1.

G.R. No. 175723

February 4, 2014

THE CITY OF MANILA, represented by MAYOR JOSE L. ATIENZA, JR., and MS. LIBERTY M. TOLEDO, in
her
capacity
as
the
City
Treasurer
of
Manila, Petitioners,
vs.
HON. CARIDAD H. GRECIA-CUERDO, in her capacity as Presiding Judge of the Regional Trial Court,
Branch 112, Pasay City; SM MART, INC.; SM PRIME HOLDINGS, INC.; STAR APPLIANCES CENTER;
SUPERVALUE, INC.; ACE HARDWARE PHILIPPINES, INC.; WATSON PERSONAL CARE STORES,
PHILS., INC.; JOLLIMART PHILS., CORP.; SURPLUS MARKETING CORPORATION and SIGNATURE
LINES,Respondents.
DECISION
PERALTA, J.:
Before the Court is a special civil action for certiorari under Rule 65 of the Rules of Court seeking to reverse
and set aside the Resolutions1 dated April 6, 2006 and November 29, 2006 of the Court of Appeals (CA) in CAG.R. SP No. 87948.
The antecedents of the case, as summarized by the CA, are as follows:
The record shows that petitioner City of Manila, through its treasurer, petitioner Liberty Toledo, assessed taxes
for the taxable period from January to December 2002 against private respondents SM Mart, Inc., SM Prime
Holdings, Inc., Star Appliances Center, Supervalue, Inc., Ace Hardware Philippines, Inc., Watsons Personal
Care Stores Phils., Inc., Jollimart Philippines Corp., Surplus Marketing Corp. and Signature Lines. In addition
to the taxes purportedly due from private respondents pursuant to Section 14, 15, 16, 17 of the Revised
Revenue Code of Manila (RRCM), said assessment covered the local business taxes petitioners were
authorized to collect under Section 21 of the same Code. Because payment of the taxes assessed was a
precondition for the issuance of their business permits, private respondents were constrained to pay
the P19,316,458.77 assessment under protest.
On January 24, 2004, private respondents filed [with the Regional Trial Court of Pasay City] the complaint
denominated as one for "Refund or Recovery of Illegally and/or Erroneously-Collected Local Business Tax,
Prohibition with Prayer to Issue TRO and Writ of Preliminary Injunction"
which was docketed as Civil Case No. 04-0019-CFM before public respondent's sala [at Branch 112]. In the
amended complaint they filed on February 16, 2004, private respondents alleged that, in relation to Section 21
thereof, Sections 14, 15, 16, 17, 18, 19 and 20 of the RRCM were violative of the limitations and guidelines
under Section 143 (h) of Republic Act. No. 7160 [Local Government Code] on double taxation. They further
averred that petitioner city's Ordinance No. 8011 which amended pertinent portions of the RRCM had already
been declared to be illegal and unconstitutional by the Department of Justice.2
In its Order3 dated July 9, 2004, the RTC granted private respondents' application for a writ of preliminary
injunction.
Petitioners filed a Motion for Reconsideration4 but the RTC denied it in its Order5 dated October 15, 2004.
Petitioners then filed a special civil action for certiorari with the CA assailing the July 9, 2004 and October 15,
2004 Orders of the RTC.6
In its Resolution promulgated on April 6, 2006, the CA dismissed petitioners' petition for certiorari holding that it
has no jurisdiction over the said petition. The CA ruled that since appellate jurisdiction over private

respondents' complaint for tax refund, which was filed with the RTC, is vested in the Court of Tax Appeals
(CTA), pursuant to its expanded jurisdiction under Republic Act No. 9282 (RA 9282), it follows that a petition for
certiorari seeking nullification of an interlocutory order issued in the said case should, likewise, be filed with the
CTA.
Petitioners filed a Motion for Reconsideration,7 but the CA denied it in its Resolution dated November 29, 2006.
Hence, the present petition raising the following issues:
I- Whether or not the Honorable Court of Appeals gravely erred in dismissing the case for lack of
jurisdiction.
II- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion amounting to lack
or excess of jurisdiction in enjoining by issuing a Writ of Injunction the petitioners, their agents and/or
authorized representatives from implementing Section 21 of the Revised Revenue Code of Manila, as
amended, against private respondents.
III- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion amounting to lack
or excess of jurisdiction in issuing the Writ of Injunction despite failure of private respondents to make a
written claim for tax credit or refund with the City Treasurer of Manila.
IV- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion amounting to lack
or excess of jurisdiction considering that under Section 21 of the Manila Revenue Code, as amended,
they are mere collecting agents of the City Government.
V- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion amounting to lack
or excess of jurisdiction in issuing the Writ of Injunction because petitioner City of Manila and its
constituents would result to greater damage and prejudice thereof. (sic)8
Without first resolving the above issues, this Court finds that the instant petition should be denied for being
moot and academic.
Upon perusal of the original records of the instant case, this Court discovered that a Decision 9 in the main case
had already been rendered by the RTC on August 13, 2007, the dispositive portion of which reads as follows:
WHEREFORE, in view of the foregoing, this Court hereby renders JUDGMENT in favor of the plaintiff and
against the defendant to grant a tax refund or credit for taxes paid pursuant to Section 21 of the Revenue Code
of the City of Manila as amended for the year 2002 in the following amounts:
To plaintiff SM Mart, Inc.

P 11,462,525.02

To plaintiff SM Prime Holdings, Inc.

3,118,104.63

To plaintiff Star Appliances Center

2,152,316.54

To plaintiff Supervalue, Inc.

1,362,750.34

To plaintiff Ace Hardware Phils., Inc.

419,689.04

To plaintiff Watsons Personal Care Health

231,453.62

To plaintiff Jollimart Phils., Corp.

140,908.54

To plaintiff Surplus Marketing Corp.

220,204.70

To plaintiff Signature Mktg. Corp.

94,906.34

Stores Phils., Inc.

TOTAL:

P 19,316,458.77

Defendants are further enjoined from collecting taxes under Section 21, Revenue Code of Manila from herein
plaintiff.
SO ORDERED.10
The parties did not inform the Court but based on the records, the above Decision had already become final
and executory per the Certificate of Finality11 issued by the same trial court on October 20, 2008. In fact, a Writ
of Execution12 was issued by the RTC on November 25, 2009. In view of the foregoing, it clearly appears that
the issues raised in the present petition, which merely involve the incident on the preliminary injunction issued
by the RTC, have already become moot and academic considering that the trial court, in its decision on the
merits in the main case, has already ruled in favor of respondents and that the same decision is now final and
executory. Well entrenched is the rule that where the issues have become moot and academic, there is no
justiciable controversy, thereby rendering the resolution of the same of no practical use or value.13
In any case, the Court finds it necessary to resolve the issue on jurisdiction raised by petitioners owing to its
significance and for future guidance of both bench and bar. It is a settled principle that courts will decide a
question otherwise moot and academic if it is capable of repetition, yet evading review.14
However, before proceeding, to resolve the question on jurisdiction, the Court deems it proper to likewise
address a procedural error which petitioners committed.
Petitioners availed of the wrong remedy when they filed the instant special civil action for certiorari under Rule
65 of the Rules of Court in assailing the Resolutions of the CA which dismissed their petition filed with the said
court and their motion for reconsideration of such dismissal. There is no dispute that the assailed Resolutions
of the CA are in the nature of a final order as they disposed of the petition completely. It is settled that in cases
where an assailed judgment or order is considered final, the remedy of the aggrieved party is appeal. Hence, in
the instant case, petitioner should have filed a petition for review on certiorari under Rule 45, which is a
continuation of the appellate process over the original case.15
Petitioners should be reminded of the equally-settled rule that a special civil action for certiorari under Rule 65
is an original or independent action based on grave abuse of discretion amounting to lack or excess of
jurisdiction and it will lie only if there is no appeal or any other plain, speedy, and adequate remedy in the
ordinary course of law.16 As such, it cannot be a substitute for a lost appeal.17
Nonetheless, in accordance with the liberal spirit pervading the Rules of Court and in the interest of substantial
justice, this Court has, before, treated a petition for certiorari as a petition for review on certiorari, particularly
(1) if the petition for certiorari was filed within the reglementary period within which to file a petition for review
on certiorari; (2) when errors of judgment are averred; and (3) when there is sufficient reason to justify the
relaxation of the rules.18 Considering that the present petition was filed within the 15-day reglementary period
for filing a petition for review on certiorari under Rule 45, that an error of judgment is averred, and because of
the significance of the issue on jurisdiction, the Court deems it proper and justified to relax the rules and, thus,
treat the instant petition for certiorari as a petition for review on certiorari.
Having disposed of the procedural aspect, we now turn to the central issue in this case. The basic question
posed before this Court is whether or not the CTA has jurisdiction over a special civil action for certiorari
assailing an interlocutory order issued by the RTC in a local tax case.
This Court rules in the affirmative.
On June 16, 1954, Congress enacted Republic Act No. 1125 (RA 1125) creating the CTA and giving to the said
court jurisdiction over the following:

(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters
arising under the National Internal Revenue Code or other law or part of law administered by the
Bureau of Internal Revenue;
(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or
other money charges; seizure, detention or release of property affected fines, forfeitures or other
penalties imposed in relation thereto; or other matters arising under the Customs Law or other law or
part of law administered by the Bureau of Customs; and
(3) Decisions of provincial or City Boards of Assessment Appeals in cases involving the assessment
and taxation of real property or other matters arising under the Assessment Law, including rules and
regulations relative thereto.
On March 30, 2004, the Legislature passed into law Republic Act No. 9282 (RA 9282) amending RA 1125 by
expanding the jurisdiction of the CTA, enlarging its membership and elevating its rank to the level of a
collegiate court with special jurisdiction. Pertinent portions of the amendatory act provides thus:
Sec. 7. Jurisdiction. - The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue or other laws administered by the Bureau of
Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other
matters arising under the National Internal Revenue Code or other laws administered by the
Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific
period of action, in which case the inaction shall be deemed a denial;
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally
decided or resolved by them in the exercise of their original or appellate jurisdiction;
4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees
or other money charges, seizure, detention or release of property affected, fines, forfeitures or
other penalties in relation thereto, or other matters arising under the Customs Law or other laws
administered by the Bureau of Customs;
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally decided
by the provincial or city board of assessment appeals;
6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for
review from decisions of the Commissioner of Customs which are adverse to the Government
under Section 2315 of the Tariff and Customs Code;
7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product,
commodity or article, and the Secretary of Agriculture in the case of agricultural product,
commodity or article, involving dumping and countervailing duties under Section 301 and 302,
respectively, of the Tariff and Customs Code, and safeguard measures under Republic Act No.
8800, where either party may appeal the decision to impose or not to impose said duties.

b. Jurisdiction over cases involving criminal offenses as herein provided:

1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National
Internal Revenue Code or Tariff and Customs Code and other laws administered by the Bureau
of Internal Revenue or the Bureau of Customs: Provided, however, That offenses or felonies
mentioned in this paragraph where the principal amount of taxes and fees, exclusive of charges
and penalties, claimed is less than One million pesos (P1,000,000.00) or where there is no
specified amount claimed shall be tried by the regular Courts and the jurisdiction of the CTA
shall be appellate. Any provision of law or the Rules of Court to the contrary notwithstanding, the
criminal action and the corresponding civil action for the recovery of civil liability for taxes and
penalties shall at all times be simultaneously instituted with, and jointly determined in the same
proceeding by the CTA, the filing of the criminal action being deemed to necessarily carry with it
the filing of the civil action, and no right to reserve the filing of such civil action separately from
the criminal action will be recognized.
2. Exclusive appellate jurisdiction in criminal offenses:
a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases originally
decided by them, in their respected territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the exercise
of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in their respective jurisdiction.
c. Jurisdiction over tax collection cases as herein provided:
1. Exclusive original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties: Provides, however, that collection cases
where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is
less than One million pesos (P1,000,000.00) shall be tried by the proper Municipal Trial Court,
Metropolitan Trial Court and Regional Trial Court.
2. Exclusive appellate jurisdiction in tax collection cases:
a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax collection cases
originally decided by them, in their respective territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the Exercise
of their appellate jurisdiction over tax collection cases originally decided by the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction.19
A perusal of the above provisions would show that, while it is clearly stated that the CTA has exclusive
appellate jurisdiction over decisions, orders or resolutions of the RTCs in local tax cases originally decided or
resolved by them in the exercise of their original or appellate jurisdiction, there is no categorical statement
under RA 1125 as well as the amendatory RA 9282, which provides that th e CTA has jurisdiction over petitions
for certiorari assailing interlocutory orders issued by the RTC in local tax cases filed before it.
The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of original
jurisdiction which must be expressly conferred by the Constitution or by law and cannot be implied from the
mere existence of appellate jurisdiction.20 Thus, in the cases of Pimentel v. COMELEC, 21 Garcia v. De
Jesus,22 Veloria v. COMELEC,23 Department of Agrarian Reform Adjudication Board v. Lubrica,24 and Garcia v.
Sandiganbayan,25this Court has ruled against the jurisdiction of courts or tribunals over petitions for certiorari
on the ground that there is no law which expressly gives these tribunals such power.26 It must be observed,
however, that with the exception of Garcia v. Sandiganbayan, 27 these rulings pertain not to regular courts but to
tribunals exercising quasi-judicial powers. With respect to the Sandiganbayan, Republic Act No. 8249 28 now

provides that the special criminal court has exclusive original jurisdiction over petitions for the issuance of the
writs of mandamus, prohibition, certiorari, habeas corpus, injunctions, and other ancillary writs and processes
in aid of its appellate jurisdiction.
In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme Court, in
the exercise of its original jurisdiction, to issue writs of certiorari, prohibition and mandamus. With respect to
the Court of Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the appellate court, also in the
exercise of its original jurisdiction, the power to issue, among others, a writ of certiorari,whether or not in aid of
its appellate jurisdiction. As to Regional Trial Courts, the power to issue a writ of certiorari, in the exercise of
their original jurisdiction, is provided under Section 21 of BP 129.
The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA, Section
1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested in one
Supreme Court and in such lower courts as may be established by law and that judicial power includes the
duty of the courts of justice to settle actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government.
On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the CTA
includes that of determining whether or not there has been grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within the
exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional mandate, is
vested with jurisdiction to issue writs of certiorari in these cases.
Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the
authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed tax
cases to the CTA, it can reasonably be assumed that the law intended to transfer also such power as is
deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There is no perceivable reason
why the transfer should only be considered as partial, not total.
Consistent with the above pronouncement, this Court has held as early as the case of J.M. Tuason & Co., Inc.
v. Jaramillo, et al.29 that "if a case may be appealed to a particular court or judicial tribunal or body, then said
court or judicial tribunal or body has jurisdiction to issue the extraordinary writ of certiorari, in aid of its appellate
jurisdiction."30 This principle was affirmed in De Jesus v. Court of Appeals, 31 where the Court stated that "a
court may issue a writ of certiorari in aid of its appellate jurisdiction if said court has jurisdiction to review, by
appeal or writ of error, the final orders or decisions of the lower court." 32 The rulings in J.M. Tuason and De
Jesus were reiterated in the more recent cases of Galang, Jr. v. Geronimo33 and Bulilis v. Nuez.34
Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law, jurisdiction is
conferred on a court or judicial officer, all auxiliary writs, processes and other means necessary to carry it into
effect may be employed by such court or officer.
If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies with the CA,
this Court would be confirming the exercise by two judicial bodies, the CA and the CTA, of jurisdiction over
basically the same subject matter precisely the split-jurisdiction situation which is anathema to the orderly
administration of justice.35 The Court cannot accept that such was the legislative motive, especially considering
that the law expressly confers on the CTA, the tribunal with the specialized competence over tax and tariff
matters, the role of judicial review over local tax cases without mention of any other court that may exercise
such power. Thus, the Court agrees with the ruling of the CA that since appellate jurisdiction over private
respondents' complaint for tax refund is vested in the CTA, it follows that a petition for certiorari seeking
nullification of an interlocutory order issued in the said case should, likewise, be filed with the same court. To
rule otherwise would lead to an absurd situation where one court decides an appeal in the main case while
another court rules on an incident in the very same case.
Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to split
jurisdiction to conclude that the intention of the law is to divide the authority over a local tax case filed with the

RTC by giving to the CA or this Court jurisdiction to issue a writ of certiorari against interlocutory orders of the
RTC but giving to the CTA the jurisdiction over the appeal from the decision of the trial court in the same case.
It is more in consonance with logic and legal soundness to conclude that the grant of appellate jurisdiction to
the CTA over tax cases filed in and decided by the RTC carries with it the power to issue a writ of certiorari
when necessary in aid of such appellate jurisdiction. The supervisory power or jurisdiction of the CTA to issue a
writ of certiorari in aid of its appellate jurisdiction should co-exist with, and be a complement to, its appellate
jurisdiction to review, by appeal, the final orders and decisions of the RTC, in order to have complete
supervision over the acts of the latter.36
A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it effectively,
to make all orders that will preserve the subject of the action, and to give effect to the final determination of the
appeal. It carries with it the power to protect that jurisdiction and to make the decisions of the court thereunder
effective. The court, in aid of its appellate jurisdiction, has authority to control all auxiliary and incidental
matters necessary to the efficient and proper exercise of that jurisdiction.1wphi1 For this purpose, it may,
when necessary, prohibit or restrain the performance of any act which might interfere with the proper exercise
of its rightful jurisdiction in cases pending before it.37
Lastly, it would not be amiss to point out that a court which is endowed with a particular jurisdiction should have
powers which are necessary to enable it to act effectively within such jurisdiction. These should be regarded as
powers which are inherent in its jurisdiction and the court must possess them in order to enforce its rules of
practice and to suppress any abuses of its process and to defeat any attempted thwarting of such process.
In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as the CA and shall possess
all the inherent powers of a court of justice.
Indeed, courts possess certain inherent powers which may be said to be implied from a general grant of
jurisdiction, in addition to those expressly conferred on them. These inherent powers are such powers as are
necessary for the ordinary and efficient exercise of jurisdiction; or are essential to the existence, dignity and
functions of the courts, as well as to the due administration of justice; or are directly appropriate, convenient
and suitable to the execution of their granted powers; and include the power to maintain the court's jurisdiction
and render it effective in behalf of the litigants.38
Thus, this Court has held that "while a court may be expressly granted the incidental powers necessary to
effectuate its jurisdiction, a grant of jurisdiction, in the absence of prohibitive legislation, implies the necessary
and usual incidental powers essential to effectuate it, and, subject to existing laws and constitutional
provisions, every regularly constituted court has power to do all things that are reasonably necessary for the
administration of justice within the scope of its jurisdiction and for the enforcement of its judgments and
mandates."39 Hence, demands, matters or questions ancillary or incidental to, or growing out of, the main
action, and coming within the above principles, may be taken cognizance of by the court and determined, since
such jurisdiction is in aid of its authority over the principal matter, even though the court may thus be called on
to consider and decide matters which, as original causes of action, would not be within its cognizance.40
Based on the foregoing disquisitions, it can be reasonably concluded that the authority of the CTA to take
cognizance of petitions for certiorari questioning interlocutory orders issued by the RTC in a local tax case is
included in the powers granted by the Constitution as well as inherent in the exercise of its appellate
jurisdiction.
Finally, it would bear to point out that this Court is not abandoning the rule that, insofar as quasi-judicial
tribunals are concerned, the authority to issue writs of certiorari must still be expressly conferred by the
Constitution or by law and cannot be implied from the mere existence of their appellate jurisdiction. This
doctrine remains as it applies only to quasi-judicial bodies. WHEREFORE, the petition is DENIED.

2.
G.R. No. 181416

November 11, 2013

MEDICAL
PLAZA
MAKATI
vs.
ROBERT H. CULLEN, Respondent.

