G.R. No. L-33987 - Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, Inc.

Ortigas & Company, Limited Partnership ("Ortigas") is the owner of the Greenhills Shopping Center (GSC).
Virra Realty Development Corporation ("Virra Realty") entered into a lease with Ortigas, which allowed Virra Realty to construct the Virra Mall Shopping Center.
Virra Mall Greenhills Association ("VMGA") was organized by Virra Realty as an association of tenants and leasehold right holders, and in the original lease, it assumed all rights, obligations, and liabilities of Virra Realty.
Virra Mall Tenants Association ("VMTA") later emerged as the assignee of leasehold rights transferred by William Uy, the president of VMGA.

On 5 November 1975, Ortigas and Virra Realty executed the First Contract of Lease over a portion of the GSC, with the lease term set to expire on 15 November 2000.
Following the lease, Virra Realty constructed Virra Mall, which had units for lease or sale of leasehold rights.
Prior to the expiration of the lease:

VMGA, through its president, William Uy, requested a renewal of the Contract of Lease on 22 November 2000.
VMGA secured insurance policies covering fire and other perils; these policies expired on 15 November 2000 with the lease.

New insurance policies were obtained on 13 March 2001, effective from 10 January 2001 to 31 December 2001.

On 5 May 2001, a fire gutted Virra Mall, causing significant damage and necessitating substantial repair and restoration.
VMGA filed an insurance claim through Winternitz Associates Insurance Company, Inc. ("Winternitz"), and received the insurance proceeds.
On 3 September 2001, Ortigas entered into a Second Contract of Lease with William Uy, which later led to the assignment of Uy’s rights and interests to VMTA on 11 September 2001.

On 7 February 2003, Ortigas initiated a Complaint for Specific Performance with Damages and a Motion for Preliminary Attachment against several parties, including the respondents, in Civil Case No. 69312.
VMTA, as an intervenor, filed a Complaint-in-Intervention on 17 February 2003, asserting:

That it was the assignee of Uy’s rights under the Second Contract of Lease.
That by order of Ortigas it engaged contractors to restore the damaged area, incurring expenses amounting to P18,902,497.75.
That it sought reimbursement for the expenses paid for the restoration, claiming such reimbursement should come from the insurance proceeds in VMGA’s custody.

The RTC, Branch 67 of Pasig City, initially admitted the Complaint-in-Intervention on 8 January 2004.
Respondents moved to dismiss the complaint on the ground that it stated no cause of action, but the trial court denied the motion based on the sufficiency of allegations and the principle that doubts in the veracity of claims should not result in dismissal without an answer.

The CA, on a Rule 65 Petition for Certiorari, reversed the RTC’s ruling by dismissing the Complaint-in-Intervention because:

VMTA allegedly failed to state a cause of action.
VMTA did not have a legal interest in the matter since it was not a party to the original lease between Ortigas and VMGA.
Allowing intervention would delay the main action, complicate the issues, and enlarge the scope of remedies.

VMTA then filed a Motion for Reconsideration which was denied by the CA in its Resolution dated 14 May 2008.
The Supreme Court, on reviewing the petition for review, found merit in VMTA’s intervention and issues raised.

Whether the CA erred in holding that the Complaint-in-Intervention failed to state a cause of action against the petitioners.

The petitioner argued that its complaint, alleging misappropriation of insurance proceeds and breach of fiduciary duty by VMGA, sufficiently constituted a cause of action.

Whether the CA erred in ruling that private respondents were not the proper parties for the reimbursement claim, insisting that the claim should be directed against Ortigas.

The argument centered on the order by Ortigas for the restoration of Virra Mall, thereby creating an obligation towards VMTA.

Whether the CA erred in holding that the preventive remedy for VMTA’s claim was to file a separate action rather than allowing its intervention in the main litigation.

It was contended that intervention was proper under Section 1, Rule 19 of the Rules of Civil Procedure, given VMTA’s legal interest in the outcome of the main case.