FACTS:

Rebecca Pacaña-Contreras and Rosalie Pacaña filed a case against Rovila Water Supply, Inc. and several individuals for accounting and damages. According to the petitioners, their family has been in the water supply business for a long time, operating under the name "Rovila Water Supply" from their family residence in Cebu City. The petitioners alleged that a former employee named Lilia Torres, along with the other respondents, fraudulently appropriated the collections and payments of the family business. They claimed that Lilia formed a corporation named Rovila Inc., with the other respondents as majority stockholders, and hid the business records while claiming ownership of the family business.

The petitioners filed the complaint on behalf of their mother, Lourdes, who authorized them to do so through a sworn declaration and special power of attorney. The respondents, however, filed a motion to dismiss the case, arguing that the court lacked jurisdiction and that the petitioners were not the real parties in interest. The Regional Trial Court (RTC) denied the motion to dismiss. Unsatisfied with the decision, the respondents filed a petition for certiorari with the Court of Appeals (CA), alleging grave abuse of discretion on the part of the RTC. The CA granted the petition and dismissed the complaint, stating that the petitioners were not the real parties in interest and should first be declared as heirs before they can bring an action in their own names.

The petitioners then filed a petition for review on certiorari with the Supreme Court, arguing that the motion to dismiss did not conform to the rules. They also argued that even if there was a non-joinder or misjoinder of parties, the correct remedy is to amend the complaint. On the other hand, the respondents contended that the petitioners were not the real parties in interest and that the grounds raised in the motion to dismiss were timely raised during the pre-trial conference.

ISSUES:

1. Whether a petition for certiorari under Rule 65 is a proper remedy for a denial of a motion to dismiss attended by grave abuse of discretion.

2. Whether the ground "fails to state a cause of action" can be invoked when the complaint is not brought in the name of the real party in interest.

3. Whether the motion to dismiss based on failure to state a cause of action was timely filed

4. Whether the grounds for dismissal were raised as affirmative defenses in the answer

5. Whether the ground for dismissal of "lack of cause of action" may be raised at any time during the proceedings.

6. Whether the distinction between the dismissal of an action based on "failure to state a cause of action" and "lack of cause of action" is applicable in this case.

7. Whether the dismissal of the complaint based on the grounds invoked by the respondents has been waived.

8. Whether the petitioners are the real parties in interest.

9. Whether the non-inclusion of indispensable parties in the case warrants a dismissal or annulment of the judgment.

10. Whether the failure to implead indispensable parties is a curable error.

11. Whether the court can order the inclusion of indispensable parties at any stage of the proceedings, especially when their non-inclusion is merely a technical defect.

RULING:

1. Yes, a petition for certiorari under Rule 65 is a proper remedy for a denial of a motion to dismiss attended by grave abuse of discretion.

2. Yes, the ground "fails to state a cause of action" can be invoked when the complaint is not brought in the name of the real party in interest.

3. The motion to dismiss based on failure to state a cause of action was not timely filed and was thus waived.

4. The grounds for dismissal were not raised as affirmative defenses in the answer.

5. No, the ground for dismissal of "lack of cause of action" cannot be raised at any time during the proceedings. It must be raised within the period prescribed by the Rules of Court.

6. The distinction between the dismissal of an action based on "failure to state a cause of action" and "lack of cause of action" is applicable in this case. The dismissal for "lack of cause of action" requires a preponderance of evidence, which is yet to be appreciated by the trial court.

7. The dismissal of the complaint based on the grounds invoked by the respondents has been waived because they failed to raise them within the period prescribed by the Rules of Court.

8. The petitioners are not the real parties in interest, thus the dismissal of the complaint based on the ground of failure to state a cause of action does not apply to them.

9. The non-inclusion of indispensable parties in the case does not warrant a dismissal or annulment of the judgment. The rule on joinder of indispensable parties is founded on equity, and Section 11, Rule 3 of the 1997 Rules of Civil Procedure prohibits the dismissal of a suit on the ground of non-joinder or misjoinder of parties. The court allows the amendment of the complaint at any stage of the proceedings to include indispensable parties.

10. The failure to implead indispensable parties is a curable error. Amendments to the complaint in order to implead indispensable parties should be freely allowed even on appeal or after rendition of judgment, as long as the complaint indicates their identity and character as indispensable parties.

11. Yes, the court can order the inclusion of indispensable parties at any stage of the proceedings. If the plaintiff refuses to implead an indispensable party despite the court's order, the court may dismiss the complaint for the plaintiff's failure to comply with a lawful court order.

PRINCIPLES:

• Certiorari and prohibition are proper remedies to address an order of denial of a motion to dismiss made without or in excess of jurisdiction.

• The ground "fails to state a cause of action" may be invoked when the complaint is not brought in the name of the real party in interest.

• The present Rules of Court restrict the dismissal of complaints, especially when the ground of "failure to state a cause of action" is invoked.

• Failure to invoke the ground of "fails to state a cause of action" in a motion to dismiss or in the answer will result in its waiver. However, it may still be cured through amendment of the pleadings.

• A motion to dismiss based on failure to state a cause of action should be filed within the time for, but before the filing of, the answer to the complaint or pleading asserting a claim.

• Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived, except for certain grounds such as lack of jurisdiction, litis pendencia, res judicata, and prescription.

• The jurisdiction of the Court in a petition for review on certiorari is limited to questions of law, except when the findings are conclusions without citation of specific evidence on which they are based.

• The burden of proving that the grounds for dismissal were timely raised lies on the party asserting it, and mere allegations without proof are insufficient.

• The pre-trial is primarily intended to ensure that all issues necessary for the disposition of the case are properly raised, and the issues submitted during the pre-trial are the ones that would govern the trial proper.

• Failure to state a cause of action is different from the lack of cause of action. Failure to state a cause of action refers to the insufficiency of the pleading, while lack of cause of action refers to a situation where the evidence does not prove the cause of action alleged in the pleading.

• A real party in interest is the party who stands to benefit or be injured by the judgment of the suit or the party entitled to the avails of the suit. An indispensable party is a party in interest without whom no final determination can be made in the action.

• The non-joinder of indispensable parties is not a ground for the dismissal of an action. The remedy is to implead the non-party claimed to be indispensable.

• Non-joinder of indispensable parties is considered a mere technical defect that can be cured at any stage of the proceedings, even after judgment.

• The rule on joinder of indispensable parties is founded on equity and is reflected in Section 11, Rule 3 of the 1997 Rules of Civil Procedure.

• The failure to implead indispensable parties is a curable error and can be corrected through amendments to the complaint.

• The court has the power to amend the processes, pleadings, proceedings, and decisions to implead indispensable parties even after judgment has been entered.

• The court has the power to order the inclusion of indispensable parties to avoid delay and ensure proper administration of justice.

• 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.

• Failure to comply with a lawful court order for the joinder of an indispensable party may result in the dismissal of the case.

• Upon the death of a party, their ownership and rights over their properties are transmitted to their heirs.

• Heirs whose hereditary rights are to be affected by a case are deemed indispensable parties who should be impleaded.