CONDOMINIUM

CORPORATION, Petitioner,

DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Court of Appeals
(CA) Decision1 dated July 10, 2007 and Resolution2 dated January 25, 2008 in CA-G.R. CV No. 86614. The
assailed decision reversed and set aside the September 9, 2005 Order 3 of the Regional Trial Court (RTC) of
Makati, Branch 58 in Civil Case No. 03-1018; while the assailed resolution denied the separate motions for
reconsideration filed by petitioner Medical Plaza Makati Condominium Corporation (MPMCC) and Meridien
Land Holding, Inc. (MLHI).
The factual and procedural antecedents are as follows:
Respondent Robert H. Cullen purchased from MLHI condominium Unit No. 1201 of the Medical Plaza Makati
covered by Condominium Certificate of Title No. 45808 of the Register of Deeds of Makati. Said title was later
cancelled and Condominium Certificate of Title No. 64218 was issued in the name of respondent.
On September 19, 2002, petitioner, through its corporate secretary, Dr. Jose Giovanni E. Dimayuga, demanded
from respondent payment for alleged unpaid association dues and assessments amounting to P145,567.42.
Respondent disputed this demand claiming that he had been religiously paying his dues shown by the fact that
he was previously elected president and director of petitioner.4 Petitioner, on the other hand, claimed that
respondents obligation was a carry-over of that of MLHI.5 Consequently, respondent was prevented from
exercising his right to vote and be voted for during the 2002 election of petitioners Board of
Directors.6Respondent thus clarified from MLHI the veracity of petitioners claim, but MLHI allegedly claimed
that the same had already been settled.7 This prompted respondent to demand from petitioner an explanation
why he was considered a delinquent payer despite the settlement of the obligation. Petitioner failed to make
such explanation. Hence, the Complaint for Damages8 filed by respondent against petitioner and MLHI, the
pertinent portions of which read:
xxxx
6. Thereafter, plaintiff occupied the said condominium unit no. 1201 and religiously paid all the
corresponding monthly contributions/association dues and other assessments imposed on the same.
For the years 2000 and 2001, plaintiff served as President and Director of the Medical Plaza Makati
Condominium Corporation;
7. Nonetheless, on September 19, 2002, plaintiff was shocked/surprised to receive a letter from the
incumbent Corporate Secretary of the defendant Medical Plaza Makati, demanding payment of alleged
unpaid association dues and assessments arising from plaintiffs condominium unit no. 1201. The said
letter further stressed that plaintiff is considered a delinquent member of the defendant Medical Plaza
Makati.
x x x;

8. As a consequence, plaintiff was not allowed to file his certificate of candidacy as director. Being
considered a delinquent, plaintiff was also barred from exercising his right to vote in the election of new
members of the Board of Directors x x x;
9. x x x Again, prior to the said election date, x x x counsel for the defendant [MPMCC] sent a demand
letter to plaintiff, anent the said delinquency, explaining that the said unpaid amount is a carry-over from
the obligation of defendant Meridien. x x x;
10. Verification with the defendant [MPMCC] resulted to the issuance of a certification stating that
Condominium Unit 1201 has an outstanding unpaid obligation in the total amount of P145,567.42 as of
November 30, 2002, which again, was attributed by defendant [MPMCC] to defendant Meridien. x x x;
11. Due to the seriousness of the matter, and the feeling that defendant Meridien made false
representations considering that it fully warranted to plaintiff that condominium unit 1201 is free and
clear from all liens and encumbrances, the matter was referred to counsel, who accordingly sent a letter
to defendant Meridien, to demand for the payment of said unpaid association dues and other
assessments imposed on the condominium unit and being claimed by defendant [MPMCC]. x x x;
12. x x x defendant Meridien claimed however, that the obligation does not exist considering that the
matter was already settled and paid by defendant Meridien to defendant [MPMCC]. x x x;
13. Plaintiff thus caused to be sent a letter to defendant [MPMCC] x x x. The said letter x x x sought an
explanation on the fact that, as per the letter of defendant Meridien, the delinquency of unit 1201 was
already fully paid and settled, contrary to the claim of defendant [MPMCC]. x x x;
14. Despite receipt of said letter on April 24, 2003, and to date however, no explanation was given by
defendant [MPMCC], to the damage and prejudice of plaintiff who is again obviously being barred from
voting/participating in the election of members of the board of directors for the year 2003;
15. Clearly, defendant [MPMCC] acted maliciously by insisting that plaintiff is a delinquent member
when in fact, defendant Meridien had already paid the said delinquency, if any. The branding of plaintiff
as delinquent member was willfully and deceitfully employed so as to prevent plaintiff from exercising
his right to vote or be voted as director of the condominium corporation; 16. Defendant [MPMCC]s
ominous silence when confronted with claim of payment made by defendant Meridien is tantamount to
admission that indeed, plaintiff is not really a delinquent member;
17. Accordingly, as a direct and proximate result of the said acts of defendant [MPMCC], plaintiff
experienced/suffered from mental anguish, moral shock, and serious anxiety. Plaintiff, being a doctor of
medicine and respected in the community further suffered from social humiliation and besmirched
reputation thereby warranting the grant of moral damages in the amount of P500,000.00 and for which
defendant [MPMCC] should be held liable;
18. By way of example or correction for the public good, and as a stern warning to all similarly situated,
defendant [MPMCC] should be ordered to pay plaintiff exemplary damages in the amount
of P200,000.00;
19. As a consequence, and so as to protect his rights and interests, plaintiff was constrained to hire the
services of counsel, for an acceptance fee of P100,000.00 plus P2,500.00 per every court hearing
attended by counsel;
20. In the event that the claim of defendant [MPMCC] turned out to be true, however, the herein
defendant Meridien should be held liable instead, by ordering the same to pay the said delinquency of

condominium unit 1201 in the amount of P145,567.42 as of November 30, 2002 as well as the above
damages, considering that the non-payment thereof would be the proximate cause of the damages
suffered by plaintiff;9
Petitioner and MLHI filed their separate motions to dismiss the complaint on the ground of lack of
jurisdiction.10MLHI claims that it is the Housing and Land Use Regulatory Board (HLURB) which is vested with
the exclusive jurisdiction to hear and decide the case. Petitioner, on the other hand, raises the following
specific grounds for the dismissal of the complaint: (1) estoppel as respondent himself approved the
assessment when he was the president; (2) lack of jurisdiction as the case involves an intra-corporate
controversy; (3) prematurity for failure of respondent to exhaust all intra-corporate remedies; and (4) the case
is already moot and academic, the obligation having been settled between petitioner and MLHI.11
On September 9, 2005, the RTC rendered a Decision granting petitioners and MLHIs motions to dismiss and,
consequently, dismissing respondents complaint.
The trial court agreed with MLHI that the action for specific performance filed by respondent clearly falls within
the exclusive jurisdiction of the HLURB.12 As to petitioner, the court held that the complaint states no cause of
action, considering that respondents obligation had already been settled by MLHI. It, likewise, ruled that the
issues raised are intra-corporate between the corporation and member.13
On appeal, the CA reversed and set aside the trial courts decision and remanded the case to the RTC for
further proceedings. Contrary to the RTC conclusion, the CA held that the controversy is an ordinary civil action
for damages which falls within the jurisdiction of regular courts. 14 It explained that the case hinged on
petitioners refusal to confirm MLHIs claim that the subject obligation had already been settled as early as
1998 causing damage to respondent.15 Petitioners and MLHIs motions for reconsideration had also been
denied.16
Aggrieved, petitioner comes before the Court based on the following grounds:
I.
THE COURT A QUO HAS DECIDED A QUESTION OF SUBSTANCE, NOT THERETOFORE DETERMINED
BY THE SUPREME COURT, OR HAS DECIDED IT IN A WAY NOT IN ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT DECLARED THE INSTANT CASE AN
ORDINARY ACTION FOR DAMAGES INSTEAD OF AN INTRA-CORPORATE CONTROVERSY
COGNIZABLE BY A SPECIAL COMMERCIAL COURT.
II.
THE COURT A QUO HAS DECIDED THE INSTANT CASE IN A WAY NOT IN ACCORD WITH LAW OR WITH
THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT TOOK COGNIZANCE OF THE
APPEAL WHILE RAISING ONLY PURE QUESTIONS OF LAW.17
The petition is meritorious.
It is a settled rule that jurisdiction over the subject matter is determined by the allegations in the complaint. It is
not affected by the pleas or the theories set up by the defendant in an answer or a motion to dismiss.
Otherwise, jurisdiction would become dependent almost entirely upon the whims of the defendant. 18 Also
illuminating is the Courts pronouncement in Go v. Distinction Properties Development and Construction, Inc.:19
Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by law and
determined by the allegations in the complaint which comprise a concise statement of the ultimate facts

constituting the plaintiffs cause of action. The nature of an action, as well as which court or body has
jurisdiction over it, is determined based on the allegations contained in the complaint of the plaintiff,
irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein.
The averments in the complaint and the character of the relief sought are the ones to be consulted. Once
vested by the allegations in the complaint, jurisdiction also remains vested irrespective of whether or not the
plaintiff is entitled to recover upon all or some of the claims asserted therein. x x x20
Based on the allegations made by respondent in his complaint, does the controversy involve intra-corporate
issues as would fall within the jurisdiction of the RTC sitting as a special commercial court or an ordinary action
for damages within the jurisdiction of regular courts?
In determining whether a dispute constitutes an intra-corporate controversy, the Court uses two tests, namely,
the relationship test and the nature of the controversy test.21
An intra-corporate controversy is one which pertains to any of the following relationships: (1) between the
corporation, partnership or association and the public; (2) between the corporation, partnership or association
and the State insofar as its franchise, permit or license to operate is concerned; (3) between the corporation,
partnership or association and its stockholders, partners, members or officers; and (4) among the stockholders,
partners or associates themselves.22 Thus, under the relationship test, the existence of any of the above intracorporate relations makes the case intra-corporate.23
Under the nature of the controversy test, "the controversy must not only be rooted in the existence of an intracorporate relationship, but must as well pertain to the enforcement of the parties correlative rights and
obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the
corporation."24 In other words, jurisdiction should be determined by considering both the relationship of the
parties as well as the nature of the question involved.25
Applying the two tests, we find and so hold that the case involves intra-corporate controversy. It obviously
arose from the intra-corporate relations between the parties, and the questions involved pertain to their rights
and obligations under the Corporation Code and matters relating to the regulation of the corporation.26
Admittedly, petitioner is a condominium corporation duly organized and existing under Philippine laws, charged
with the management of the Medical Plaza Makati. Respondent, on the other hand, is the registered owner of
Unit No. 1201 and is thus a stockholder/member of the condominium corporation. Clearly, there is an intracorporate relationship between the corporation and a stockholder/member.
The nature of the action is determined by the body rather than the title of the complaint.1wphi1 Though
denominated as an action for damages, an examination of the allegations made by respondent in his complaint
shows that the case principally dwells on the propriety of the assessment made by petitioner against
respondent as well as the validity of petitioners act in preventing respondent from participating in the election
of the corporations Board of Directors. Respondent contested the alleged unpaid dues and assessments
demanded by petitioner.
The issue is not novel. The nature of an action involving any dispute as to the validity of the assessment of
association dues has been settled by the Court in Chateau de Baie Condominium Corporation v. Moreno. 27 In
that case, respondents therein filed a complaint for intra-corporate dispute against the petitioner therein to
question how it calculated the dues assessed against them, and to ask an accounting of association dues.
Petitioner, however, moved for the dismissal of the case on the ground of lack of jurisdiction alleging that since
the complaint was against the owner/developer of a condominium whose condominium project was registered
with and licensed by the HLURB, the latter has the exclusive jurisdiction. In sustaining the denial of the motion
to dismiss, the Court held that the dispute as to the validity of the assessments is purely an intra-corporate
matter between petitioner and respondent and is thus within the exclusive jurisdiction of the RTC sitting as a

special commercial court. More so in this case as respondent repeatedly questioned his characterization as a
delinquent member and, consequently, petitioners decision to bar him from exercising his rights to vote and be
voted for. These issues are clearly corporate and the demand for damages is just incidental. Being corporate in
nature, the issues should be threshed out before the RTC sitting as a special commercial court. The issues on
damages can still be resolved in the same special commercial court just like a regular RTC which is still
competent to tackle civil law issues incidental to intra-corporate disputes filed before it.28
Moreover, Presidential Decree No. 902-A enumerates the cases over which the Securities and Exchange
Commission (SEC) exercises exclusive jurisdiction:
xxxx
b) Controversies arising out of intra-corporate or partnership relations, between and among
stockholders, members or associates; between any or all of them and the corporation, partnership or
association of which they are stockholders, members, or associates, respectively; and between such
corporation, partnership or association and the State insofar as it concerns their individual franchise or
right to exist as such entity; and
c) Controversies in the election or appointment of directors, trustees, officers, or managers of such
corporations, partnerships, or associations.29
To be sure, this action partakes of the nature of an intra-corporate controversy, the jurisdiction over which
pertains to the SEC. Pursuant to Section 5.2 of Republic Act No. 8799, otherwise known as the Securities
Regulation Code, the jurisdiction of the SEC over all cases enumerated under Section 5 of Presidential Decree
No. 902-A has been transferred to RTCs designated by this Court as Special Commercial Courts. 30 While the
CA may be correct that the RTC has jurisdiction, the case should have been filed not with the regular court but
with the branch of the RTC designated as a special commercial court. Considering that the RTC of Makati City,
Branch 58 was not designated as a special commercial court, it was not vested with jurisdiction over cases
previously cognizable by the SEC.31 The CA, therefore, gravely erred in remanding the case to the RTC for
further proceedings.
Indeed, Republic Act (RA) No. 9904, or the Magna Carta for Homeowners and Homeowners Associations,
approved on January 7, 2010 and became effective on July 10, 2010, empowers the HLURB to hear and
decide inter-association and/or intra-association controversies or conflicts concerning homeowners
associations. However, we cannot apply the same in the present case as it involves a controversy between a
condominium unit owner and a condominium corporation. While the term association as defined in the law
covers homeowners associations of other residential real property which is broad enough to cover a
condominium corporation, it does not seem to be the legislative intent. A thorough review of the deliberations of
the bicameral conference committee would show that the lawmakers did not intend to extend the coverage of
the law to such kind of association. We quote hereunder the pertinent portion of the Bicameral Conference
Committees deliberation, to wit:
THE CHAIRMAN (SEN. ZUBIRI). Lets go back, Mr. Chair, very quickly on homeowners.
THE ACTING CHAIRMAN (REP. ZIALCITA). Ang sa akin lang, I think our views are similar, Your Honor,
Senator Zubiri, the entry of the condominium units might just complicate the whole matters. So wed like to put
it on record that were very much concerned about the plight of the Condominium Unit Homeowners
Association. But this could very well be addressed on a separate bill that Im willing to co-sponsor with the
distinguished Senator Zubiri, to address in the Condominium Act of the Philippines, rather than address it here
because it might just create a red herring into the entire thing and it will just complicate matters, hindi ba?

THE CHAIRMAN (SEN. ZUBIRI). I also agree with you although I sympathize with them---although we
sympathize with them and we feel that many times their rights have been also violated by abusive
condominium corporations. However, there are certain things that we have to reconcile. There are certain
issues that we have to reconcile with this version.
In the Condominium Code, for example, they just raised a very peculiar situation under the Condominium Code
--- Condominium Corporation Act. Its five years the proxy, whereas here, its three years. So there would
already be violation or there will be already a problem with their version and our version. Sino ang matutupad
doon? Will it be our version or their version?
So I agree that has to be studied further. And because they have a law pertaining to the condominium housing
units, I personally feel that it would complicate matters if we include them. Although I agree that they should be
looked after and their problems be looked into.
Probably we can ask our staff, Your Honor, to come up already with the bill although we have no more time.
Hopefully we can tackle this again on the 15th Congress. But I agree with the sentiments and the inputs of the
Honorable Chair of the House panel.
May we ask our resource persons to also probably give comments?
Atty. Dayrit.
MR. DAYRIT.
Yes I agree with you. There are many, I think, practices in their provisions in the Condominium Law that may
be conflicting with this version of ours.
For instance, in the case of, lets say, the condominium, the so-called common areas and/or maybe so called
open spaces that they may have, especially common areas, they are usually owned by the condominium
corporation. Unlike a subdivision where the open spaces and/or the common areas are not necessarily owned
by the association. Because sometimes --- generally these are donated to the municipality or to the city. And it
is only when the city or municipality gives the approval or the conformity that this is donated to the
homeowners association. But generally, under PD [Presidential Decree] 957, its donated. In the Condominium
Corporation, hindi. Lahat ng mga open spaces and common areas like corridors, the function rooms and
everything, are owned by the corporation. So thats one main issue that can be conflicting.
THE CHAIRMAN (SEN. ZUBIRI). Ill just ask for a one-minute suspension so we can talk.
THE ACTING CHAIRMAN (REP. ZIALCITA). Unless you want to put a catchall phrase like what we did in the
Senior Citizens Act. Something like, to the extent --- paano ba iyon? To the extent that it is practicable and
applicable, the rights and benefits of the homeowners, are hereby extended to the --- mayroon kaming ginamit
na phrase eh...to the extent that it be practicable and applicable to the unit homeoweners, is hereby extended,
something like that. Its a catchall phrase. But then again, it might create a...
MR. JALANDONI. It will become complicated. There will be a lot of conflict of laws between the two laws.
THE ACTING CHAIRMAN (REP. ZIALCITA). Kaya nga eh. At saka, I dont know. I think the --- mayroon naman
silang protection sa ano eh, di ba? Buyers decree doon sa Condominium Act. Im sure there are provisions
there eh. Huwag na lang, huwag na lang.
MR. JALANDONI. Mr. Chairman, I think it would be best if your previous comments that youd be supporting an
amendment.1wphi1 I think that would be --- Well, that would be the best course of action with all due respect.

THE ACTING CHAIRMAN (REP. ZIALCITA). Yeah. Okay. Thank you. So iyon na lang final proposal naming
yung catchall phrase, "With respect to the..."32
xxxx
THE CHAIRMAN (SEN. ZUBIRI). xxx And so, what is their final decision on the definition of homeowners?
THE ACTING CHAIRMAN (REP. ZIALCITA).
We stick to the original, Mr. Chairman. Well just open up a whole can of worms and a whole new ball game will
come into play. Besides, I am not authorized, neither are you, by our counterparts to include the condominium
owners.
THE CHAIRMAN (SEN. ZUBIRI).
Basically that is correct. We are not authorized by the Senate nor because we have discussed this lengthily
on the floor, actually, several months on the floor. And we dont have the authority as well for other Bicam
members to add a provision to include a separate entity that has already their legal or their established
Republic Act tackling on that particular issue. But we just like to put on record, we sympathize with the plight of
our friends in the condominium associations and we will just guarantee them that we will work on an
amendment to the Condominium Corporation Code. So with that we skipped, that is correct, we have to go
back to homeowners association definition, Your Honor, because we had skipped it altogether. So just quickly
going back to Page 7 because there are amendments to the definition of homeowners. If it is alright with the
House Panel, adopt the opening phrase of Subsection 7 of the Senate version as opening phrase of
Subsection 10 of the reconciled version.
x x x x33
To be sure, RA 4726 or the Condominium Act was enacted to specifically govern a condominium. Said law
sanctions the creation of the condominium corporation which is especially formed for the purpose of holding
title to the common area, in which the holders of separate interests shall automatically be members or
shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units. 34 The
rights and obligations of the condominium unit owners and the condominium corporation are set forth in the
above Act.
Clearly, condominium corporations are not covered by the amendment. Thus, the intra-corporate dispute
between petitioner and respondent is still within the jurisdiction of the RTC sitting as a special commercial court
and not the HLURB. The doctrine laid down by the Court in Chateau de Baie Condominium Corporation v.
Moreno35 which in turn cited Wack Wack Condominium Corporation, et al v. CA36 is still a good law.
WHEREFORE, we hereby GRANT the petition and REVERSE the Court of Appeals Decision dated July 10,
2007 and Resolution dated January 25, 2008 in CA-G.R. CV No. 86614. The Complaint before the Regional
Trial Court of Makati City, Branch 58, which is not a special commercial court, docketed as Civil Case No. 031018 is ordered DISMISSED for lack of jurisdiction. Let the case be REMANDED to the Executive Judge of the
Regional Trial Court of Makati City for re-raffle purposes among the designated special commercial courts.
SO ORDERED

3.
G.R. No. 180321

March 20, 2013

EDITHA
vs.
ELENITA DINGLASAN and FELICISIMO DINGLASAN, Respondents.

