLY CLERIGO, DULCE NAVARETTE, ROWENA BELLO,
DANIEL RAMIREZ, AILEEN BAUTISTA and BALTAZAR FERRERA, respondents.
FACTS: Lotte Phil. Co., Inc, a domestic corporation, hired herein respondents, by entering into a
contract with 7J Maintenance and Janitorial Services. But said respondents were later on advised
not to report for work anymore. Respondents filed a case against petitioner for illegal dismissal
before LA. The LA rendered judgment declaring 7J as employer of respondents. Respondents
appealed to the NLRC praying that Lotte be declared as their direct employer because 7J is
merely a labor-only contractor. The NLRC in its decision said that there is no reason to disturb the
findings of the labor arbiter and affirmed its ruling that 7J is the employer of respondents and
solely liable for their claims. The CA reversed the NLRCs decision.
ISSUE: Whether the failure to implead 7J should have resulted in the outright dismissal of the
case.
HELD: NO. An indispensable party is a party in interest without whom no final determination
can be had of an action, and who shall be joined either as plaintiffs or defendants. The joinder of
indispensable parties is mandatory. The presence of indispensable parties is necessary to vest the
court with jurisdiction, which is the authority to hear and determine a cause, the right to act in a
case. Thus, without the presence of indispensable parties to a suit or proceeding, judgment of a
court cannot attain real finality. The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the absent parties
but even as to those present.
In the case at bar, 7J is an indispensable party. It is a party in interest because it will be
affected by the outcome of the case. The Labor Arbiter and the NLRC found 7J to be solely liable
as the employer of respondents. The Court of Appeals however rendered Lotte jointly and
severally liable with 7J who was not impleaded by holding that the former is the real employer of
respondents. Plainly, its decision directly affected 7J.
In Domingo v. Scheer, we held that the non-joinder of indispensable parties is not a ground
for the dismissal of an action and the remedy is to implead the non-party claimed to be
indispensable. Parties may be added by order of the court on motion of the party or on its own
initiative at any stage of the action and/or such times as are just. If the petitioner refuses to

implead an indispensable party despite the order of the court, the latter may dismiss the
complaint/petition for the petitioner/plaintiffs failure to comply therefor.