G.R. No. 216756 , August 8, 2018
GENOVEVA P. TAN, deceased, substituted by Melchor P. Tan as the legal representative of the deceased petitioner, Petitioner, vs. REPUBLIC OF THE PHILIPPINES, represented by the BUREAU OF CUSTOMS, Respondent.

FACTS

The Bureau of Customs filed a collection case against Mannequin International Corporation for using spurious Tax Credit Certificates to pay duties and taxes from 1995-1997. The Amended Complaint later included Genoveva P. Tan as a defendant. After the plaintiff rested its case, Tan filed a demurrer to evidence, which she later sought to re-caption as a “Motion to Exclude/Drop” her from the case. The Regional Trial Court granted her motion, excluding her as a defendant and lifting a preliminary injunction against her properties. The Republic moved for reconsideration, which was denied.
The Republic then filed a Petition for Certiorari with the Court of Appeals. Initially dismissed on procedural grounds, the petition was reinstated upon motion. The CA ultimately granted the petition, reversing the RTC. The CA found that while the RTC did not err in treating the pleading as a motion to exclude, it committed grave abuse of discretion in granting it based solely on Tan’s evidence without properly considering contrary evidence presented by the Republic.

ISSUE

Whether the Court of Appeals correctly ruled that the Regional Trial Court committed grave abuse of discretion in granting Genoveva Tan’s Motion to Exclude her from the case.

RULING

Yes, the Supreme Court affirmed the Court of Appeals’ ruling. The legal logic centers on the proper evaluation of evidence in resolving a motion to exclude a party. The RTC granted the motion primarily on Tan’s submission of public documents from the Securities and Exchange Commission, which she claimed proved she had resigned from Mannequin Corporation before the fraudulent transactions occurred. These documents enjoy a presumption of regularity.
However, the CA correctly held that this presumption is disputable and may be overcome by contrary evidence. The Republic presented significant counter-evidence, including the testimony of a co-defendant identifying Tan as the principal orchestrator of the fraud and a Director’s Certificate from 1992 bearing Tan’s signature, which contradicted her claim of a 1991 resignation. The RTC’s failure to weigh this contrary evidence and its reliance solely on Tan’s submissions constituted a failure to exercise sound judicial discretion. A motion to exclude a misjoined party, while permissible at any stage under Rule 3, Section 11 of the Rules of Court, must still be grounded on a proper factual and legal basis. By ignoring the contradictions and inconsistencies in the evidence, the RTC acted in a capricious and whimsical manner, amounting to grave abuse of discretion. Therefore, the exclusion of Tan was improper, and she must remain as a party defendant to fully litigate the allegations against her.