PADLAN, Petitioner,

DECISION
PERALTA, J.:
This is a petition for review on certiorari assailing the Decision 1 dated June 29, 2007 of the Court of Appeals
(CA) in CA-G.R. CV No. 86983, and the Resolution 2 dated October 23, 2007 denying petitioner's Motion for
Reconsideration.3
The factual and procedural antecedents are as follows:
Elenita Dinglasan (Elenita) was the registered owner of a parcel of land designated as Lot No. 625 of the
Limay Cadastre which is covered by Transfer Certificate of Title (TCT) No. T-105602, with an aggregate area of
82,972 square meters. While on board a jeepney, Elenitas mother, Lilia Baluyot (Lilia), had a conversation with
one Maura Passion (Maura) regarding the sale of the said property. Believing that Maura was a real estate
agent, Lilia borrowed the owners copy of the TCT from Elenita and gave it to Maura. Maura then subdivided
the property into several lots from Lot No. 625-A to Lot No. 625-O, under the name of Elenita and her husband
Felicisimo Dinglasan (Felicisimo).
Through a falsified deed of sale bearing the forged signature of Elenita and her husband Felicisimo, Maura
was able to sell the lots to different buyers. On April 26, 1990, Maura sold Lot No. 625-K to one Lorna Ong
(Lorna), who later caused the issuance of TCT No. 134932 for the subject property under her name. A few

months later, or sometime in August 1990, Lorna sold the lot to petitioner Editha Padlan for P4,000.00. Thus,
TCT No. 134932 was cancelled and TCT No. 137466 was issued in the name of petitioner.
After learning what had happened, respondents demanded petitioner to surrender possession of Lot No. 625K, but the latter refused. Respondents were then forced to file a case before the Regional Trial Court (RTC) of
Balanga, Bataan for the Cancellation of Transfer Certificate of Title No. 137466, docketed as Civil Case No.
438-ML. Summons was, thereafter, served to petitioner through her mother, Anita Padlan.
On December 13, 1999, respondents moved to declare petitioner in default and prayed that they be allowed to
present evidence ex parte.4
On January 17, 2000, petitioner, through counsel, filed an Opposition to Declare Defendant in Default with
Motion to Dismiss Case for Lack of Jurisdiction Over the Person of Defendant. 5 Petitioner claimed that the
court did not acquire jurisdiction over her, because the summons was not validly served upon her person, but
only by means of substituted service through her mother. Petitioner maintained that she has long been residing
in Japan after she married a Japanese national and only comes to the Philippines for a brief vacation once
every two years.
On April 5, 2001, Charlie Padlan, the brother of petitioner, testified that his sister is still in Japan and submitted
a copy of petitioners passport and an envelope of a letter that was allegedly sent by his sister. Nevertheless,
on April 5, 2001, the RTC issued an Order6 denying petitioners motion to dismiss and declared her in default.
Thereafter, trial ensued.
On July 1, 2005, the RTC rendered a Decision 7 finding petitioner to be a buyer in good faith and, consequently,
dismissed the complaint.
Not satisfied, respondents sought recourse before the CA, docketed as CA-G.R. No. CV No. 86983.
On June 29, 2007, the CA rendered a Decision 8 in favor of the respondent. Consequently, the CA reversed and
set aside the Decision of the RTC and ordered the cancellation of the TCT issued in the name of Lorna and the
petitioner, and the revival of respondents own title, to wit:
WHEREFORE, in view of the foregoing, the Decision dated July
1, 2005 of the Regional Trial Court, Third Judicial Region, Branch 4, Mariveles, Bataan (Stationed in Balanga,
Bataan) in Civil Case No. 438-ML is hereby REVERSED and SET ASIDE.
The Transfer Certificate of Title No. 134932 issued in the name of Lorna Ong and Transfer Certificate of Title
No. 137466 issued in the name of defendant-appellee Editha Padlan are CANCELLED and Transfer Certificate
of Title No. 134785 in the name of the plaintiffs-appellants is REVIVED.
SO ORDERED.9
The CA found that petitioner purchased the property in bad faith from Lorna. The CA opined that although a
purchaser is not expected to go beyond the title, based on the circumstances surrounding the sale, petitioner
should have conducted further inquiry before buying the disputed property. The fact that Lorna bought a 5,000square-meter property for only P4,000.00 and selling it after four months for the same amount should have put
petitioner on guard. With the submission of the Judgment in Criminal Case No. 4326 rendered by the RTC,
Branch 2, Balanga, Bataan, entitled People of the Philippines v. Maura Passion10 and the testimonies of
respondents, the CA concluded that respondents sufficiently established that TCT No. 134932 issued in the
name of Lorna and TCT No. 137466 issued in the name of petitioner were fraudulently issued and, therefore,
null and void.

Aggrieved, petitioner filed a Motion for Reconsideration. Petitioner argued that not only did the complaint lacks
merit, the lower court failed to acquire jurisdiction over the subject matter of the case and the person of the
petitioner.
On October 23, 2007, the CA issued a Resolution 11 denying the motion. The CA concluded that the rationale
for the exception made in the landmark case of Tijam v. Sibonghanoy12 was present in the case. It reasoned
that when the RTC denied petitioners motion to dismiss the case for lack of jurisdiction, petitioner neither
moved for a reconsideration of the order nor did she avail of any remedy provided by the Rules. Instead, she
kept silent and only became interested in the case again when the CA rendered a decision adverse to her
claim.
Hence, the petition assigning the following errors:
I
WHETHER OR NOT THE HONORABLE COURT HAS JURISDICTION OVER THE PERSON OF THE
PETITIONER.
II
WHETHER OR NOT THE HONORABLE COURT HAS JURISDICTION OVER THE SUBJECT MATTER OF
THE CASE.
III
WHETHER OR NOT PETITIONER IS A BUYER IN GOOD FAITH AND FOR VALUE.13
Petitioner maintains that the case of Tijam v. Sibonghanoy finds no application in the case at bar, since the said
case is not on all fours with the present case. Unlike in Tijam, wherein the petitioner therein actively
participated in the proceedings, petitioner herein asserts that she did not participate in any proceedings before
the RTC because she was declared in default.
Petitioner insists that summons was not validly served upon her, considering that at the time summons was
served, she was residing in Japan. Petitioner contends that pursuant to Section 15, Rule 14 of the Rules of
Civil Procedure, when the defendant does not reside in the Philippines and the subject of the action is property
within the Philippines of the defendant, service may be effected out of the Philippines by personal service or by
publication in a newspaper of general circulation. In this case, summons was served only by substituted
service to her mother. Hence, the court did not acquire jurisdiction over her person.
Also, petitioner posits that the court lacks jurisdiction of the subject matter, considering that from the complaint,
it can be inferred that the value of the property was only P4,000.00, which was the amount alleged by
respondents that the property was sold to petitioner by Lorna.
Finally, petitioner stresses that she was a buyer in good faith. It was Maura who defrauded the respondents by
selling the property to Lorna without their authority.
Respondents, on the other hand, argue that the CA was correct in ruling in their favor.
The petition is meritorious.
Respondents filed the complaint in 1999, at the time Batas Pambansa Blg. (BP) 129, the Judiciary
Reorganization Act of 1980, was already amended by Republic Act (RA) No. 7691, An Act Expanding the

Jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts,
amending for the purpose BP Blg. 129.14
Section 1 of RA 7691, amending BP Blg. 129, provides that the RTC shall exercise exclusive original
jurisdiction on the following actions:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization Act of
1980," is hereby amended to read as follows:
Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;
(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein,
where the assessed value of the property involved exceeds Twenty Thousand Pesos (P20,000.00) or
for civil actions in Metro Manila, where such value exceeds Fifty Thousand Pesos (P50,000.00), except
actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which
is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts; x x x
Section 3 of RA 7691 expanded the exclusive original jurisdiction of the first level courts, thus:
Section 3. Section 33 of the same law BP Blg. 129 is hereby amended to read as follows:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in
Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall
exercise:
xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any
interest therein where the assessed value of the property or interest therein does not exceed Twenty Thousand
Pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty
Thousand Pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorney's fees, litigation
expenses and costs: Provided, That in cases of land not declared for taxation purposes, the value of such
property shall be determined by the assessed value of the adjacent lots.
Respondents filed their Complaint with the RTC; hence, before proceeding any further with any other issues
raised by the petitioner, it is essential to ascertain whether the RTC has jurisdiction over the subject matter of
this case based on the above-quoted provisions.
However, in order to determine which court has jurisdiction over the action, an examination of the complaint is
essential. Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by law
and determined by the allegations in the complaint which comprise a concise statement of the ultimate facts
constituting the plaintiff's cause of action. The nature of an action, as well as which court or body has
jurisdiction over it, is determined based on the allegations contained in the complaint of the plaintiff,
irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein.
The averments in the complaint and the character of the relief sought are the ones to be consulted. Once
vested by the allegations in the complaint, jurisdiction also remains vested irrespective of whether or not the
plaintiff is entitled to recover upon all or some of the claims asserted therein.15

What determines the jurisdiction of the court is the nature of the action pleaded as appearing from the
allegations in the complaint. The averments therein and the character of the relief sought are the ones to be
consulted.16
Respondents Complaint17 narrates that they are the duly registered owners of Lot No. 625 of the Limay
Cadastre which was covered by TCT No. T-105602. Without their knowledge and consent, the land was
divided into several lots under their names through the fraudulent manipulations of Maura. One of the lots was
Lot 625-K, which was covered by TCT No. 134785. On April 26, 1990, Maura sold the subject lot to Lorna. By
virtue of the fictitious sale, TCT No. 134785 was cancelled and TCT No. 134932 was issued in the name of
Lorna. Sometime in August 1990, Lorna sold the lot to petitioner for a consideration in the amount
of P4,000.00. TCT No. 134932 was later cancelled and TCT No. 137466 was issued in the name of petitioner.
Despite demands from the respondents, petitioner refused to surrender possession of the subject property.
Respondents were thus constrained to engage the services of a lawyer and incur expenses for litigation.
Respondents prayed for the RTC (a) to declare TCT No. 137466 null and to revive TCT No. T-105602 which
was originally issued and registered in the name of the respondents; and (b) to order petitioner to pay
attorneys fees in the sum of P50,000.00 and litigation expenses ofP20,000.00, plus cost of suit.18
An action "involving title to real property" means that the plaintiff's cause of action is based on a claim that he
owns such property or that he has the legal rights to have exclusive control, possession, enjoyment, or
disposition of the same. Title is the "legal link between (1) a person who owns property and (2) the property
itself." "Title" is different from a "certificate of title" which is the document of ownership under the Torrens
system of registration issued by the government through the Register of Deeds. While title is the claim, right or
interest in real property, a certificate of title is the evidence of such claim.19
In the present controversy, before the relief prayed for by the respondents in their complaint can be granted,
the issue of who between the two contending parties has the valid title to the subject lot must first be
determined before a determination of who between them is legally entitled to the certificate of title covering the
property in question.1wphi1
From the Complaint, the case filed by respondent is not simply a case for the cancellation of a particular
certificate of title and the revival of another. The determination of such issue merely follows after a court of
competent jurisdiction shall have first resolved the matter of who between the conflicting parties is the lawful
owner of the subject property and ultimately entitled to its possession and enjoyment. The action is, therefore,
about ascertaining which of these parties is the lawful owner of the subject lot, jurisdiction over which is
determined by the assessed value of such lot.20
In no uncertain terms, the Court has already held that a complaint must allege the assessed value of the real
property subject of the complaint or the interest thereon to determine which court has jurisdiction over the
action.21 In the case at bar, the only basis of valuation of the subject property is the value alleged in the
complaint that the lot was sold by Lorna to petitioner in the amount of P4,000.00. No tax declaration was even
presented that would show the valuation of the subject property. In fact, in one of the hearings, respondents
counsel informed the court that they will present the tax declaration of the property in the next hearing since
they have not yet obtained a copy from the Provincial Assessors Office. 22 However, they did not present such
copy.
To reiterate, where the ultimate objective of the plaintiffs is to obtain title to real property, it should be filed in the
proper court having jurisdiction over the assessed value of the property subject thereof. 23 Since the amount
alleged in the Complaint by respondents for the disputed lot is only P4,000.00, the MTC and not the RTC has
jurisdiction over the action. Therefore, all proceedings in the RTC are null and void.24
Consequently, the remaining issues raised by petitioner need not be discussed further.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 86983,
dated June 29, 2007, and its Resolution dated October 23, 2007, are REVERSED and SET ASIDE. The
Decision of the Regional Trial Court, dated July I, 2005, is declared NULL and VOID. The complaint in Civil
Case No. 438-ML is dismissed without prejudice.
SO ORDERED.

4.
G.R. No. 170354

June 30, 2006

EDGARDO
PINGA, Petitioner,
vs.
THE HEIRS OF GERMAN, SANTIAGO represented by FERNANDO SANTIAGO, Respondents.
DECISION
TINGA, J.:
The constitutional faculty of the Court to promulgate rules of practice and procedure 1 necessarily carries the
power to overturn judicial precedents on points of remedial law through the amendment of the Rules of Court.
One of the notable changes introduced in the 1997 Rules of Civil Procedure is the explicit proviso that if a
complaint is dismissed due to fault of the plaintiff, such dismissal is "without prejudice to the right of the
defendant to prosecute his counterclaim in the same or in a separate action." 2 The innovation was instituted in
spite of previous jurisprudence holding that the fact of the dismissal of the complaint was sufficient to justify the
dismissal as well of the compulsory counterclaim.3
In granting this petition, the Court recognizes that the former jurisprudential rule can no longer stand in light of
Section 3, Rule 17 of the 1997 Rules of Civil Procedure.
The relevant facts are simple enough. Petitioner Eduardo Pinga was named as one of two defendants in a
complaint for injunction4 filed with Branch 29 of the Regional Trial Court (RTC) 5 of San Miguel, Zamboanga del
Sur, by respondent Heirs of German Santiago, represented by Fernando Santiago. The Complaint 6 dated 28
May 1998 alleged in essence that petitioner and co-defendant Vicente Saavedra had been unlawfully entering
the coco lands of the respondent, cutting wood and bamboos and harvesting the fruits of the coconut trees
therein. Respondents prayed that petitioner and Saavedra be enjoined from committing "acts of depredation"
on their properties, and ordered to pay damages.
In their Amended Answer with Counterclaim, 7 petitioner and his co-defendant disputed respondents ownership
of the properties in question, asserting that petitioners father, Edmundo Pinga, from whom defendants derived
their interest in the properties, had been in possession thereof since the 1930s. 8 They alleged that as far back
as 1968, respondents had already been ordered ejected from the properties after a complaint for forcible entry
was filed by the heirs of Edmundo Pinga. It was further claimed that respondents application for free patent
over the properties was rejected by the Office of the President in 1971. Defendants in turn prayed that owing to
respondents forcible re-entry in the properties and the irresponsible and reckless filing of the case, they be
awarded various types of damages instead in amounts totaling P2,100,000 plus costs of suit.9
By July of 2005, the trial of the case had not yet been completed. Moreover, respondents, as plaintiffs, had
failed to present their evidence. It appears that on 25 October 2004, the RTC already ordered the dismissal of
the complaint after respondents counsel had sought the postponement of the hearing scheduled
then.10 However, the order of dismissal was subsequently reconsidered by the RTC in an Order dated 9 June
2005, which took into account the assurance of respondents counsel that he would give priority to that case.11
At the hearing of 27 July 2005, plaintiffs counsel on record failed to appear, sending in his stead a
representative who sought the postponement of the hearing. Counsel for defendants (who include herein
petitioner) opposed the move for postponement and moved instead for the dismissal of the case. The RTC
noted that it was obvious that respondents had failed to prosecute the case for an unreasonable length of time,
in fact not having presented their evidence yet. On that ground, the complaint was dismissed. At the same
time, the RTC allowed defendants "to present their evidence ex-parte."12
Respondents filed a Motion for Reconsideration13 of the order issued in open court on 27 July 2005, opting
however not to seek that their complaint be reinstated, but praying instead that the entire action be dismissed
and petitioner be disallowed from presenting evidence ex-parte. Respondents claimed that the order of the

RTC allowing petitioner to present evidence ex-parte was not in accord with established jurisprudence. They
cited cases, particularly City of Manila v. Ruymann14 and Domingo v. Santos,15 which noted those instances in
which a counterclaim could not remain pending for independent adjudication.
On 9 August 2005, the RTC promulgated an order granting respondents Motion for Reconsideration and
dismissing the counterclaim, citing as the only ground therefor that "there is no opposition to the Motion for
Reconsideration of the [respondents]."16 Petitioner filed a Motion for Reconsideration, but the same was denied
by the RTC in an Order dated 10 October 2005.17 Notably, respondents filed an Opposition to Defendants
Urgent Motion for Reconsideration, wherein they argued that the prevailing jurisprudential rule 18 is that
"compulsory counterclaims cannot be adjudicated independently of plaintiffs cause of action," and "a
conversu, the dismissal of the complaint carries with it the dismissal of the compulsory counterclaims."19
The matter was elevated to this Court directly by way of a Petition for Review under Rule 45 on a pure
question of law, the most relevant being whether the dismissal of the complaint necessarily carries the
dismissal of the compulsory counterclaim.
We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Procedure, the dismissal of the complaint due
to the fault of plaintiff does not necessarily carry with it the dismissal of the counterclaim, compulsory or
otherwise. In fact, the dismissal of the complaint is without prejudice to the right of defendants to prosecute the
counterclaim.
On a prefatory note, the RTC, in dismissing the counterclaim, did not expressly adopt respondents argument
that the dismissal of their complaint extended as well to the counterclaim. Instead, the RTC justified the
dismissal of the counterclaim on the ground that "there is no opposition to [plaintiffs] Motion for
Reconsideration [seeking the dismissal of the counterclaim]."20 This explanation is hollow, considering that
there is no mandatory rule requiring that an opposition be filed to a motion for reconsideration without need for
a court order to that effect; and, as posited by petitioner, the "failure to file an opposition to the Plaintiffs Motion
for Reconsideration is definitely not one among the established grounds for dismissal [of the
counterclaim]."21 Still, the dismissal of the counterclaim by the RTC betrays at very least a tacit recognition of
respondents argument that the counterclaim did not survive the dismissal of the complaint. At most, the
dismissal of the counterclaim over the objection of the defendant (herein petitioner) on grounds other than the
merits of the counterclaim, despite the provisions under Rule 17 of the 1997 Rules of Civil Procedure,
constitutes a debatable question of law, presently meriting justiciability through the instant action. Indeed, in
reviewing the assailed orders of the RTC, it is inevitable that the Court consider whether the dismissal of the
complaint, upon motion of the defendant, on the ground of the failure to prosecute on plaintiffs part precipitates
or carries with it the dismissal of the pending counterclaims.
Our core discussion begins with Section 3, Rule 17 of the 1997 Rules of Civil Procedure, which states:
SEC. 3. Dismissal due to fault of plaintiff.If, for no justifiable cause, the plaintiff fails to appear on the date of
the presentation of his evidence in chief on the complaint, or to prosecute his action for an unreasonable length
of time, or to comply with these Rules or any order of the court, the complaint may be dismissed upon motion
of defendant or upon the court's own motion, without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. This dismissal shall have the effect of an adjudication upon
the merits, unless otherwise declared by the court.
The express qualification in the provision that the dismissal of the complaint due to the plaintiffs fault, as in the
case for failure to prosecute, is without prejudice to the right of the defendant to prosecute his counterclaim in
the same or separate action. This stands in marked contrast to the provisions under Rule 17 of the 1964 Rules
of Court which were superseded by the 1997 amendments. In the 1964 Rules, dismissals due to failure to
prosecute were governed by Section 3, Rule 17, to wit:

