CO v.
ACOSTA ● Meanwhile, in 1982, RII filed an ex-parte motion to declare Co in default for
Defaults | 17 Jan 1985 | J. Gutierrez, Jr.
Nature of Case: Petition for certiorari to annul RTC Decision
Digest maker: Ponio
SUMMARY: PEPSI order 12,000 units of refrigerators from an appliance centre of
which petitioner Co is the proprietor. Co assigned his rights to private respondent
Refrigeration Industries, Inc. (RIII), but this was not recognised by PEPSI. 10,000
units were delivered and paid for, but when the next 1,000 units were delivered,
PEPSI refused to pay. Demand letters were sent but were ignored until RII filed a
Civil Case against PEPSI and Co. Following a joint release, waiver, quitclaim, RII
filed a motion to dismiss complaint against PEPSI while also filing an ex-parte
motion to declare Co in default for having failed to file his answer. Co assails the
decisions and orders of the respondent Court which declared him in default, which
were rendered against him, and which had his properties levied. The SC grants his
petition and rules that regardless of whether or not a defendant filed his answer
and another defendant didn’t and was subsequently declared to be in default, the
mere fact that they’re both indispensable parties or that there’s a singleness of the
cause of action would disallow the court from exercising its power to relieve one
defendant and at the same time render judgment against another.
DOCTRINE: “...in all instances where a common cause of action is alleged against
several defendants, some of whom answer and the others do not, the latter of
those in default acquire a vested right not only to own the defence interposed in
the answer of their co-defendant/s not in default but also to expect a result of the
litigation totally common with them in kind and in amount whether favourable or
unfavourable.”
FACTS:
● In November 1979, Pepsi Cola Bottling Company of the Philippines, Inc. (PEPSI)
issued 3 purchase orders to CTC Appliance Centre for 12,000 units of
refrigerators valued at around P35mil.
● Petitioner Co is the proprietor of the Centre.
● The day after, Co assigned, through a formal deed of assignment, his rights and
interests to the purchase orders to private respondent Refrigerations Industries,
Inc. (RII).
● In the following year, PEPSI, through a letter, informed RII that it took notice of
the assignment but that it was not recognising it. 10,000 units were still
delivered and paid.
● PEPSI, in 1981, requested for the delivery of 1,000 units. These units were
received a few months after and were invoiced at around P2.9mil. In June, RII
sent a demand letter.
● PEPSI wrote back that it did not recognise Co’s assignment and is not bound by
it. Another demand letter was sent to which PEPSI replied similarly, until RII and
Delta Motors Corporation filed a Civil Case for a sum of money with attachment
before the CFI of Rizal Branch 10.
● However, months later, RII filed a formal ex-parte motion to dismiss the
complaint against PEPSI, attaching an instrument entitled, “Joint Release,
Waiver, and/or Quitclaim” which showed the agreement to discharge any
liability or cause of action arising from the 1,000 units’ transaction.
● The respondent court issued an Order dismissing the complaint against PEPSI.
having failed to file his answer. The respondent Court granted this and ordered
RII to present evidence ex-parte, and subsequently, Co was ordered to pay the
2.9mil plus interest, attorney’s fees, and the costs of the suit.
● Co filed a Petition for Relief from Judgment. Pending this, the respondent Court
issued a writ of execution, and Co’s properties were levied upon and advertised
for sale. Co filed a motion for a restraining order which the SC granted. The
respondent Court ultimately denied his Petition for Relief from Judgment. Hence,
this petition.
ISSUE/S & RATIO:
1. W/N the order of dismissal against PEPSI should have led the respondent Court
to dismiss the case against Co as well - YES (in other words, W/N the order of
default and the issuance of a writ of execution against Co are valid - NO)
a. The case of Lim Tanhu v. Hon. Ramolete is cited wherein the same
cause of action was averred by several defendants, some of whom
were declared in default and some of whom filed their answers which
were made available to those who were in default. Co argues that the
case is applicable to the case at bar while RII argues otherwise,
saying that neither PEPSI nor Co filed their answers.
b. “...in all instances where a common cause of action is alleged against
several defendants, some of whom answer and the others do not, the
latter of those in default acquire a vested right not only to own the
defence interposed in the answer of their co-defendant/s not in
default but also to expect a result of the litigation totally common with
them in kind and in amount whether favourable or unfavourable. [...]
When any defendant allows himself to be in default, knowing that his
co-defendant has already answered, he does so trusting in the
assurance implicit in the rule that his default is in essence a mere
formality that deprives him of no more than the right to take part in
the trial and the the court would deem anything done by or for the
answering defendant as done by or for him. The presumption is that
otherwise he would not have seen to it that he would not be in
default…” (Lim Tanhu case, as cited).
c. The Court agrees with petitioner Co that the Lim Tanhu case is
applicable and declares that PEPSI and Co are indispensable
parties to the case filed by RII. Based on RII’s complaint, particularly
paragraph 21, and paragraphs 2 and 3 of RII’s affidavit attached to
the complaint, there can be no doubt as to the intention of RII in
suing PEPSI and Co as indispensable parties. Regardless of whether or
not a defendant filed his answer and another defendant didn’t and
was subsequently declared to be in default, the mere fact that they’re
both indispensable parties or that there’s a singleness of the cause of
action would disallow the court from exercising its power to relieve
one defendant and at the same time render judgment against
another.
d. “Where all the defendants are indispensable parties, [...] any
compromise that the plaintiff might wish to make with any of them
must, as a matter of correct procedure, have to await until after the
rendition of the judgment, at which state the plaintiff may then treat
 the matter of its execution and the satisfaction of his claim as variably
as he might please.”
e. Hence, the SC rules that the respondent Court erred in declaring Co in
default, in rendering judgment against Co, in issuing the writ of
execution, etc. After the lower court dropped PEPSI as a party
defendant, the respondent court lost authority to act further in the
case insofar as Co is concerned.

RULING: Petition GRANTED.