SEC. 3. Failure to prosecute. If plaintiff fails to appear at the time of the trial, or to prosecute his action for
an unreasonable length of time, or to comply with these rules or any order of the court, the action may be
dismissed upon motion of the defendant or upon the courts own motion. This dismissal shall have the effect of
an adjudication upon the merits, unless otherwise provided by court.
Evidently, the old rule was silent on the effect of such dismissal due to failure to prosecute on the pending
counterclaims. As a result, there arose what one authority on remedial law characterized as "the nagging
question of whether or not the dismissal of the complaint carries with it the dismissal of the
counterclaim."22 Jurisprudence construing the previous Rules was hardly silent on the matter.
In their arguments before the RTC on the dismissal of the counterclaim, respondents cited in support City of
Manila v.
Ruymann,23 Domingo v. Santos,24 Belleza v. Huntington,25 and Froilan v. Pan Oriental Shipping Co.,26 all of
which were decided more than five decades ago. Notably though, none of the complaints in these four cases
were dismissed either due to the fault of the plaintiff or upon the instance of the defendant.27
The distinction is relevant, for under the previous and current incarnations of the Rules of Civil Procedure, it is
Section 3, Rule 17 that governs the dismissals due to the failure of the plaintiff to prosecute the complaint, as
had happened in the case at bar. Otherwise, it is Section 2, Rule 17, which then, and still is now, covered
dismissals ordered by the trial court upon the instance of the plaintiff. 28 Yet, as will be seen in the foregoing
discussion, a discussion of Section 2 cannot be avoided as the postulate behind that provision was eventually
extended as well in cases that should have properly been governed by Section 3.
Even though the cases cited by respondents involved different factual antecedents, there exists more
appropriate precedents which they could have cited in support of their claim that the counterclaim should have
been dismissed even if the dismissal of the complaint was upon the defendants motion and was predicated on
the plaintiffs fault. BA Finance Corp. v. Co29 particularly stands out in that regard, although that ruling is itself
grounded on other precedents as well. Elucidation of these cases is in order.
On the general effect of the dismissal of a complaint, regardless of cause, on the pending counterclaims,
previous jurisprudence laid emphasis on whether the counterclaim was compulsory or permissive in character.
The necessity of such distinction was provided in the 1964 Rules itself, particularly Section 2, Rule 17, which
stated that in instances wherein the plaintiff seeks the dismissal of the complaint, "if a counterclaim has been
pleaded by a defendant prior to the service upon him of the plaintiffs motion to dismiss, the action shall not be
dismissed against the defendants objection unless the counterclaim can remain pending for independent
adjudication by the court."30 The
vaunted commentaries of Chief Justice Moran, remarking on Section 2, Rule 17, noted that "[t]here are
instances in which a counterclaim cannot remain pending for independent adjudication, as, where it arises out
of, or is necessarily connected with, the transaction or occurrence which is the subject matter of the opposing
partys claim."31
This view expressed in Morans Commentaries was adopted by the Court in cases where the application of
Section 2, Rule 17 of the 1964 Rules of Court was called for, such as in Lim Tanhu v. Ramolete,32 and Dalman
v. City Court of Dipolog City.33 The latter case warrants brief elaboration. Therein, the plaintiff in a civil case for
damages moved for the withdrawal of her own case on the ground that the dispute had not been referred to the
barangay council as required by law. Over the objection of the defendant, who feared that her own
counterclaim would be prejudiced by the dismissal, plaintiffs motion was granted, the complaint and the
counterclaim accordingly dismissed by the trial court. The Court refused to reinstate the counterclaim, opining
without elaboration, "[i]f the civil case is dismissed, so also is the counterclaim filed therein." 34 The broad
nature of that statement gave rise to the notion that the mandatory

dismissal of the counterclaim upon dismissal of the complaint applied regardless of the cause of the
complaints dismissal.35
Notably, the qualification concerning compulsory counterclaims was provided in Section 2, Rule 17 of the 1964
Rules, the provision governing dismissals by order of the court, and not Section 3, Rule 17. As stated earlier,
Section 3, which covered dismissals for failure to prosecute upon motion of the defendant or upon motu
proprioaction of the trial court, was silent on the effect on the counterclaim of dismissals of such nature.
Spouses Sta. Maria, Jr. v. Court of Appeals,36 decided in 1972, ostensibly supplied the gap on the effect on the
counterclaim of complaints dismissed under Section 3. The defendants therein successfully moved before the
trial court for the dismissal of the complaint without prejudice and their declaration in default on the
counterclaim after plaintiffs therein failed to attend the pre-trial. After favorable judgment was rendered on the
counterclaim, plaintiffs interposed an appeal, citing among other grounds, that the counterclaim could no
longer have been heard after the dismissal of the complaint. While the Court noted that the adjudication of the
counterclaim in question "does not depend upon the adjudication of the claims made in the complaint since
they were virtually abandoned by the non-appearance of the plaintiffs themselves," it was also added that "[t]he
doctrine invoked is not available to plaintiffs like the petitioners, who prevent or delay the hearing of their own
claims and allegations."37 The Court, through Justice JBL Reyes, noted:
The doctrine that the complaint may not be dismissed if the counterclaim cannot be independently
adjudicated is not available to, and was not intended for the benefit of, a plaintiff who prevents or
delays the prosecution of his own complaint. Otherwise, the trial of counterclaims would be made to
depend upon the maneuvers of the plaintiff, and the rule would offer a premium to vexing or delaying tactics to
the prejudice of the counterclaimants. It is in the same spirit that we have ruled that a complaint may not be
withdrawn over the opposition of the defendant where the counterclaim is one that arises from, or is
necessarily connected with, the plaintiffs action and cannot remain pending for independent adjudication.38
There is no doubt that under the 1964 Rules, the dismissal of a complaint due to the failure of the plaintiff to
appear during pre-trial, as what had happened in Sta. Maria, fell within the coverage of Section 3, Rule 17. On
the other hand, Section 2 was clearly limited in scope to those dismissals sustained at the instance of the
plaintiff.39Nonetheless, by the early 1990s, jurisprudence was settling on a rule that compulsory counterclaims
were necessarily terminated upon the dismissal of the complaint not only if such dismissal was upon motion of
the plaintiff, but at the instance of the defendant as well. Two decisions from that period stand out in this
regard,Metals Engineering Resources Corp. v. Court of Appeals 40 and International Container Terminal
Services v. Court of Appeals.41
In Metals, the complaint was expunged from the record after the defendant had filed a motion for
reconsideration of a trial court order allowing the filing of an amended complaint that corrected a jurisdictional
error in the original complaint pertaining to the specification of the amount of damages sought. When the
defendant was nonetheless allowed to present evidence on the counterclaim, the plaintiff assailed such
allowance on the ground that the counterclaim was compulsory and could no longer remain pending for
independent adjudication. The Court, in finding for the plaintiff, noted that the counterclaim was indeed
compulsory in nature, and as such, was auxiliary to the proceeding in the original suit and derived its
jurisdictional support therefrom.42 It was further explained that the doctrine was in consonance with the primary
objective of a counterclaim, which was to avoid and prevent circuitry of action by allowing the entire
controversy between the parties to be litigated and finally determined in one action, and to discourage
multiplicity of suits.43 Also, the Court noted that since the complaint was dismissed for lack of jurisdiction, it was
as if no claim was filed against the defendant, and there was thus no more leg for the complaint to stand on.44
In International Container, the defendant filed a motion to dismiss which was granted by the trial court. The
defendants counterclaim was dismissed as well. The Court summarized the key question as "what is the effect
of the dismissal of a complaint ordered at the instance of the defendant upon a compulsory counterclaim duly

raised in its answer."45 Then it ruled that the counterclaim did not survive such dismissal. After classifying the
counterclaim therein as compulsory, the Court noted that "[i]t is obvious from the very nature of the
counterclaim that it could not remain pending for independent adjudication, that is, without adjudication by the
court of the complaint itself on which the counterclaim was based."46
Then in 1993, a divided Court ruled in BA Finance that the dismissal of the complaint for nonappearance of
plaintiff at the pre-trial, upon motion of the defendants, carried with it the dismissal of their compulsory
counterclaim.47 The Court reiterated the rule that "a compulsory counterclaim cannot remain pending for
independent adjudication by the court as it is auxiliary to the proceeding in the original suit and merely
derives its jurisdictional support therefrom."48 Express reliance was made on Metals, International
Container, and evenDalman in support of the majoritys thesis. BA Finance likewise advised that the proper
remedy for defendants desirous that their counterclaims not be dismissed along with the main complaint was
for them to move to declare the plaintiffs to be "non-suited" on their complaint and "as in default" on their
compulsory counterclaim, instead of moving for the dismissal of the complaint.49
Justice Regalado, joined by Chief Justice Narvasa, registered a strong objection to the theory of the majority.
They agreed that the trial court could no longer hear the counterclaim, but only on the ground that defendants
motion to be allowed to present evidence on the counterclaim was filed after the order dismissing the complaint
had already become final. They disagreed however that the compulsory counterclaim was necessarily
dismissed along with the main complaint, pointing out that a situation wherein the dismissal of the complaint
was occasioned by plaintiffs failure to appear during pre-trial was governed under Section 3, Rule 17, and not
Section 2 of the same rule. Justice Regalado, who ironically penned the decision in Metals cited by the
majority, explained:
Turning back to Rule 17, it is readily apparent that Sections 2 and 3 thereof envisage different factual and
adjective situations. The dismissal of the complaint under Section 2 is at the instance of plaintiff, for whatever
reason he is minded to move for such dismissal, and, as a matter of procedure, is without prejudice unless
otherwise stated in the order of the court or, for that matter, in plaintiff's motion to dismiss his own complaint.
By reason thereof, to curb any dubious or frivolous strategy of plaintiff for his benefit or to obviate possible
prejudice to defendant, the former may not dismiss his complaint over the defendant's objection if the latter has
a compulsory counterclaim since said counterclaim would necessarily be divested of juridical basis and
defendant would be deprived of possible recovery thereon in that same judicial proceeding.
Section 3, on the other hand, contemplates a dismissal not procured by plaintiff, albeit justified by causes
imputable to him and which, in the present case, was petitioner's failure to appear at the pre-trial. This situation
is also covered by Section 3, as extended by judicial interpretation, and is ordered upon motion of defendant or
motu proprio by the court. Here, the issue of whether defendant has a pending counterclaim, permissive or
compulsory, is not of determinative significance. The dismissal of plaintiff's complaint is evidently a
confirmation of the failure of evidence to prove his cause of action outlined therein, hence the dismissal is
considered, as a matter of evidence, an adjudication on the merits. This does not, however, mean that there is
likewise such absence of evidence to prove defendant's counterclaim although the same arises out of the
subject matter of the complaint which was merely terminated for lack of proof. To hold otherwise would not only
work injustice to defendant but would be reading a further provision into Section 3 and wresting a meaning
therefrom although neither exists even by mere implication. Thus understood, the complaint can accordingly be
dismissed, but relief can nevertheless be granted as a matter of course to defendant on his counterclaim as
alleged and proved, with or without any reservation therefor on his part, unless from his conduct, express or
implied, he has virtually consented to the concomitant dismissal of his counterclaim.50
Justice Regalado also adverted to Sta. Maria and noted that the objections raised and rejected by the Court
therein were the same as those now relied upon by the plaintiff. He pointed out that Dalman and International
Container, both relied upon by the majority, involved the application of Section 2, Rule 17 and not Section 3,
which he insisted as the applicable provision in the case at bar.51

The partial dissent of Justice Regalado in BA Finance proved opportune, as he happened then to be a member
of the Rules of Court Revision Committee tasked with the revision of the 1964 Rules of Court. Just a few
months after BA Finance was decided, Justice Regalado proposed before the Committee an amendment to
Section 3, Rule 17 that would explicitly provide that the dismissal of the complaint due to the fault of the plaintiff
shall be "without prejudice to the right of the defendant to prosecute his counterclaim in the same or in a
separate action." The amendment, which was approved by the Committee, is reflected in the minutes of the
meeting of the Committee held on 12 October 1993:
[Justice Regalado] then proposed that after the words "upon the courts own motion" in the 6th line of the draft
in Sec. 3 of Rule 17, the following provision be inserted: "without prejudice to the right of the defendant to
prosecute his counterclaim in the same or in a separate action." The Committee agreed with the
proposed amendment of Justice Regalado.
Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not the action that is dismissed but the
complaint. He asked whether there is any distinction between "complaint" and "action." Justice Regalado
opined that the action of the plaintiff is initiated by his complaint.
Justice Feria then suggested that the dismissal be limited to the complaint[.] Thus, in the 1st line of
Sec. 1, the words "An action" will be changed to "a complaint"; in the 2nd line of Sec. 2, the words "an
action" will be changed to "a complaint" and in Sec. 3, the word "action" on the 5th line of the draft will
be changed to "complaint." The Committee agreed with Justice Ferias suggested amendments.
CA Pao believed that there is a need to clarify the counterclaim that the defendant will prosecute,
whether it is permissive or compulsory or all kinds of counterclaims.
Justice Regalado opined that there is no need of making a clarification because it is already
understood that it covers both counterclaims.52
It is apparent from these minutes that the survival of the counterclaim despite the dismissal of the complaint
under Section 3 stood irrespective of whether the counterclaim was permissive or compulsory. Moreover, when
the Court itself approved the revisions now contained in the 1997 Rules of Civil Procedure, not only did Justice
Regalados amendment to Section 3, Rule 17 remain intact, but the final version likewise eliminated the
qualification formerly offered under Section 2 on "counterclaims that can remain pending for independent
adjudication by the court."53 At present, even Section 2, concerning dismissals on motion of the plaintiff, now
recognizes the right of the defendant to prosecute the counterclaim either in the same or separate action
notwithstanding the dismissal of the complaint, and without regard as to the permissive or compulsory nature
of the counterclaim.
In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado expounds on the effects of the
amendments to Section 2 and 3 of Rule 17:
2. Under this revised section [2], where the plaintiff moves for the dismissal of his complaint to which a
counterclaim has been interposed, the dismissal shall be limited to the complaint. Such dismissal shall be
without prejudice to the right of the defendant to either prosecute his counterclaim in a separate action or to
have the same resolved in the same action. Should he opt for the first alternative, the court should render the
corresponding order granting and reserving his right to prosecute his claim in a separate complaint. Should he
choose to have his counterclaim disposed of in the same action wherein the complaint had been dismissed, he
must manifest such preference to the trial court within 15 days from notice to him of plaintiffs motion to
dismiss.These alternative remedies of the defendant are available to him regardless of whether his
counterclaim is compulsory or permissive. A similar alternative procedure, with the same underlying reason
therefor, is adopted in Sec. 6, Rule 16 and Sec. 3 of this Rule, wherein the complaint is dismissed on the
motion of thedefendant or, in the latter instance, also by the court motu proprio.

xxxx
2. The second substantial amendment to [Section 3] is with respect to the disposition of the defendants
counterclaim in the event the plaintiffs complaint is dismissed. As already observed, he is here granted the
choice to prosecute that counterclaim in either the same or a separate action. x x x x
3. With the aforestated amendments in Secs. 2 and 3 laying down specific rules on the disposition of
counterclaims involved in the dismissal actions, the controversial doctrine in BA Finance Corporation
vs. Co, et al., (G.R. No. 105751, June 30, 1993) has been abandoned, together with the apparent
confusion on the proper application of said Secs. 2 and 3. Said sections were distinguished and discussed
in the authors separate opinion in that case, even before they were clarified by the present amendments x x
x.54
Similarly, Justice Feria notes that "the present rule reaffirms the right of the defendant to move for the dismissal
of the complaint and to prosecute his counterclaim, as stated in the separate opinion [of Justice Regalado
in BA Finance.]"55 Retired Court of Appeals Justice Herrera pronounces that the amendment to Section 3, Rule
17 settles that "nagging question" whether the dismissal of the complaint carries with it the dismissal of the
counterclaim, and opines that by reason of the amendments, the rulings in Metals Engineering, International
Container, and BA Finance "may be deemed abandoned."56 On the effect of amendment to Section 3, Rule 17,
the commentators are in general agreement, 57 although there is less unanimity of views insofar as Section 2,
Rule 17 is concerned.58
To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended Rule 17,
those previous jural doctrines that were inconsistent with the new rules incorporated in the 1997 Rules of Civil
Procedure were implicitly abandoned insofar as incidents arising after the effectivity of the new procedural
rules on 1 July 1997. BA Finance, or even the doctrine that a counterclaim may be necessarily dismissed along
with the complaint, clearly conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA Finance as
doctrine extends as far back as 1997, when the Court adopted the new Rules of Civil Procedure. If, since then,
such abandonment has not been affirmed in jurisprudence, it is only because no proper case has arisen that
would warrant express confirmation of the new rule. That opportunity is here and now, and we thus rule that
the dismissal of a complaint due to fault of the plaintiff is without prejudice to the right of the defendant to
prosecute any pending counterclaims of whatever nature in the same or separate action. We confirm that BA
Finance and all previous rulings of the Court that are inconsistent with this present holding are now
abandoned.
Accordingly, the RTC clearly erred when it ordered the dismissal of the counterclaim, since Section 3, Rule 17
mandates that the dismissal of the complaint is without prejudice to the right of the defendant to prosecute the
counterclaim in the same or separate action. If the RTC were to dismiss the counterclaim, it should be on the
merits of such counterclaim. Reversal of the RTC is in order, and a remand is necessary for trial on the merits
of the counterclaim.
It would be perfectly satisfactory for the Court to leave this matter at that. Still, an explanation of the reason
behind the new rule is called for, considering that the rationale behind the previous rule was frequently
elaborated upon.
Under Act No. 190, or the Code of Procedure in Civil Actions promulgated in 1901, it was recognized in Section
127(1) that the plaintiff had the right to seek the dismissal of the complaint at any time before trial, "provided a
counterclaim has not been made, or affirmative relief sought by the cross-complaint or answer of the
defendant."59 Note that no qualification was made then as to the nature of the counterclaim, whether it be
compulsory or permissive. The protection of the defendants right to prosecute the counterclaim was indeed
unqualified. In City of Manila, decided in 1918, the Court explained:

By paragraph 1 [of Section 127], it will be seen that, where the defendant has interposed a counterclaim, or is
seeking affirmative relief by a cross-complaint, that then, and in that case, the plaintiff cannot dismiss the
action so as to affect the right of the defendant in his counterclaim or prayer for affirmative relief. The reason
for that exception is clear. When the answer sets up an independent action against the plaintiff, it then
becomes an action by the defendant against the plaintiff, and, of course, the plaintiff has no right to
ask for a dismissal of the defendants action.60
Nonetheless, a new rule was introduced when Act No. 190 was replaced by the 1940 Rules of Court. Section
2, Rule 30 of the 1940 Rules specified that if a counterclaim is pleaded by a defendant prior to the service of
the plaintiffs motion to dismiss, the action shall not be dismissed against the defendants objection unless the
counterclaim can remain pending for independent adjudication by the court. This qualification remained intact
when the 1964 Rules of Court was introduced.61 The rule referred only to compulsory counterclaims, or
counterclaims which arise out of or are necessarily connected with the transaction or occurrence that is the
subject matter of the plaintiffs claim, since the rights of the parties arising out of the same transaction should
be settled at the same time.62 As was evident in Metals, International Container and BA Finance, the rule was
eventually extended to instances wherein it was the defendant with the pending counterclaim, and not the
plaintiff, that moved for the dismissal of the complaint.
We should not ignore the theoretical bases of the rule distinguishing compulsory counterclaims from
permissive counterclaims insofar as the dismissal of the action is concerned. There is a particular school of
thought that informs the broad proposition in Dalman that "if the civil case is dismissed, so also is the
counterclaim filed therein,"63 or the more nuanced discussions offered in Metals, International Container,
and BA Finance. The most potent statement of the theory may be found in Metals,64 which proceeds from the
following fundamental premisesa compulsory counterclaim must be set up in the same proceeding or would
otherwise be abated or barred in a separate or subsequent litigation on the ground of auter action pendant, litis
pendentia or res judicata; a compulsory counterclaim is auxiliary to the main suit and derives its jurisdictional
support therefrom as it arises out of or is necessarily connected with the transaction or occurrence that is the
subject matter of the complaint;65and that if the court dismisses the complaint on the ground of lack of
jurisdiction, the compulsory counterclaim must also be dismissed as it is merely ancilliary to the main action
and no jurisdiction remained for any grant of relief under the counterclaim.
The first point is derived from Section 4, Rule 9, of the 1964 Rules of Court, while the two latter points are
sourced from American jurisprudence. There is no disputing the theoretical viability of these three points. In
fact, the requirement that the compulsory counterclaim must be set up in the same proceeding remains extant
under the 1997 Rules of Civil Procedure.66 At the same time, other considerations rooted in actual practice
provide a counterbalance to the above-cited rationales.
Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint; namely a
cause (or causes) of action constituting an act or omission by which a party violates the right of another. The
main difference lies in that the cause of action in the counterclaim is maintained by the defendant against the
plaintiff, while the converse holds true with the complaint. Yet, as with a complaint, a counterclaim without a
cause of action cannot survive.
It would then seemingly follow that if the dismissal of the complaint somehow eliminates the cause(s) of the
counterclaim, then the counterclaim cannot survive. Yet that hardly is the case, especially as a general
rule. More often than not, the allegations that form the counterclaim are rooted in an act or omission of
the plaintiff other than the plaintiffs very act of filing the complaint. Moreover, such acts or omissions
imputed to the plaintiff are often claimed to have occurred prior to the filing of the complaint itself. The
only apparent exception to this circumstance is if it is alleged in the counterclaim that the very act of
the plaintiff in filing the complaint precisely causes the violation of the defendants rights. Yet even in
such an instance, it remains debatable whether the dismissal or withdrawal of the complaint is
sufficient to obviate the pending cause of action maintained by the defendant against the plaintiff. 67

These considerations persist whether the counterclaim in question is permissive or compulsory. A compulsory
counterclaim arises out of or is connected with the transaction or occurrence constituting the subject matter of
the opposing partys claim, does not require for its adjudication the presence of third parties, and stands within
the jurisdiction of the court both as to the amount involved and the nature of the claim. 68 The fact that the
culpable acts on which the counterclaim is based are founded within the same transaction or occurrence as the
complaint, is insufficient causation to negate the counterclaim together with the complaint. The dismissal or
withdrawal of the complaint does not traverse the boundaries of time to undo the act or omission of the plaintiff
against the defendant, or vice versa. While such dismissal or withdrawal precludes the pursuit of litigation
by the plaintiff, either through his/her own initiative or fault, it would be iniquitous to similarly encumber the
defendant who maintained no such initiative or fault. If the defendant similarly moves for the dismissal of the
counterclaim or neglects to timely pursue such action, let the dismissal of the counterclaim be premised on
those grounds imputable to the defendant, and not on the actuations of the plaintiff.
The other considerations supplied in Metals are anchored on the premise that the jurisdictional foundation of
the counterclaim is the complaint itself. The theory is correct, but there are other facets to this subject that
should be taken into account as well. On the established premise that a counterclaim involves separate causes
of action than the complaint even if derived from the same transaction or series of transactions, the
counterclaim could have very well been lodged as a complaint had the defendant filed the action ahead of the
complainant.69 The terms "ancillary" or "auxiliary" may mislead in signifying that a complaint innately possesses
more credence than a counterclaim, yet there are many instances wherein the complaint is trivial but the
counterclaim is meritorious. In truth, the notion that a counterclaim is, or better still, appears to be merely
"ancillary" or "auxiliary" is chiefly the offshoot of an accident of chronology, more than anything else.
The formalistic distinction between a complaint and a counterclaim does not detract from the fact that both of
them embody causes of action that have in their end the vindication of rights. While the distinction is necessary
as a means to facilitate order and clarity in the rules of procedure, it should be remembered that the primordial
purpose of procedural rules is to provide the means for the vindication of rights. A party with a valid cause of
action against another party cannot be denied the right to relief simply because the opposing side had the
good fortune of filing the case first. Yet this in effect was what had happened under the previous procedural
rule and correspondent doctrine, which under their final permutation, prescribed the automatic dismissal of the
compulsory counterclaim upon the dismissal of the complaint, whether upon the initiative of the plaintiff or of
the defendant.
Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable disposition of the
counterclaims by ensuring that any judgment thereon is based on the merit of the counterclaim itself and not
on the survival of the main complaint. Certainly, if the counterclaim is palpably without merit or suffers
jurisdictional flaws which stand independent of the complaint, the trial court is not precluded from dismissing it
under the amended rules, provided that the judgment or order dismissing the counterclaim is premised on
those defects. At the same time, if the counterclaim is justified, the amended rules now unequivocally protect
such counterclaim from peremptory dismissal by reason of the dismissal of the complaint.
WHEREFORE, the petition is GRANTED. The Orders dated 9 August 2005 and 10 October 2005 of Branch 29,
Regional Trial Court of San Miguel, Zamboanga del Sur in Civil Case No. 98-012 are SET ASIDE. Petitioners
counterclaim as defendant in Civil Case. No. 98-012 is REINSTATED. The Regional Trial Court is ORDERED
to hear and decide the counterclaim with deliberate dispatch.
SO ORDERED.

5.
G.R. No. 150325 August 31, 2006
EDGARDO
V.
vs.
THE DEPARTMENT OF JUSTICE and CLEMENTE TERUEL, Respondents.

QUESADA, Petitioner,

DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the Petition for Certiorari 1 (with prayer for a temporary restraining order and/or preliminary
injunction) assailing the Resolutions dated January 17, 2001 and September 17, 2001 issued by the Secretary
of Justice in I.S. No. 00-29780-C, entitled "Clemente M. Teruel, complainant, versus Ramon P. Camacho, Jr.,
Edgardo V. Quesada and Rodolfo Corgado, respondents."
On March 1, 2000, Clemente M. Teruel, herein respondent, filed with the Office of the City Prosecutor,
Mandaluyong City, an affidavit-complaint 2 charging Edgardo V. Quesada (herein petitioner), Ramon P.
Camacho, Jr., and Rodolfo Corgado with the crime of estafa under Article 315, paragraphs 2 and 3 of the
Revised Penal Code, docketed as I.S. No. 00-29780-C. The affidavit-complaint alleges that on June 13, 1998
at Shangrila Plaza Hotel, EDSA, Mandaluyong City, Quesada, Camacho, and Corgado represented
themselves to Teruel as the president, vice-president/treasurer, and managing director, respectively, of VSH
Group Corporation; that they offered to him a telecommunication device called Star Consultant Equipment

Package which provides the user easy access to the internet via television; that they assured him that after he
pays the purchase price ofP65,000.00, they will immediately deliver to him two units of the internet access
device; that relying on their representations, he paid them P65,000.00 for the two units; and that despite
demands, they, did not deliver to him the units.
It was only petitioner Quesada who filed a counter-affidavit. 3 He alleged that he, Camacho, and Corgado are
Star Consultant Trainers of F.O.M. Philippines, Inc., a corporation engaged in the business of selling and
marketing telecommunication products and technologies; that they formed the VSH Group as a corporation "for
the principal purpose of pooling the commissions they will receive as Star Consultant Trainers and then
dividing said commissions among themselves according to their agreement"; that while he admitted that the
two units of internet access devices purchased by herein respondent Teruel were not delivered to him,
however, this was not due to their alleged fraudulent representations since they merely acted as sales agents
of F.O.M. Phils., Inc.; and that they found out too late that the said company could not cope with its
commitment to them as it ran short of supplies of telecommunication products.
On April 25, 2000, Assistant City Prosecutor Esteban A. Tacla, Jr. issued a Resolution 4 finding probable cause
against petitioner Quesada, Camacho, and Corgado, and recommending the filing of the corresponding
Information.
Consequently, an Information for estafa against petitioner Quesada, Camacho, and Corgado was filed with the
Regional Trial Court (RTC), Mandaluyong City, docketed as Criminal Case No. MC-00-2510. This case was
later raffled off to Branch 208.
In the meantime, petitioner filed with the Department of Justice a Petition for Review challenging the April 25,
2000 Resolution of the Investigating Prosecutor. On January 17, 2001, the Secretary of Justice issued a
Resolution 5 dismissing the petition. Petitioners motion for reconsideration was denied in a Resolution 6 dated
September 17, 2001.
While the RTC was hearing Criminal Case No. MC-00-2510, petitioner filed with this Court the instant Petition
forCertiorari alleging that the Secretary of Justice, in dismissing his Petition for Review in I.S. No. 00-29780-C,
acted with grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioner contends that the
element of fraud or deceit in the crime of estafa is not present 7 and that there is no evidence which will prove
that the accuseds promise to deliver the purchased items was false or made in bad faith. 8
The Solicitor General, in his Comment, maintains that the Secretary of Justice, in finding a probable cause
against the three accused, did not act with grave abuse of discretion and prayed for the dismissal of the instant
petition for being unmeritorious.
Initially, we observe that the present petition was directly filed with this Court, in utter violation of the rule on
hierarchy of courts.
A petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, must be filed with the
Court of Appeals whose decision may then be appealed to this Court by way of a petition for review
on certiorariunder Rule 45 of the same Rules. 9 A direct recourse to this Court is warranted only where there
are special and compelling reasons specifically alleged in the petition to justify such action. Such ladder of
appeals is in accordance with the rule on hierarchy of courts. In Vergara, Sr. v. Suelto, 10 we stressed that this
should be the constant policy that must be observed strictly by the courts and lawyers, thus:
x x x. The Supreme Court is a court of last resort, and must so remain if it is to satisfactorily perform the
functions assigned to it by the fundamental charter and immemorial tradition. It cannot and should not be
burdened with the task of dealing with causes in the first instance. Its original jurisdiction to issue the so-called
extraordinary writs should be exercised only where absolutely necessary or where serious and important

reasons exist therefor. Hence, that jurisdiction should generally be exercised relative to actions or proceedings
before the Court of Appeals, or before constitutional or other tribunals, bodies or agencies whose acts for some
reason or another are not controllable by the Court of Appeals. Where the issuance of an extraordinary writ is
also within the competence of the Court of Appeals or a Regional Trial Court, it is in either of these courts that
the specific action for the writs procurement must be presented. This is and should continue to be the policy in
this regard, a policy that courts and lawyers must strictly observe. (Underscoring supplied)
We later reaffirmed such policy in People v. Cuaresma 11 after noting that there is "a growing tendency on the
part of litigants and lawyers to have their applications for the so-called extraordinary writs, and sometimes even
their appeals, passed upon and adjudicated directly and immediately by the highest tribunal of the land." We
again emphasized that:
x x x. This Courts original jurisdiction to issue writs of certiorari (as well as prohibition, mandamus, quo
warranto, habeas corpus and injunction) is not exclusive. x x x. It is also shared by this Court, and by the
Regional Trial Court, with the Court of Appeals x x x. This concurrence of jurisdiction is not, however, to be
taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of the court
to which application therefor will be directed. There is, after all, a hierarchy of courts. That hierarchy is
determinative of the venue of appeals, and should also serve as a general determinant of the appropriate
forum for petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most certainly
indicates that petitions for the issuance of extraordinary writs against first level courts should be filed with the
Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme
Courts original jurisdiction to issue these writs should be allowed only when there are special and important
reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy that is
necessary to prevent inordinate demands upon the Courts time and attention which are better devoted to
those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Courts docket. x x x.
(Underscoring supplied)
Here, we cannot discern any special and compelling reason to justify the direct filing with this Court of the
present petition. Clearly, it should be dismissed outright.
Even assuming that the petition can be filed directly with this Court, the same must fail. Petitioner contends
that the element of fraud or deceit as an element of the crime of estafa is absent. Consequently, the affirmance
by the Secretary of Justice of the Investigating Prosecutors finding that there exists a probable cause is
tainted with grave abuse of discretion.
The issue of whether the element of fraud or deceit is present is both a question of fact and a matter of
defense, the determination of which is better left to the trial court after the parties shall have adduced their
respective evidence. It bears stressing that a preliminary investigation is merely an inquiry or proceeding to
determine whether there is sufficient ground to engender a well-founded belief that a crime has been
committed and that the respondent is probably guilty thereof, and should be held for trial. 12 It does not call for
the application of rules and standards of proof that a judgment of conviction requires after trial on the
merits. 13 As implied by the words "probably guilty," the inquiry is concerned merely with probability, not
absolute or moral certainty. 14 At this stage, the complainant need not present proof beyond reasonable doubt.
A preliminary investigation does not require a full and exhaustive presentation of the parties evidence. 15 A
finding of probable cause needs only to rest on evidence showing that more likely than not, a crime has been
committed and was committed by petitioner and his co-accused. As ruled by the Investigating Prosecutor and
affirmed by the Secretary of Justice, petitioners representation and assurance to respondent Teruel that the
telecommunication equipment would be delivered to him upon payment of its purchase price was the
compelling reason why he parted with his money. Such assurance, the Investigating Prosecutor added, is
actually a misrepresentation or deceit.

Thus, we hold that the Secretary of Justice did not gravely abuse his discretion. An act of a court or tribunal
may only be considered as committed in grave abuse of discretion when the same was performed in a
capricious or whimsical exercise of judgment which is equivalent to lack of jurisdiction. The abuse of discretion
must be patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty
enjoined by law or to act at all in contemplation of law, as where the power is exercised in an arbitrary and
despotic manner by reason of passion or personal hostility. 16
WHEREFORE, we DISMISS the instant petition. Costs against petitioner.
SO ORDERED.

6.
G.R. No. 97381 November 5, 1992
BENIGNO
V.
MAGPALE,
JR., petitioner,
vs.
CIVIL SERVICE COMMISSION and ROGELIO A. DAYAN, in his capacity as the General Manager of the
Philippine Ports Authority, respondents.

MELO, J.:

Before Us is a petition for review on certiorari assailing Resolution No. 90-962 dated October 19, 1990 of
respondent Civil Service Commission (CSC). Said CSC resolution set aside and modified the decision dated
February 5, 1990 of the Merit System Protection Board in MSPB Case No. 449, which ordered the immediate
reinstatement in the service of herein petitioner Benigno V. Magpale, Jr., without loss of seniority rights and
with payment of back salaries and other emoluments to which he is entitled under the law.
The record shows that petitioner started his career in government as an employee in the Presidential
Assistance on Community Development in 1960. Fifteen years later, or in 1975, he transferred to the Philippine
Ports Authority (PPA) as Arrastre Superintendent. He was promoted to the position of Port Manager in 1977 of
the Port Management Unit (PMU), General Santos City. Then he was reassigned, in the same year to PPAPMU, Tacloban City where he likewise discharged the functions of Port Manager. On December 1, 1982, the
PPA General Manager designated Atty. William A. Enriquez as officer-in-charge of PPA-PMU, Tacloban City
effective December 6, 1982. On January 6, 1983, petitioner was ordered to immediately report to the Assistant
General Manager (AGM) for Operation, PPA, Manila, Petitioner reported at PPA Manila on the same date and
performed the duties and functions assigned to him.
In an Internal Control Department Report dated March 5, 1984, the PMU-Tacloban Inventory Committee and
the Commission on Audit (COA) stated that petitioner failed to account for equipment of PPA value at
P65,542.25 and to liquidate cash advances amounting to P130,069.61. He was found also to have incurred
unauthorized absences from May 25, 1984 to July 23, 1984.
On July 23, 1984, or nineteen months after he began reporting in Manila, a formal charge for Dishonesty,
Pursuit of Private Business without permission as required by Civil Service Rules and Regulations, Frequent
and Unauthorized Absences and Neglect of Duty was filed against petitioner. Based on said charges he was
ordered preventively suspended and has been out of service since then.
For almost four years the case remained unacted upon. The formal investigation and hearing resumed on
September 18, 1987.
On January 18, 1989 a Decision was rendered by the Secretary of the Department of Transportation and
Communication (DOTC), through its Administrative Action Board, finding petitioner guilty of Gross Negligence
on two counts: (a) for his failure to account for the forty-four (44) assorted units of equipment, among them a
Sony Betamax and a TV Camera, and (b) for failing to render the required liquidation of his cash advances
amounting to P44,877.00 for a period of four years. Petitioner was also found guilty of frequent and
unauthorized absences. Accordingly, he was meted the penalty of dismissal from the service with the
corresponding accessory penalties.
When petitioner's motion for reconsideration of the aforesaid Decision was denied in the DOTC's Order of
February 20, 1989, he appealed to the Merit System and Protection Board (MSPB) of respondent Civil Service
Commission.
On February 5, 1990, the MSPB rendered a Decision reversing the Decision of the DOTC. The pertinent
portion of the MSPB's Decision reads:
After a careful review of the record of the case, this Board found the appeal meritorious.
Respondent cannot be held liable for Gross Negligence for his alleged failure to account for
several properties and for failure to liquidate the cash advances he received as there was no
showing that he has been specifically required to do so either by law or regulation. The mere
detail of respondent to PPA-Manila, in the absence of an order requiring him to turn over and
account for the funds and property received for his office at PMU-Tacloban will not necessarily
obligate him to make accounting for the same.

Moreover, Section 105, Chapter 5 of Presidential Decree 1445, otherwise known as "The
Government Auditing Code of the Philippines" measured the liability of an officer accountable for
government property only to the money value of said property. Though respondent is the person
primarily liable for these funds and property, he holds this liability jointly with the person who has
the actual possession thereof and who has the immediate responsibility for the safekeeping.
As to the charge relative to respondent's frequent unauthorized absences had been sufficiently
and convincingly explained, due to which the Board found him not at all guilty of the offense
charged (sic).
IN VIEW THEREOF, the decision appealed from is hereby reversed. Respondent-Appellant
Magpale should immediately by reinstated in the service without loss of seniority rights and with
payment of back salaries and other emoluments to which he is entitled under the law. (pp. 3132, Rollo.)
On March 1, 1990, PPA, through its General Manager, herein respondent Rogelio A Dayan, filed an appeal
with the Civil Service Field Office-PPA, and the latter office indorsed the appeal to respondent CSC in a letter
dated March 5, 1990.
On March 5, 1990, petitioner requested the Secretary of the DOTC to direct the PPA to implement the MSPB
decision as it has become final and executory. Said request was reiterated in another letter also dated March
5, 1990 by petitioner to OIC Wilfredo M. Trinidad of the Office of the Assistant Secretary for Administration and
Legal Affairs, DOTC.
On March 13, 1990, petitioner filed with the MSPB a Motion for Implementation of the MSPB decision. This
was opposed by the PPA through its General Manager.
On April 27, 1990 petitioner filed with respondent CSC his comment to the appeal of the PPA contending that
he is not an accountable officer and is under no obligation to account for the property and equipment; that said
property and equipment were not received by him as custodian and he should not be held liable for the loss of
the same; that the said property and equipment were place in PPA-PMU Tacloban City which the herein
petitioner left on October 8, 1982 and since then had lost control over them. Moreover, petitioner averred that
as to the unliquidated cash advances of P44,877.00, the same had long been liquidated. Finally, petitioner
claimed that his failure to secure the clearance for any possible property or financial obligation in PMUTacloban was due to the urgency of his transfer to PPA-Manila and the absence of any order or demand to
secure the clearance.
On May 29, 1990, the MSPB issued an Order for the immediate implementation of its February 5, 1990
Decision ruling that:
Records further show that a copy of this Board's decision was received by the Office of the
Honorable Secretary, that Department, thru Mr. Frankie Tampus on February 6, 1990. Records
finally show that as of March 5, 1990, no motion for reconsideration of this Board's
aforementioned decision has ever been filed as evidenced by the certification of even date
issued and signed by Director Adelaida C. Montero of the Office for Central Personnel Records,
this Commission. Hence, said decision has long become final and executory. (p. 34, Rollo.)
On June 28, 1990, petitioner filed a Motion to Dismiss the appeal of PPA claiming that:
1. Appeal of PPA was filed out of time and that the CSC has no jurisdiction over it;

2. The PPA has not exhausted administrative remedies before appealing to the higher body, the
CSC;
3. The MSPB decision has become final and therefore cannot be disturbed anymore.
(p. 22, Rollo.)
On October 19, 1990, respondent CSC rendered its now assailed Resolution No. 90-962, the pertinent portion
of which reads as follows:
The Commission thus holds respondent Magpale guilty of Gross Neglect of Duty on two (2)
counts for the forty-four (44) equipments (sic) under his charge and to render an accounting for
cash advances amounting to P44,877.90. Accordingly, considering two mitigating circumstances
of length of service and first offense in favor of respondent, the commission hereby imposes a
penalty of suspension for a period of one (1) year against him. As he has been out of the service
since 1984, the penalty is deemed served and he should now be reinstated to his former
position. This is, however, without prejudice to any criminal or civil proceedings that the agency
concerned or the COA may institute as proper under the premises.
Finally, the decision of the MSPB exonerating the respondent Magpale for Gross Negligence is
hereby reversed. Corollarily, the order of payment of back salaries is hereby set aside. MSPB is
likewise reminded to be more circumspect on matters of this nature, especially as the instant
case involves accountability of public funds and property.
WHEREFORE, foregoing premises considered, the Commission finds respondent Benigno V.
Magpale, Jr., guilty of Gross Neglect of Duty on two (2) counts for failure to account for the fortyfour (44) equipments (sic) under his charge and to render an accounting for cash advance
amounting to P44,877.90. In view of the attendant mitigating circumstances of length of service
and first offense in favor of respondents and the Neglect of Duty to account for cash advance in
the amount of P44,877.90 (second count) be appreciated as an aggravating circumstances, the
penalty of suspension for one (1) year shall be imposed against respondent. This shall be
without prejudice to any criminal or civil proceeding that PPA or COA may institute against
respondent. Accordingly, the Decision and Order of MSBP dated February 5, 1990 and May 29,
1990, respectively, are hereby set aside. (pp. 27-28, Rollo.)
Hence, the present recourse.
The petition alleges that respondent CSC, in issuing its Resolution No. 90-962, gravely abused its discretion
because:
1. The law did not authorize an appeal by the government from an adverse decision of the Merit
Systems Protection Board (MSBP);
2. Respondent PPA General Manager did not have the right or legal personality to appeal from
the MSPB decision;
3. Assuming that the appeal was available to respondent DAYAN, the same was filed out time
after the MSPB decision had long become final and executory. (pp. 6-7, Petition; pp. 7-8, Rollo.)
In support of this first contention, petitioner invokes Paragraph 2(a). Section 16, Chapter 3, Subtitle A, Title I,
Book V of Executive Order No. 292, otherwise known as the Administrative Code of 1987 which provides:

Sec. 16. Offices in the Commission. The Commission shall have the following offices:
xxx xxx xxx
(2) The Merit Systems Protection Board composed of a Chairman and two (2)
members shall have the following functions:
(a) Hear and decide on appeal administrative cases involving
officials and employees of the Civil Service. Its decision shall be
final except those involving dismissal or separation from the
service which may be appealed to the Commission. (Emphasis
supplied.)
claiming that since the MSBP decision was for dismissal or separation from the service, but reinstatement
without loss of seniority rights and with payment of back salaries, the said MSBP decision should be
deemed final, immediately executory and unappealable.
Petitioner next contends that assuming, for the sake of argument, that the decision of the MSBP was
appealable, respondent Dayan, even in his capacity as General Manager of the PPA, did not have the legal
personality not the right to appeal the decision of the MSBP, citing Paragraph 1, Section 49, Chapter 7, Subtitle
A, Title I, Book V, of Executive Order No. 292 and the case of Paredes vs. CSC, G.R. No. 88177, December 4,
1990, 192 SCRA 84.
Assuming further that the MSBP decision was appealable and that respondent Dayan had the legal personality
to appeal the MSBP decision, petitioner still contends that the appeal should not have been given due course
by the respondent CSC because the appeal was not filed with the proper disciplining office in accordance with
same Section 49 of Executive Order No. 292, which in this case, should be the DOTC, not with the CSC Field
Office at the PPA.
On the merit of the petition, petitioner claims that assuming even further that an appeal lies from the MSBP
decision, that respondent Dayan had the legal personality or standing to institute the appeal that it was filed
with the proper office, still CSC Resolution 90-962 was rendered with grave abuse of discretion because
petitioner cannot be suspended for alleged failure to account for pieces of equipment and cash advances since
this is not the neglect of duty contemplated by Section 36 of Presidential Degree No. 807 or Section 46 of
chapter in the Civil Service in Executive Order 292. At most, petitioner can be held liable for the money value of
the equipment and advances as mandated by Section 105 of Presidential Decree No. 1445, the Government
Auditing Code of the Philippines.
For its part, respondent CSC maintains
First, that the finality of the MSPB decision in the disciplinary cases as stated in Section 16, Paragraph 2(a),
Book V of Executive Order No. 292, relied upon by petitioner, is modified by section 12, Paragraph 11, Book V,
of the same Executive Order No. 292, which reads:
Sec. 12. Powers and Functions. The Commission shall have the following powers and
functions:
xxx xxx xxx
(11) Hear and decide administrative case instituted by or bought directly or on appeal, including
contested appointments, and review decisions and actions of its offices and of the agencies
attached to it.

Furthermore, relevant provisions of Executive Order No 135 dated February 25, 1987 amending Section 19(b)
of Presidential Decree No. 807 and Section 8 of Presidential Decree No. 1409 state, thus:
WHEREAS, in the interest of justice, there is a need to confer upon the Civil Service
Commission jurisdiction over appeal in contested or provisional appointments and to make its
decision thereon, as well as in administrative disciplinary cases final and reviewable by the
Supreme Court.
xxx xxx xxx
Relationship with the Civil Service Commission. The Commission shall hear and decide
appeals from other decisions of the Board provided that the decisions of the Commission shall
be subject to review on certiorari upon receipt of the copy thereof by the aggrieved part.
Thus, respondent CSC argues that it is deemed not to have lost its appellate jurisdiction over the decisions of
the MSPB in administrative disciplinary case.
Second, the case of Paredes vs. CSC is not applicable. Respondent Dayan appealed the MSPB decision not
in his personal capacity nor in pursuit in his private interest, but as head of PPA, being the general manager
thereof.
Third, the appeal was filed with the proper disciplining office because the decision appealed from was that of
the MSPB, one of the offices in respondent CSC. Thus, respondent CSC was justified in giving due course to
PPA's notice of appeal filed with its (CSC) Field Office at the PPA.
Finally, petitioner's claim that he is liable only for the money value of the property and cash advances and
cannot be administratively charged for such infraction is untenable and a mockery of the civil service law. For
his failure to account for the property under his charge and to liquidate his cash advances, petitioner is guilty of
Gross Neglect of Duty and should have been dismissed from the service if no mitigating circumstances were
considered in his favor.
We gave due course to the petition and required the parties to file their respective memoranda. After
considering the same and the pertinent laws and jurisprudence, We find that the petition must be granted.
After Mendez vs. Civil Service Commission, (204 SCRA 965 [1991]), the extent of the authority of respondent
CSC to review the decisions of the MSPB is now a settled matter.
The Court, in said case held:
It is axiomatic that the right to appeal is merely a statutory privilege and may be
exercised only in the manner and in accordance with the provisions of law.
(Victorias Milling Co., Inc. vs. Office of the Presidential Assistant for Legal Affairs,
153 SCRA 318).
A cursory reading of P.D. 807, otherwise known as "The Philippines Civil Service
Law" shows that said law does not contemplate a review of decisions
exonerating officers or employees from administrative charges.
Section 37 paragraph (a) thereof, provides:
The Commission shall decide upon appeal all administrative disciplinary cases
involving the imposition of the penalty of suspension for more than thirty days, or

fine in an amount exceeding thirty day's salary, demotion in rank or salary or

transfer, removal or dismissal from office. . . . (Emphasis supplied) (p. 7. Rollo)
Said provisions must be read together with Section 39 paragraph (a) of P.D. 805 which
contemplates:
Appeals, where allowable, shall be made by the party adversely affected by the
decision . . . (Emphasis supplied) (p. 104, Rollo)
The phrase "party adversely affective by the decision" refers to the government employees
against whom the administrative case is filed for the purpose of disciplinary action which may
take the form of suspension, demotion in rank or salary, transfer, removal or dismissal from
office. In the instant case, Coloyan who filed the appeal cannot be considered an aggrieved
party because he is not the respondent of the administrative case below.
Finally, pursuant to Section 37 paragraph (b) of P.D. 807, the city mayor, as head of the city
government, is empowered to enforce judgment with finality on lesser penalties like suspension
from work for one month and forfeiture of salary equivalent to one month against erring
employees.
By inference or implication, the remedy of appeal may be availed of only in a case where the
respondent is found guilty of the charges filed against him. But the respondent is exonerated of
said charges, as in this case, there is no occasion on appeal. (pp. 967-968)
The above ruling is a reiteration of the earlier pronouncement in Paredes vs. Civil Service Commission, (192
SCRA 84 [1990]) cited by petitioner, where We said:
Based on the above provisions of law, appeal to the Civil Service Commission in an
administrative case is extended to the party adversely affected by the decision, that is, the
person or the respondent employee who has been meted out the penalty of suspension for
more than thirty days; or fine in an amount exceeding thirty days salary demotion in rank or
salary or transfer, removal or dismissal from office. The decision of the disciplining authority is
even final and not appealable to the Civil Service Commission in cases where the penalty
imposed is suspension for not more than thirty days or fine in an amount not exceeding thirty
days salary. Appeal in cases allowed by law must be filed within fifteen days from receipt of the
decision.
Here the MSPB after hearing and the submission of memoranda exonerated private respondent
Amor of all charges except for habitual tardiness. The penalty was only a reprimand so that
even private respondent Amor, the party adversely affected by the decision, cannot even
interpose an appeal to the Civil Service Commission.
As correctly ruled by respondent, petitioner Paredes the complainant is not the part adversely
affected by the decision so that she has no legal personality to interpose an appeal to the Civil
Service Commission. In an administrative case, the complainant is a mere witness (Gonzalo vs.
D. Roda, 64 SCRA 120). Even if she is the Head of the Administrative Services Department of
the HSRC as a complaint she is merely a witness for the government in an administrative case.
No private interest is involved in an administrative case as the offense is committed against the
government. (pp. 98-99)
While it is true, as contended by respondent Civil Service Commission that under Section 12 (par. 11), Chapter
3, Subtitle A, Book V of Executive Order 292, the CSC does have the power to

Hear and decide administrative cases instituted by or brought before it directly or on appeal,
including contested appointments, and review decisions and actions of its offices and of the
agencies attached to it. . . .
the exercise of the power is qualified by and should be read together with the other sections of the same subtitle and book of Executive Order 292, particularly Section 49 which prescribes the following requisites for the
exercise of the power of appeal, to wit:
(a) the decision must be appealable;
(b) the appeal must be made by the party adversely affected by the decision;
(c) the appeal must be made within fifteen days from receipt of the decision, unless a petition for
the reconsideration is seasonably filed; and
(d) the notice of appeal must be filed with the disciplining office, which shall forward the records
of the case, together with the notice of appeal to the appellate authority within fifteen days from
filing of the notice of appeal, with its comments, if any.
Under Section 47 of the same Code, the CSC shall decide on appeal all administrative disciplinary cases
involving the imposition of:
(a) a penalty of suspension for more than thirty days; or
(b) fine in an amount exceeding thirty days salary; or
c) demotion in rank or salary or transfer; or
(d) removal or dismissal from office.
The February 5, 1990 decision of the MSPB did not involve dismissal or separation from office, rather, the
decision exonerated petitioner and ordered him reinstated to his former position. Consequently, in the light of
our pronouncements in the aforecited cases of Mendez v. Civil Service Commission and Paredes vs. Civil
Service Commission, the MSPB decision was not a proper subject of appeal to the CSC.
Settled is the rule that a tribunal, board, or officer exercising judicial functions acts without jurisdiction if no
authority has been conferred by law to hear and decide the case. (Acena v. Civil Service Commission, 193
SCRA 623 [1991]).
WHEREFORE, the decision of the Civil Service Commission is hereby ANNULLED and SET ASIDE and the
decision of the Merit Systems Protection Board dated February 5, 1990 is hereby REINSTATED.
SO ORDERED.

7.
G.R. No. 90503 September 27, 1990
NESTOR
SANDOVAL, petitioner,
vs.
HON. DOROTEO CAEBA, Presiding Judge, RTC, Manila, Branch 20, DEPUTY SHERIFF OF MANILA
(RTC, Manila, Branch 20), and ESTATE DEVELOPERS & INVESTORS CORPORATION, respondents.
Arnold V. Guerrero & Associates for petitioner.
Lino M. Patajo for private respondent.

GANCAYCO, J.:
The issue in this petition is whether or not the ordinary courts have jurisdiction over the collection of unpaid
installments regarding a subdivision lot.
On August 20, 1987 private respondent filed a complaint in the Regional Trial Court (RTC) of Manila for the
collection of unpaid installments regarding a subdivision lot, pursuant to a promissory note, plus interest. On
January 29, 1988 the trial court rendered a decision.
It appears that petitioner was declared in default so much so that after receiving the evidence of private
respondent, the trial court rendered its decision on January 19,1988, the dispositive portion of which reads as
follows:
WHEREFORE, on the allegations and the prayer of the complaint and the
evidence adduced in support therefor, judgment is hereby rendered, ordering the
defendant to pay plaintiff the following:
1. The sum of P73,867.42 plus interest and other charges commencing from January 1, 1988
until fully paid;
2. Such sum which shall not be less than P2,000.00 or 25% of the amount of delinquency
whichever is greater, as and for attorney's fees.
3. Costs against the defendant.
4. SO ORDERED. 1
On September 28, 1988 the trial court issued an order directing the issuance of a writ of execution to enforce
its decision that had become final and executory.
On September 30, 1988 petitioner filed a motion to vacate judgment and to dismiss the complaint on the
ground that the lower court has no jurisdiction over the subject matter and that its decision is null and void. A

motion for reconsideration of the writ of execution was also filed by petitioner. An opposition to both motions
was filed by private respondent to which a reply was filed by petitioner.
On February 17, 1989 the trial court denied the motion to vacate the judgment on the ground that it is now
beyond the jurisdiction of the Court to do so. It directed the issuance of a writ of execution anew.
Hence the herein petition wherein it is alleged that the trial court committed a grave abuse of discretion as
follows:
5.1. The respondent Judge gravely abused his discretion and acted without jurisdiction in taking
cognizance of the complaint before him notwithstanding that exclusive and original jurisdiction
over the subject-matter thereof is vested with the Housing and Land Use Regulatory Board
(HLURB) pursuant to PD 957.
5.2. The respondent Judge gravely abused his discretion and acted without jurisdiction in
refusing to vacate his judgment rendered without jurisdiction and in issuing a writ of execution to
implement his abovesaid void judgment. 2
The petition is impressed with merit.
Under Section 1 of Presidential Decree No. 957 the National Housing Authority (NHA) was given the exclusive
jurisdiction to hear and decide certain cases as follows:
SEC.1. In the exercise of its function to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing
Authority shall haveexclusive jurisdiction to hear and decide cases of the following nature:
A. Unsound real estate business practices:
B. Claims involving refund and any other claims filed by subdivision lot or condominium unit
buyer against the project owner, developer, dealer, broker or salesman;and
C. Cases involving specific performance of contractual and statutory obligations filed by buyers
of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman.
(Emphasis supplied.)
The language of this section, particularly, the second portion thereof, leaves no room for doubt that exclusive
jurisdiction over the case between the petitioner and private respondent is vested not on the RTC but on the
NHA. The NHA was re-named Human Settlements Regulatory Commission and thereafter it was re-named as
the Housing and Land Use Regulatory Board (HLURB). 3
Undeniably the sum of money sought to be collected by private respondent from petitioner represented unpaid
installments of a subdivision lot which the petitioner purchased. Petitioner alleges that he suspended payments
thereof because of the failure of the developer to develop the subdivision pursuant to their agreement.
In Antipolo Realty Corporation vs. National Housing Authority, 4 the suit which was filed with the NHA, likewise
involved non-payment of installments over a subdivision lot, wherein this Court held that the NHA has exclusive
authority to hear and decide the case.
In Solid Homes, Inc. vs. Teresita Payawal, 5 this Court ruled that upon the issuance of Presidential Decree No.
957, the trial court may no longer assume jurisdiction over the cases enumerated in Section 1 of Presidential

Decree No. 397. We even stated therein that the Housing and Land Use Regulatory Board has the authority to
award damages in the exercise of this exclusive power conferred upon it by Presidential Decree No. 1344.
In Estate Developers and Investors Corporation vs. Antonio Sarte and Erlinda Sarte, G.R. No. 93646, which is
a case substantially similar to the instant case, in a resolution of August 13, 1990 this Court upheld the
exclusive jurisdiction of the HLURB over the collection suit.
Considering that the trial court has no jurisdiction under the circumstances obtaining in this case, the decision it
rendered is null and void ab initio. It is as if no decision was rendered by the trial court at all.
When as in this case the attention of the trial court is drawn to its lack of competence and authority to act on
the case, certainly the trial court has a duty to vacate the judgment by declaring the same to be null and
void ab initio.
This is as it should be. Inasmuch as the questioned judgment is null and void, it is, as above observed, as if no
decision had been rendered by the trial court. It cannot become final and exucutory, much less can it be
enforced by a writ of execution.
The trial court, rather than reiterating the issuance of a writ of execution in this case, which it did, should have
recalled and cancelled the writ of execution of the judgment. WHEREFORE, the petition is GRANTED. The
questioned decision of the trial court dated January 29, 1988 is hereby declared null and void for lack of
jurisdiction. No pronouncement as to costs.
8.
G.R. Nos. 79937-38 February 13, 1989
SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS and D.J. WARBY, petitioners,
vs.
HON. MAXIMIANO C. ASUNCION, Presiding Judge, Branch 104, Regional Trial Court, Quezon City and
MANUEL CHUA UY PO TIONG, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Offices for petitioners. Tanjuatco, Oreta,
Tanjuatco, Berenguer & Sanvicente Law Offices for private respondent.

GANCAYCO, J.:
Again the Court is asked to resolve the issue of whether or not a court acquires jurisdiction over a case when
the correct and proper docket fee has not been paid.
On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a complaint with the
Regional Trial Court of Makati, Metro Manila for the consignation of a premium refund on a fire insurance policy
with a prayer for the judicial declaration of its nullity against private respondent Manuel Uy Po Tiong. Private
respondent as declared in default for failure to file the required answer within the reglementary period.
On the other hand, on March 28, 1984, private respondent filed a complaint in the Regional Trial Court of
Quezon City for the refund of premiums and the issuance of a writ of preliminary attachment which was
docketed as Civil Case No. Q-41177, initially against petitioner SIOL, and thereafter including E.B. Philipps and
D.J. Warby as additional defendants. The complaint sought, among others, the payment of actual,
compensatory, moral, exemplary and liquidated damages, attorney's fees, expenses of litigation and costs of

the suit. Although the prayer in the complaint did not quantify the amount of damages sought said amount may
be inferred from the body of the complaint to be about Fifty Million Pesos (P50,000,000.00).
Only the amount of P210.00 was paid by private respondent as docket fee which prompted petitioners' counsel
to raise his objection. Said objection was disregarded by respondent Judge Jose P. Castro who was then
presiding over said case. Upon the order of this Court, the records of said case together with twenty-two other
cases assigned to different branches of the Regional Trial Court of Quezon City which were under investigation
for under-assessment of docket fees were transmitted to this Court. The Court thereafter returned the said
records to the trial court with the directive that they be re-raffled to the other judges in Quezon City, to the
exclusion of Judge Castro. Civil Case No. Q-41177 was re-raffled to Branch 104, a sala which was then
vacant.
On October 15, 1985, the Court en banc issued a Resolution in Administrative Case No. 85-10-8752-RTC
directing the judges in said cases to reassess the docket fees and that in case of deficiency, to order its
payment. The Resolution also requires all clerks of court to issue certificates of re-assessment of docket fees.
All litigants were likewise required to specify in their pleadings the amount sought to be recovered in their
complaints.
On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q-41177 was temporarily
assigned, issuedan order to the Clerk of Court instructing him to issue a certificate of assessment of the docket
fee paid by private respondent and, in case of deficiency, to include the same in said certificate.
On January 7, 1984, to forestall a default, a cautionary answer was filed by petitioners. On August 30,1984, an
amended complaint was filed by private respondent including the two additional defendants aforestated.
Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter assigned, after his assumption
into office on January 16, 1986, issued a Supplemental Order requiring the parties in the case to comment on
the Clerk of Court's letter-report signifying her difficulty in complying with the Resolution of this Court of
October 15, 1985 since the pleadings filed by private respondent did not indicate the exact amount sought to
be recovered. On January 23, 1986, private respondent filed a "Compliance" and a "Re-Amended Complaint"
stating therein a claim of "not less than Pl0,000,000. 00 as actual compensatory damages" in the prayer. In the
body of the said second amended complaint however, private respondent alleges actual and compensatory
damages and attorney's fees in the total amount of about P44,601,623.70.
On January 24, 1986, Judge Asuncion issued another Order admitting the second amended complaint and
stating therein that the same constituted proper compliance with the Resolution of this Court and that a copy
thereof should be furnished the Clerk of Court for the reassessment of the docket fees. The reassessment by
the Clerk of Court based on private respondent's claim of "not less than P10,000,000.00 as actual and
compensatory damages" amounted to P39,786.00 as docket fee. This was subsequently paid by private
respondent.
Petitioners then filed a petition for certiorari with the Court of Appeals questioning the said order of Judie
Asuncion dated January 24, 1986.
On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of
P20,000,000.00 as d.qmages so the total claim amounts to about P64,601,623.70. On October 16, 1986, or
some seven months after filing the supplemental complaint, the private respondent paid the additional docket
fee of P80,396.00. 1
On August 13, 1987, the Court of Appeals rendered a decision ruling, among others, as follows:
WHEREFORE, judgment is hereby rendered:

1. Denying due course to the petition in CA-G.R. SP No. 1, 09715 insofar as it seeks annulment
of the order
(a) denying petitioners' motion to dismiss the complaint, as amended, and
(b) granting the writ of preliminary attachment, but giving due course to the portion thereof
questioning the reassessment of the docketing fee, and requiring the Honorable respondent
Court to reassess the docketing fee to be paid by private respondent on the basis of the amount
of P25,401,707.00. 2
Hence, the instant petition.
During the pendency of this petition and in conformity with the said judgment of respondent court, private
respondent paid the additional docket fee of P62,432.90 on April 28, 1988. 3
The main thrust of the petition is that the Court of Appeals erred in not finding that the lower court did not
acquire jurisdiction over Civil Case No. Q-41177 on the ground of nonpayment of the correct and proper docket
fee. Petitioners allege that while it may be true that private respondent had paid the amount of P182,824.90 as
docket fee as herein-above related, and considering that the total amount sought to be recovered in the
amended and supplemental complaint is P64,601,623.70 the docket fee that should be paid by private
respondent is P257,810.49, more or less. Not having paid the same, petitioners contend that the complaint
should be dismissed and all incidents arising therefrom should be annulled. In support of their theory,
petitioners cite the latest ruling of the Court in Manchester Development Corporation vs. CA, 4 as follows:
The Court acquires jurisdiction over any case only upon the payment of the prescribed docket
fee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the
Court, much less the payment of the docket fee based on the amounts sought in the amended
pleading. The ruling in the Magaspi Case in so far as it is inconsistent with this pronouncement
is overturned and reversed.
On the other hand, private respondent claims that the ruling in Manchester cannot apply retroactively to Civil
Case No. Q41177 for at the time said civil case was filed in court there was no such Manchester ruling as yet.
Further, private respondent avers that what is applicable is the ruling of this Court in Magaspi v.
Ramolete, 5wherein this Court held that the trial court acquired jurisdiction over the case even if the docket fee
paid was insufficient.
The contention that Manchester cannot apply retroactively to this case is untenable. Statutes regulating the
procedure of the courts will be construed as applicable to actions pending and undetermined at the time of
their passage. Procedural laws are retrospective in that sense and to that extent. 6
In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full amount of the docket fee is an
indispensable step for the perfection of an appeal. In a forcible entry and detainer case before the justice of the
peace court of Manaoag, Pangasinan, after notice of a judgment dismissing the case, the plaintiff filed a notice
of appeal with said court but he deposited only P8.00 for the docket fee, instead of P16.00 as required, within
the reglementary period of appeal of five (5) days after receiving notice of judgment. Plaintiff deposited the
additional P8.00 to complete the amount of the docket fee only fourteen (14) days later. On the basis of these
facts, this court held that the Court of First Instance did notacquire jurisdiction to hear and determine the
appeal as the appeal was not thereby perfected.
In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to become a Filipino citizen by
sending it through registered mail to the Office of the Solicitor General in 1953 but the required filing fee was
paid only in 1956, barely 5V2 months prior to the filing of the petition for citizenship. This Court ruled that the

declaration was not filed in accordance with the legal requirement that such declaration should be filed at least
one year before the filing of the petition for citizenship. Citing Lazaro, this Court concluded that the filing of
petitioner's declaration of intention on October 23, 1953 produced no legal effect until the required filing fee
was paid on May 23, 1956.
In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were applied. It was an original
petition for quo warranto contesting the right to office of proclaimed candidates which was mailed, addressed
to the clerk of the Court of First Instance, within the one-week period after the proclamation as provided
therefor by law. 10 However, the required docket fees were paid only after the expiration of said period.
Consequently, this Court held that the date of such payment must be deemed to be the real date of filing of
aforesaid petition and not the date when it was mailed.
Again, in Garica vs, Vasquez, 11 this Court reiterated the rule that the docket fee must be paid before a court
will act on a petition or complaint. However, we also held that said rule is not applicable when petitioner seeks
the probate of several wills of the same decedent as he is not required to file a separate action for each will but
instead he may have other wills probated in the same special proceeding then pending before the same court.
Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case is deemed filed only upon
payment of the docket fee regardless of the actual date of its filing in court. Said case involved a complaint for
recovery of ownership and possession of a parcel of land with damages filed in the Court of First Instance of
Cebu. Upon the payment of P60.00 for the docket fee and P10.00 for the sheriffs fee, the complaint was
docketed as Civil Case No. R-11882. The prayer of the complaint sought that the Transfer Certificate of Title
issued in the name of the defendant be declared as null and void. It was also prayed that plaintiff be declared
as owner thereof to whom the proper title should be issued, and that defendant be made to pay monthly
rentals of P3,500.00 from June 2, 1948 up to the time the property is delivered to plaintiff, P500,000.00 as
moral damages, attorney's fees in the amount of P250,000.00, the costs of the action and exemplary damages
in the amount of P500,000.00.
The defendant then filed a motion to compel the plaintiff to pay the correct amount of the docket fee to which
an opposition was filed by the plaintiff alleging that the action was for the recovery of a parcel of land so the
docket fee must be based on its assessed value and that the amount of P60.00 was the correct docketing fee.
The trial court ordered the plaintiff to pay P3,104.00 as filing fee.
The plaintiff then filed a motion to admit the amended complaint to include the Republic as the defendant. In
the prayer of the amended complaint the exemplary damages earlier sought was eliminated. The amended
prayer merely sought moral damages as the court may determine, attorney's fees of P100,000.00 and the
costs of the action. The defendant filed an opposition to the amended complaint. The opposition
notwithstanding, the amended complaint was admitted by the trial court. The trial court reiterated its order for
the payment of the additional docket fee which plaintiff assailed and then challenged before this Court. Plaintiff
alleged that he paid the total docket fee in the amount of P60.00 and that if he has to pay the additional fee it
must be based on the amended complaint.
The question posed, therefore, was whether or not the plaintiff may be considered to have filed the case even
if the docketing fee paid was not sufficient. In Magaspi, We reiterated the rule that the case was deemed filed
only upon the payment of the correct amount for the docket fee regardless of the actual date of the filing of the
complaint; that there was an honest difference of opinion as to the correct amount to be paid as docket fee in
that as the action appears to be one for the recovery of property the docket fee of P60.00 was correct; and that
as the action is also one, for damages, We upheld the assessment of the additional docket fee based on the
damages alleged in the amended complaint as against the assessment of the trial court which was based on
the damages alleged in the original complaint.

However, as aforecited, this Court overturned Magaspi in Manchester. Manchester involves an action for torts
and damages and specific performance with a prayer for the issuance of a temporary restraining order, etc.
The prayer in said case is for the issuance of a writ of preliminary prohibitory injunction during the pendency of
the action against the defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the
property in question, the attachment of such property of defendants that may be sufficient to satisfy any
judgment that may be rendered, and, after hearing, the issuance of an order requiring defendants to execute a
contract of purchase and sale of the subject property and annul defendants' illegal forfeiture of the money of
plaintiff. It was also prayed that the defendants be made to pay the plaintiff jointly and severally, actual,
compensatory and exemplary damages as well as 25% of said amounts as may be proved during the trial for
attorney's fees. The plaintiff also asked the trial court to declare the tender of payment of the purchase price of
plaintiff valid and sufficient for purposes of payment, and to make the injunction permanent. The amount of
damages sought is not specified in the prayer although the body of the complaint alleges the total amount of
over P78 Millon allegedly suffered by plaintiff.
Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for the docket fee based on the
nature of the action for specific performance where the amount involved is not capable of pecuniary estimation.
However, it was obvious from the allegations of the complaint as well as its designation that the action was one
for damages and specific performance. Thus, this court held the plaintiff must be assessed the correct docket
fee computed against the amount of damages of about P78 Million, although the same was not spelled out in
the prayer of the complaint.
Meanwhile, plaintiff through another counsel, with leave of court, filed an amended complaint on September
12, 1985 by the inclusion of another co-plaintiff and eliminating any mention of the amount of damages in the
body of the complaint. The prayer in the original complaint was maintained.
On October 15, 1985, this Court ordered the re-assessment of the docket fee in the said case and other cases
that were investigated. On November 12, 1985, the trial court directed the plaintiff to rectify the amended
complaint by stating the amounts which they were asking for. This plaintiff did as instructed. In the body of the
complaint the amount of damages alleged was reduced to P10,000,000.00 but still no amount of damages was
specified in the prayer. Said amended complaint was admitted.
Applying the principle in Magaspi that "the case is deemed filed only upon payment of the docket fee
regardless of the actual date of filing in court," this Court held that the trial court did not acquire jurisdiction over
the case by payment of only P410.00 for the docket fee. Neither can the amendment of the complaint thereby
vest jurisdiction upon the Court. For all legal purposes there was no such original complaint duly filed which
could be amended. Consequently, the order admitting the amended complaint and all subsequent proceedings
and actions taken by the trial court were declared null and void. 13
The present case, as above discussed, is among the several cases of under-assessment of docket fee which
were investigated by this Court together with Manchester. The facts and circumstances of this case are similar
toManchester. In the body of the original complaint, the total amount of damages sought amounted to about
P50 Million. In the prayer, the amount of damages asked for was not stated. The action was for the refund of
the premium and the issuance of the writ of preliminary attachment with damages. The amount of only P210.00
was paid for the docket fee. On January 23, 1986, private respondent filed an amended complaint wherein in
the prayer it is asked that he be awarded no less than P10,000,000.00 as actual and exemplary damages but
in the body of the complaint the amount of his pecuniary claim is approximately P44,601,623.70. Said
amended complaint was admitted and the private respondent was reassessed the additional docket fee of
P39,786.00 based on his prayer of not less than P10,000,000.00 in damages, which he paid.
On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of
P20,000,000.00 in damages so that his total claim is approximately P64,601,620.70. On October 16, 1986,
private respondent paid an additional docket fee of P80,396.00. After the promulgation of the decision of the

respondent court on August 31, 1987 wherein private respondent was ordered to be reassessed for additional
docket fee, and during the pendency of this petition, and after the promulgation of Manchester, on April 28,
1988, private respondent paid an additional docket fee of P62,132.92. Although private respondent appears to
have paid a total amount of P182,824.90 for the docket fee considering the total amount of his claim in the
amended and supplemental complaint amounting to about P64,601,620.70, petitioner insists that private
respondent must pay a docket fee of P257,810.49.
The principle in Manchester could very well be applied in the present case. The pattern and the intent to
defraud the government of the docket fee due it is obvious not only in the filing of the original complaint but
also in the filing of the second amended complaint.
However, in Manchester, petitioner did not pay any additional docket fee until] the case was decided by this
Court on May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this Court held
that the court a quo did not acquire jurisdiction over the case and that the amended complaint could not have
been admitted inasmuch as the original complaint was null and void.
In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester,
private respondent demonstrated his willingness to abide by the rules by paying the additional docket fees as
required. The promulgation of the decision in Manchester must have had that sobering influence on private
respondent who thus paid the additional docket fee as ordered by the respondent court. It triggered his change
of stance by manifesting his willingness to pay such additional docket fee as may be ordered.
Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the total
amount of the claim. This is a matter which the clerk of court of the lower court and/or his duly authorized
docket clerk or clerk in-charge should determine and, thereafter, if any amount is found due, he must require
the private respondent to pay the same.
Thus, the Court rules as follows:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed
docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the
filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment
of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third party claims and similar pleadings, which shall not
be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment
of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary
period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment
of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if
specified the same has been left for determination by the court, the additional filing fee therefor shall constitute
a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to
enforce said lien and assess and collect the additional fee.
WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of the court a quo is hereby
instructed to reassess and determine the additional filing fee that should be paid by private respondent
considering the total amount of the claim sought in the original complaint and the supplemental complaint as
may be gleaned from the allegations and the prayer thereof and to require private respondent to pay the
deficiency, if any, without pronouncement as to costs.
SO ORDERED.

9.
G.R. No. L-24680

October 7, 1968

JESUSA
VDA.
vs.
JUANITO CHAN, defendant-appellant.

DE

MURGA, plaintiff-appellee,

Jose
Go
and
Fernando
P.
Blanco
for
plaintiff-appellee.
Abelardo A. Climaco, T. de los Reyes, Enrique A. Fernandez and Ernani Cruz Pao for defendant-appellant.
ANGELES, J.:
In this appeal, two issues involving questions of law are posed for resolution: First, whether or not the
allegations in the complaint constitute a cause of action for unlawful detainer, and confer jurisdiction over the
case to the municipal court (now city court) of Zamboanga City, under the provisions of Rule 70 of the Rules of
Court and decisions interpreting the same, when particularly considered in the light of the contexture of the
pertinent letter of demand to vacate the leased premises (Annex J of the Complaint), couched in the following
wise:
Please be advised further that we reiterate our demand made to you in our registered letter dated
February 4, 1959 (to vacate the leased premises) which was received by you on the 10th instant,
unless you pay the amount of Six Hundred pesos (P600.00) or Seven Hundred pesos (P700.00) as
new rental per our letter of January 19, 1959, before the expiration of the 15-day period granted you for
vacating the same.
and, Second, whether or not the lessor and the lessee had agreed upon an automatic renewal of the lease of
the premises, under the stipulation in clause "7" of the corresponding contract of lease, containing the following
agreement:
7. That upon the termination of the term of Ten (10) years above expressed, the said Jesusa Vda. de
Murga shall have the option to purchase the building or buildings belonging to and constructed by the
said Juanito Chan, and the price of said building or buildings shall be determined by three
commissioners, two of whom shall be appointed by each of the parties, and the remainder
commissioner shall be appointed by both. However, in the event that the said Jesusa Vda. de Murga
shall not exercise the right granted her for any reason or cause, this contract of lease shall be
automatically renewed but the period for said renewal shall, however, be fixed and adjusted again by
the parties. It is agreed further that in case of said renewal, the rental shall also be adjusted by the
parties depending on the business condition which shall then at that time prevail. (Exhibit A.)
Jesusa Vda. de Murga was the owner of two parcels of land in the City of Zamboanga, designated as lots 36
and 38 of the cadastral plan of the place, and covered by Transfer Certificates of Title Nos. 3237 and 3238,
respectively.
On January 31, 1949, a contract of lease over said two lots was entered into by and between Jesusa Vda. de
Murga as lessor, and Juanito Chan as lessee, the basic terms of which pertinent to the present case are: The
period of the lease was ten (10) years from January 31, 1949; the lessee to pay a monthly rent of P500.00
within the first ten days of every month; with the consent of the lessor, the lessee may introduce improvements
on the land; and Clause "7" quoted hereinabove. (Exhibit A.)
Upon taking possession of the leased premises, with the consent of the lessor, the lessee introduced
improvements on the land consisting of buildings of the total costs of P70,000.00. It is not disputed that the
lessee paid in full the monthly rent during the ten- year period of the lease.
As early as July 23, 1958, before the expiration of the ten-year period of the lease, there had been intercourse
of communications between the lessor and the lessee for the renewal of the lease, but the parties failed to
arrive at an agreement; hence, this action by the lessor against the lessee.
Thus, on July 23, 1958, the lessor informed the lessee of her willingness to renew the lease for five years at a
monthly rent of P700.00. (Exhibit B.) In his reply the lessee said:

... Much as I am willing to consider the suggested increase of rental, however, I would like to plead with
you that due to very poor business at present, I may not be able to consider your indicated increase.
(Exhibit C.)
On August 1, 1958, the lessor advised the lessee that:
Beginning February 1, 1959, ... the rental of my lots ... will be P700.00. (Exhibit D.)
On January 18, 1959, the lessee advised the lessor that she (lessor) should purchase the buildings
constructed on the land in accordance with the stipulation in the contract of lease, and
... In case you do not agree with the purchase of the aforesaid buildings, I am willing to continue
occupying the land and execute a new contract of lease, but I am appealing to you to take into
consideration the prevailing business conditions by reducing the monthly rental to P400.00, ... (Exhibit
L.)
On January 19, 1959, the lessor replied that
... she rejects the option to purchase the buildings, ... and her present last offer is: (a) Six hundred
pesos (P600.00) rentals payable within the first fifteen days of every month, without contract; or (b)
Seven hundred pesos (P700.00) rentals payable within the first fifteen days of every month, one year
advanced rental, with a five-year contract. (Exhibit F.)
On January 20, 1959, the lessor informed the lessee that the conditions stated in the latter's letter of January
18, 1959, were not acceptable to her. (Exhibit G.)
On January 21, 1959, the lessee advised the lessor that he (lessee) cannot accept the conditions stated in her
(lessor's) letters of January 19 and 20, 1959
... y, insists que Vd. compre mis casas enclavadas en los lotes objeto de arrendamiento. Y en caso de
su negative seguire ocupando el solar bajo el pago de un alquiler mensual de Quinientos pesos
(P500.00) debido al negocio reinante en estos dias, tal como esta dispuesto en el contrato de
arrendamiento firmado por Vd. y yo el dia 31 de Enero de 1949." (Exhibit H.)
On February 4, 1959, the lessor made demand on the lessee to vacate the premises
... for the reason that the lease contract had expired on January 31, 1959, ... and the lessor had waived
the right to exercise the option granted her under paragraph "7" of said contract, ... (Exhibit I.)
On February 16, 1959, the lessee sent his check for P500.00 to the lessor in payment of the monthly rental
corresponding to the month of February, 1959. (See Exhibit J.)
On February 19, 1959, the lessor returned to the lessee the check which the latter had sent to the former,
stating further in the letter that she was demanding that the leased premises be vacated, if he (lessor) would
not agree to pay the new rental of P600.00 or P700.00 a month beginning February 1, 1959, as embodied in
the letter, Exhibit J, hereinabove quoted.
Disregarding the written demand of the lessor, dated February 19, 1959, Exhibit J, the lessee chose to remain
in the possession of the leased premises and insisted that the contract of lease stipulated an automatic
renewal of the lease, and conformably thereto, he has a right to continue occupying the premises; and as
token of his decision, he sent to the lessor his check for P500.00 in payment of the monthly rent corresponding
to the month of February 1959. The lessor was undoubtedly not satisfied with the tendered amount of P500.00,

because she had demanded P600.00 or P700.00, as new monthly rent as a condition for the renewal of the
lease. And without any further definite demand on the lessee to vacate the premises filed, on March 10, 1959,
a complaint of unlawful detainer in the municipal court of Zamboanga City against the lessee, Juanito Chan, to
eject the latter from the leased premises. The facts alleged in the complaint as cause of action, consisted in
reproducing and reiterating the substance of the correspondence exchanged between lessor and lessee, as
narrated above, and claiming that the possession of the lessee of the premises had become illegal by his
failure and refusal to pay the increased new rental. For relief, the plaintiff prayed that the defendant be ordered
to vacate the premises, and "TO PAY THE NEW RENTS DEMANDED OF P600.00 or P700.00 FROM
FEBRUARY 1, 1959 MONTHLY AS THE CASE MAY BE." Attached to the complaint, as annexes thereto, were
copies of the letters exchanged between the lessor and the lessee, Exhibits B to J.
In his answer (as amended), the defendant admitting the genuineness and authenticity of the letters annexed
to the complaint, but traversing some of the allegations therein, raised the defenses of lack of jurisdiction of the
court over the case, and lack of cause of action for unlawful detainer.
After a trial, decision was rendered ordering the defendant to vacate the premises, to pay the plaintiff the sum
of P600.00 as monthly rent from February 1, 1959, and P500.00 as attorney's fees.
The defendant appealed from the decision to the Court of First Instance of Zamboanga City. Before this Court,
the defendant again raised the special defenses of lack of jurisdiction of the municipal court and lack of cause
of action for unlawful detainer. Ruling on the issue of lack of jurisdiction, the court said:
With reference to the contention of defendant that the municipal court had no jurisdiction to try this case
because the interpretation, application and enforcement of the terms of the Lease Agreement is within
the competence of a court higher than that of the municipal court, deserves hardly any discussion.
Suffice it to say that the jurisdiction of the municipal court is grounded on Section 88 of the Judiciary Act
of 1948.
After a trial, the Court of First Instance rendered judgment ordering the defendant to vacate the premises, to
pay the plaintiff the sum of P1,200.00 from February 1, 1959, as monthly rental of the land, and P2,000.00 as
attorney's fees.
From the foregoing decision, the defendant interposed a direct appeal to this Court. Therefore, only questions
of law may be considered in this appeal.
Among the four errors assigned by the appellant in his brief, the first two pose the issue of lack of jurisdiction of
the municipal Court and of the lack of cause of action for unlawful detainer; the remaining errors delving on
questions of fact which, by reason of the nature of the appeal are, therefore, deemed admitted and may not be
reviewed in this appeal.
In relation to the issue of lack of jurisdiction of the municipal court over the case, it is to be noted that, after the
lessor and the lessee had failed to agree on the renewal of the lease which terminated on January 31, 1959,
the lessor, on February 19, 1959, sent the demand letter hereinabove quoted, Exhibit J. It was, then, as it is
now, the contention of the lessee that such demand is not that kind of demand contemplated in the Rules of
Court as complying with the jurisdictional requirement that demand to vacate is indispensable in order to
determine whether the tenant's possession has become illegal. On this matter, the rulings in the following
cases are pertinent and applicable:
The notice giving lessee the alternative either to pay the increased rental or otherwise to vacate the
land is not the demand contemplated by the Rules of Court in unlawful detainer cases. When after such
notice, the lessee elects to stay, he thereby merely assumes the new rental and cannot be ejected until

he defaults in said obligation and necessary demand is first made. (Manotok vs. Guinto, L-9540, April
30, 1957.)
The lessor may, under Article 1569 of the Civil Code, judicially disposses the lessee for default in the
payment of the price agreed upon. But where such default is based on the fact that the rent sought to
be collected is not that agreed upon, an action for ejectment cannot lie. (Belmonte vs. Martin, 42 Off.
Gaz. No. 10, 2146.)
In the case at bar, it clearly appears from the demand letter of February 19, 1959, that the obligation to vacate
the leased premises would be dependent on the failure of the lessee to agree to the new rent demanded by
the lessor. As the lessee, however, was in the physical possession of the land by virtue of a prior contract of
lease, and the demand was in the alternative imposing a new rental, even without taking into account the
efficacy of the stipulation for an automatic renewal of the lease, which shall be discussed hereafter, in the light
of the ruling inBelmonte vs. Martin, supra, without any subsequent definite demand to vacate the premises,
subject to no condition, the lessee did not incur in default which would give rise to a right on the part of the
lessor to bring an action of unlawful detainer.
Delving on the second special defense to wit, that the allegations in the complaint do not constitute a cause of
action of unlawful detainer, it is the contention of the lessee-appellant that clause "7" of the contract of lease,
quoted hereinabove, meant an express grant to the lessee to renew the lease at his option, contrary to the
claim of the lessor-appellee that there must be a prior mutual agreement of the parties. As we read clause "7",
We find that it envisioned the happening of two eventualities at the expiration of the lease on January 31, 1959
either the lessor may purchase the improvements constructed by the lessee on the land, or in case the
lessor fails, for any cause or reason, to exercise the option to buy, the lease shall be deemed automatically
renewed. The evidence has established that the lessor had refused to buy the buildings on the land. The
statement in said clause "7" that in case of renewal the duration of the lease and the new rental to be paid shall
be adjusted by the parties, is of no moment in the solution of the issue, whether or not the facts alleged in the
complaint constitute a cause of action of unlawful detainer. The pleadings of the parties, and the annexes
thereto, clearly show that the jugular vein of the controversy hinges on the correct interpretation of clause "7" of
the contract of lease, a matter outside the jurisdiction of the municipal court. The lessor-appellee maintains that
the lease had terminated on January 31, 1959, renewable only upon a new agreement of the parties; on the
other hand, the lessee-appellant contends that, inasmuch as the controversy hinges on the interpretation of
clause "7" of the contract, that is, whether or not said clause contemplated an automatic renewal of the lease,
the action was not for unlawful detainer but one not capable of pecuniary estimation and, therefore, beyond the
competence of the municipal court.
The contention of the lessee-appellant must be sustained.
In Cruz vs. Alberto, 39 Phil. 991, the contract of lease had the following provision:
That the term of this contract of lease shall be six years from the date of the execution, and extendible
for another six years agreed upon by both parties.
It was contended by the lessor that the lease cannot be extended except upon mutual agreement. Ruling on
the contention, the Supreme Court said:
We are of the opinion that the trial judge was entirely correct in his interpretation of the contracts in
question; and though it must be admitted that this interpretation renders the words "agreed upon by
both parties" superfluous yet this does not involve any strain upon the meaning of the entire passage. If
the interpretation which the appellant would have us adopt be true, the entire clause relative to the
extension of the term would be superfluous, for if the extension is only to be effective upon a new
agreement of the parties to be made at the expiration of the original term, why should anything at all be

said about an extension? Parties who are free to make one contract of lease are certainly free to make
a new one when the old has expired without being reminded of their faculty to do so by the insertion of
a clause of this kind in the first lease. This would not only be superfluous but nonsensical. The clause
relative to the extension of the lease should, if possible, be so interpreted as to give it some force.
As we interpret the contracts before us, the parties meant to express the fact that they had already
agreed that there might be an extension of the lease and had agreed upon its duration, thus giving the
defendant the right of election to take for a second term or to quit upon the expiration of the original
term. The clause in question has the same meaning as if the words "agreed upon by both parties" had
been omitted and the passage had closed with a period after the word "years" in the first contract and
after "extension" in the third contract.
It has been held by this court that the word "extendible" standing without qualification in a contract of
lease, means that the term of the lease may be extended and is equivalent to a promise to extend,
made by the lessor to the lessee, and, as unilateral stipulation, obliges the promisor to fulfill his
promise. (Legarda Koh vs. Ongsiako, 36 Phil. Rep. 185). Such a stipulation is supported by the
consideration which is at the basis of the contract of lease (16 R.C.L. pp. 883, 884) and obviously
involves a mutuality of benefit, or reciprocity, between the parties, notwithstanding the right of election
is conceded solely to the lessee. As a general rule, in construing provisions of this character, the tenant
is favored, where there is any uncertainty, and not the landlord, upon the principle that a grant should
be taken most strongly against the grantor. (15 R.C.L. p. 884, 24 Cyc. 915.)
In the case of Legarda Koh vs. Ongsiaco, 36 Phil. 189-190, the contract of lease had this provision:
The term of the said contract shall be for one year, counting from the 1st of December of the present
year (1963) which term shall be extendible at the will of both parties.
Said the Supreme Court:
According to Article 1091 of the Civil Code, obligations arising from contracts have legal force between
the contracting parties and must be fulfilled in accordance with their stipulation. Therefore, if the
defendant bound himself to lease his properties for the period of one year, which term should be
extendible, it is evident and strictly in accord with justice that the plaintiff-lessee has a right, at the
termination of the first period of one year, to have the said contract of lease renewed in fulfillment of the
stipulated extension of the term of the lease; otherwise, the clause contained in the document Exhibit 1,
that the lease at its termination would be extendible, would be worthless.
The defendant-appellant is wrong in his contention that the renewal or extension of the contract
depended solely upon himself, notwithstanding the stipulations contained in said contract, inasmuch as
the renewal and continuation of the lease could not be left wholly to the plaintiff's free will, without
counting on the defendant's consent a consent expressly granted in the promise that the term would
be extended, which term, although its duration was not fixed, should be understood to be for another
year, a period equal to and not greater than the term of the lease.
When a contract of lease provides that the term thereof is extendible, the agreement is understood as
being in favor of the lessee, and the latter is authorized to renew the contract and to continue to occupy
the leased property, after notifying the lessor to that effect. The lessor can withdraw from the said
contract only after having fulfilled his promise to grant the extension of time stipulated therein, unless
the lessee has failed to comply with or has violated the conditions of the contract. It is not necessary
that the extension be expressly conceded by the lessor because he consented thereto in the original
contract.

UPON THE FOREGOING CONSIDERATIONS, We declare that the municipal court (now city court) of
Zamboanga City had no jurisdiction over the case; therefore, the appealed decision is set aside and reversed,
with costs against the plaintiff-appellee.

10.
[G.R. No. 146195. November 18, 2004]
AVELINA ZAMORA, EMERITA ZAMORA-NICOL, SONNY NICOL, TERESA ZAMORA-UMALI, CLARENCE
UMALI, ROBERTO ZAMORA, ROLANDO ZAMORA, MARY ANN ZAMORA, MICHELLE ZAMORA
and RODRIGO ZAMORA, petitioners, vs. HEIRS of CARMEN IZQUIERDO, represented by their
attorney-in-fact, ANITA F. PUNZALAN, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari[1] assailing the Decision[2] of the Court of Appeals dated
September 12, 2000 and its Resolution dated December 1, 2000 in CA-G.R. SP No. 54541, entitled Avelina
Zamora, et al., petitioners, versus Heirs of Carmen Izquierdo, represented by the executrix, Anita F. Punzalan,
respondents.
The records show that sometime in 1973, Carmen Izquierdo and Pablo Zamora entered into a verbal
stipulation whereby the former leased to the latter one of her apartment units located at 117-B General Luna
Street, Caloocan City. They agreed on the following: the rental is P3,000.00 per month; the leased premises is
only for residence; and only a single family is allowed to occupy it.
After the death of Carmen (lessor) in 1996 her attorney-in-fact, Anita Punzalan, representing the heirs,
herein respondents, prepared a new contract of lease wherein the rental was increased from P3,000.00
to P3,600.00 per month.[3] However, petitioners refused to sign it.
In January 1997, Pablo (lessee) died. His wife, Avelina Zamora, and their children (two of whom have their
own families), herein petitioners, continued to reside in the apartment unit. However, they refused to pay the
increased rental and persisted in operating a photocopying business in the same apartment.
Meanwhile, petitioner Avelina Zamora applied with the Metropolitan Waterworks & Sewerage System
(MWSS) for a water line installation in the premises. Since a written consent from the owner is required for
such installation, she requested respondents attorney-in-fact to issue it. However, the latter declined because
petitioners refused to pay the new rental rate and violated the restrictions on the use of the premises by using
a portion thereof for photocopying business and allowing three families to reside therein.
This prompted petitioner Avelina Zamora to file with the Office of the Punong Barangay of Barangay 16,
Sona 2, District I, Lungsod ng Caloocan, a complaint against Anita Punzalan (respondents attorney-in-fact),
docketed as Usaping Bgy. Blg. 1-27-97, Ukol sa: Hindi Pagbibigay ng Pahintulot sa Pagpapakabit ng Tubig.

On August 24, 1997, during the barangay conciliation proceedings, petitioner Avelina Zamora declared
that she refused to sign the new lease contract because she is not agreeable with the conditions specified
therein.
The following day, Anita Punzalan sent Avelina a letter [4] informing her that the lease is being terminated
and demanding that petitioners vacate the premises within 30 days from notice.
Despite several barangay conciliation sessions, the parties failed to settle their dispute amicably. Hence,
the Barangay Chairman issued a Certification to File Action dated September 14, 1997.[5]
Consequently, on October 2, 1997, respondents, represented by Anita Punzalan, filed with the
Metropolitan Trial Court (MTC), Branch 49, Caloocan City, a complaint for unlawful detainer and damages
against petitioners, docketed as Civil Case No. 23702. [6] Forthwith, petitioners filed a motion to dismiss [7] the
complaint on the ground that the controversy was not referred to the barangay for conciliation. First, they
alleged that the barangay Certification to File Action is fatally defective because it pertains to another
dispute, i.e., the refusal by respondents attorney-in-fact to give her written consent to petitioners request for
installation of water facilities in the premises. And, second, when the parties failed to reach an amicable
settlement before the Lupong Tagapamayapa, the Punong Barangay (as Lupon Chairman), did not constitute
the Pangkat ng Tagapagkasundo before whom mediation or arbitration proceedings should have been
conducted, in violation of Section 410(b), Chapter 7 (Katarungang Pambarangay), Title One, Book III of
Republic Act No. 7160[8] (otherwise known as the Local Government Code of 1991), which reads:
SECTION 410. Procedure for Amicable Settlement.
(a) x x x
(b) Mediation by lupon chairman Upon receipt of the complaint, the lupon chairman[9] shall, within the next
working day, summon the respondent(s), with notice to the complainant(s) for them and their witnesses to
appear before him for a mediation of their conflicting interests. If he fails in his mediation effort within fifteen
(15) days from the first meeting of the parties before him, he shall forthwith set a date for the
constitution of the pangkat in accordance with the provisions of this Chapter. (Underscoring supplied)
Respondents opposed the motion to dismiss,[10] the same being prohibited under Section 19 of the 1991
Revised Rule on Summary Procedure. They prayed that judgment be rendered as may be warranted by the
facts alleged in the complaint, pursuant to Section 6[11] of the same Rule.
On July 9, 1998, the MTC issued an Order [12] denying petitioners motion to dismiss and considering the
case submitted for decision in view of their failure to file their answer to the complaint.
Petitioners filed a motion for reconsideration, [13] contending that a motion to dismiss the complaint on the
ground of failure to refer the complaint to the Lupon for conciliation is allowed under Section 19 of the 1991
Revised Rule on Summary Procedure, which partly provides:
SEC. 19. Prohibited pleadings and motions. The following pleadings, motions, or petitions shall not be
allowed in the cases covered by this Rule:
(a) Motion to dismiss the complaint or to quash the complaint or information except on the ground of lack
of jurisdiction over the subject matter, or failure to comply with the preceding section[referring to Section 18
on referral of the complaint to the Lupon for conciliation];
x x x.

On August 26, 1998, the MTC rendered a Judgment[14] in favor of respondents and against petitioners, the
dispositive portion of which reads:
WHEREFORE, Judgment is hereby rendered in favor of the plaintiff and against the defendants, ordering
defendants and all persons claiming right under them:
1)

To vacate the leased premises located at No. 117-B General Luna Street, Caloocan City
and to surrender possession thereof to the plaintiff;

2)

To pay the amount of three thousand six hundred (P3,600.00) pesos per month starting
January, 1997 until the premises being occupied by them is finally vacated and possession
thereof is restored to the plaintiff;

3)

To pay plaintiff the sum of five thousand (P5,000.00) pesos as and for attorneys fees; and

4)

To pay the costs of this suit.

SO ORDERED.
On appeal, the Regional Trial Court (RTC), Branch 125, Caloocan City, rendered its Decision [15] dated
February 15, 1999 affirming the MTC Judgment. Subsequently, it denied petitioners motion for reconsideration.
[16]

Petitioners then filed with the Court of Appeals a petition for review, docketed as CA-G.R. SP No. 54541.
On September 12, 2000, it rendered a Decision[17] affirming the RTC Decision.
Thereafter, petitioners filed a motion for reconsideration but was denied by the Appellate Court in its
Resolution dated December 1, 2000.[18]
Hence, the instant petition.
I
The primordial objective of Presidential Decree No. 1508 (the Katarungang Pambarangay Law), now
included under R.A. No. 7160 (the Local Government Code of 1991), is to reduce the number of court
litigations and prevent the deterioration of the quality of justice which has been brought about by the
indiscriminate filing of cases in the courts. [19] To attain this objective, Section 412(a) of R.A. No. 7160 requires
the parties to undergo a conciliation process before the Lupon Chairman or the Pangkat as a precondition to
filing a complaint in court, thus:
SECTION 412. Conciliation. (a) Pre-condition to Filing of Complaint in Court. No complaint, petition, action, or
proceeding involving any matter within the authority of the lupon shall be filed or instituted directly in court or
any other government office for adjudication, unless there has been a confrontation between the parties before
the lupon chairman or the pangkat, and that no conciliation or settlement has been reached as certified by
the lupon or pangkat secretary and attested to by the lupon or pangkat chairman x x x. (Underscoring
supplied)
In the case at bar, the Punong Barangay, as Chairman of the Lupong Tagapamayapa, conducted
conciliation proceedings to resolve the dispute between the parties herein. Contrary to petitioners contention,
the complaint does not only allege, as a cause of action, the refusal of respondents attorney-in-fact to give her
consent to the installation of water facilities in the premises, but also petitioners violation of the terms of the

lease, specifically their use of a portion therein for their photocopying business and their failure to pay the
increased rental. As correctly found by the RTC:
The records show that confrontations before the barangay chairman were held on January 26, 1997, February
9, 1997, February 23, 1997, February 28, 1997, July 27, 1997, August 3, 1997, August 10, 1997, August 17,
1997 and August 24, 1997 wherein not only the issue of water installation was discussed but also the terms of
the lease and the proposed execution of a written contract relative thereto. It appears, however, that no
settlement was reached despite a total of nine meetings at the barangay level.
It is of no moment that the complaint was initially made by defendant-appellant Avelina Zamora because herein
plaintiff-appellee was given by the Sangguniang Barangay the authority to bring her grievance to the Court for
resolution. While it is true that the Sertifikasyon dated September 14, 1997 is entitled Ukol Sa Hindi Pagbibigay
Ng Pahintulot Sa Pagpapakabit Ng Tubig, this title must not prevail over the actual issues discussed in the
proceedings.
Hence, to require another confrontation at the barangay level as a sine qua non for the filing of the instant case
would not serve any useful purpose anymore since no new issues would be raised therein and the parties have
proven so many times in the past that they cannot get to settle their differences amicably.[20]
We cannot sustain petitioners contention that the Lupon conciliation alone, without the proceeding before
the Pangkat ng Tagapagkasundo, contravenes the law on Katarungang Pambarangay. Section 412(a) of R.A.
No. 7160, quoted earlier, clearly provides that, as a precondition to filing a complaint in court, the parties shall
go through the conciliation processeither before the Lupon Chairman (as what happened in the present
case), or the Pangkat.
Moreover, in Diu vs. Court of Appeals,[21] we held that notwithstanding the mandate in Section 410(b) of
R.A. No. 7160 that the Barangay Chairman shall constitute a Pangkat if he fails in his mediation efforts, the
same Section 410(b) should be construed together with Section 412(a) of the same law (quoted earlier), as
well as the circumstances obtaining in and peculiar to the case. Here, while the Pangkat was not constituted,
however, the parties met nine (9) times at the Office of the Barangay Chairman for conciliation wherein not
only the issue of water installation was discussed but also petitioners violation of the lease contract. It is thus
manifest that there was substantial compliance with the law which does not require strict adherence thereto.[22]
II
We hold that petitioners motion to dismiss the complaint for unlawful detainer is proscribed by Section
19(a) of the 1991 Revised Rule on Summary Procedure, quoted earlier. Section 19(a) permits the filing of such
pleading only when the ground for dismissal of the complaint is anchored on lack of jurisdiction over the
subject matter, or failure by the complainant to refer the subject matter of his/her complaint to
the Lupon for conciliation prior to its filing with the court. This is clear from the provisions of Section 18 of the
same Rule, which reads:
SEC. 18. Referral to Lupon. Cases requiring referral to the Lupon for conciliation under the provisions of
Presidential Decree No. 1508 where there is no showing of compliance with such requirement, shall be
dismissed without prejudice, and may be revived only after such requirement shall have been complied with.
This provision shall not apply to criminal cases where the accused was arrested without a warrant.
(Underscoring supplied)
As discussed earlier, the case was referred to the Lupon Chairman for conciliation. Obviously, petitioners
motion to dismiss, even if allowed, is bereft of merit.

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 54541 sustaining the Decision of the RTC which upheld the MTC Judgment is AFFIRMED.
Costs against petitioners.