Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 198755               June 5, 2013

ALBERTO PAT-OG, SR., Petitioner,

vs.
CIVIL SERVICE COMMISSION, Respondent.

DECISION

MENDOZA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, which
seeks to set aside the April 6, 2011 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No.
101700, affirming the April 11, 2007 Decision2 of the Civil Service Commission (CSC), which ordered
the dismissal of petitioner Alberto Pat-og, Sr. (Pat-og) from the service for grave misconduct.

The Facts

On September 13, 2003, Robert Bang-on (Bang-on), then a 14-year old second year high school
student of the Antadao National High School in Sagada, Mountain Province, tiled an affidavit-
complaint against Pat-og, a third year high school teacher of the same school, before the Civil
Service Commission-Cordillera Administrative Region (CSC-CAR).

Bang-on alleged that on the morning of August 26, 2003, he attended his class at the basketball
court of the school, where Pat-og and his third year students were also holding a separate class; that
he and some of his classmates joined Pat-og’s third year students who were practicing basketball
shots; that Pat-og later instructed them to form two lines; that thinking that three lines were to be
formed, he stayed in between the two lines; that Pat-og then held his right arm and punched his
stomach without warning for failing to follow instructions; and that as a result, he suffered stomach
pain for several days and was confined in a hospital from September 10-12, 2003, as evidenced by
a medico-legal certificate, which stated that he sustained a contusion hematoma in the hypogastric
area.

Regarding the same incident, Bang-on filed a criminal case against Pat-og for the crime of Less
Serious Physical Injury with the Regional Trial Court (RTC) of Bontoc, Mountain Province.

Taking cognizance of the administrative case, the CSC-CAR directed Pat-og to file his counter-
affidavit. He denied the charges hurled against him and claimed that when he was conducting his
Music, Arts, Physical Education and Health (MAPEH) class, composed of third year students, he
instructed the girls to play volleyball and the boys to play basketball; that he later directed the boys
to form two lines; that after the boys failed to follow his repeated instructions, he scolded them in a
loud voice and wrested the ball from them; that while approaching them, he noticed that there were
male students who were not members of his class who had joined the shooting practice; that one of
those male students was Bang-on, who was supposed to be having his own MAPEH class under
another teacher; that he then glared at them, continued scolding them and dismissed the class for
their failure to follow instructions; and that he offered the sworn statement of other students to prove
that he did not box Bang-on.

On June 1, 2004, the CSC-CAR found the existence of a prima faciecase for misconduct and
formally charged Pat-og.

While the proceedings of the administrative case were ongoing, the RTC rendered its judgment in
the criminal case and found Pat-og guilty of the offense of slight physical injury. He was meted the
penalty of imprisonment from eleven (11) to twenty (20) days. Following his application for probation,
the decision became final and executory and judgment was entered.

Meanwhile, in the administrative case, a pre-hearing conference was conducted after repeated
postponement by Pat-og. With the approval of the CSC-CAR, the prosecution submitted its position
paper in lieu of a formal presentation of evidence and formally offered its evidence, which included
the decision in the criminal case. It offered the affidavits of Raymund Atuban, a classmate of Bang-
on; and James Domanog, a third year high school student, who both witnessed Pat-og hit Bang-on
in the stomach.

For his defense, Pat-og offered the testimonies of his witnesses - Emiliano Dontongan (Dontongan),
a teacher in another school, who alleged that he was a member of the Municipal Council for the
Protection of Children, and that, in such capacity, he investigated the incident and came to the
conclusion that it did not happen at all; and Ernest Kimmot, who testified that he was in the
basketball court at the time but did not see such incident. Pat-og also presented the affidavits of
thirteen other witnesses to prove that he did not punch Bang-on.

Ruling of the CSC-CAR

In its Decision,3 dated September 19, 2006, the CSC-CAR found Pat-og guilty and disposed as
follows:

WHEREFORE, all premises told, respondent Alberto Pat-og, Sr., Teacher Antadao National High
School, is hereby found guilty of Simple Misconduct.

Under the Uniform Rules on Administrative Cases in the Civil Service, the imposable penalty on the
first offense of Simple Misconduct is suspension of one (1) month and one (1) day to six (6) months.

Due to seriousness of the resulting injury to the fragile body of the minor victim, the CSC-CAR
hereby imposed upon respondent the maximum penalty attached to the offense which is six months
suspension without pay.

The CSC-CAR gave greater weight to the version posited by the prosecution, finding that a blow was
indeed inflicted by Pat-og on Bang-on. It found that Pat-og had a motive for doing so - his students’
failure to follow his repeated instructions which angered him. Nevertheless, the CSCCAR ruled that
a motive was not necessary to establish guilt if the perpetrator of the offense was positively
identified. The positive identification of Pat-og was duly proven by the corroborative testimonies of
the prosecution witnesses, who were found to be credible and disinterested. The testimony of
defense witness, Dontongan, was not given credence considering that the students he interviewed
for his investigation claimed that Pat-og was not even angry at the time of the incident, contrary to
the latter’s own admission.
The CSC-CAR held that the actions of Pat-og clearly transgressed the proper norms of conduct
required of a public official, and the gravity of the offense was further magnified by the seriousness
of the injury of Bang-on which required a healing period of more than ten (10) days. It pointed out
that, being his teacher, Pat-og’s substitute parental authority did not give him license to physically
chastise a misbehaving student. The CSC-CAR added that the fact that Pat-og applied for probation
in the criminal case, instead of filing an appeal, further convinced it of his guilt.

The CSC-CAR believed that the act committed by Pat-og was sufficient to find him guilty of Grave
Misconduct. It, however, found the corresponding penalty of dismissal from the service too harsh
under the circumstances. Thus, it adjudged petitioner guilty of Simple Misconduct and imposed the
maximum penalty of suspension for six (6) months.

On December 11, 2006, the motion for reconsideration filed by Pat-og was denied for lack of merit. 4

The Ruling of the CSC

In its Resolution,5 dated April 11, 2007, the CSC dismissed Pat-og’s appeal and affirmed with
modification the decision of the CSC-CAR as follows:

WHEREFORE, foregoing premises considered, the instant appeal is hereby DISMISSED. The
decision of the CSC-CAR is affirmed with the modification that Alberto Pat-og, Sr., is adjudged guilty
of grave misconduct, for which he is meted out the penalty of dismissal from the service with all its
accessory penalties of cancellation of eligibilities, perpetual disqualification from reemployment in
the government service, and forfeiture of retirement benefits. 6

After evaluating the records, the CSC sustained the CSC-CAR’s conclusion that there existed
substantial evidence to sustain the finding that Pat-og did punch Bang-on in the stomach. It gave
greater weight to the positive statements of Bang-on and his witnesses over the bare denial of
Patog. It also highlighted the fact that Pat-og failed to adduce evidence of any ill motive on the part
of Bang-on in filing the administrative case against him. It likewise gave credence to the medico-
legal certificate showing that Bang-on suffered a hematoma contusion in his hypogastric area.

The CSC ruled that the affidavits of Bang-on’s witnesses were not bereft of evidentiary value even if
Pat-og was not afforded a chance to cross-examine the witnesses of Bang-on. It is of no moment
because the cross- examination of witnesses is not an indispensable requirement of administrative
due process.

The CSC noted that Pat-og did not question but, instead, fully acquiesced in his conviction in the
criminal case for slight physical injury, which was based on the same set of facts and circumstances,
and involved the same parties and issues. It, thus, considered his prior criminal conviction as
evidence against him in the administrative case.

Finding that his act of punching his student displayed a flagrant and wanton disregard of the dignity
of a person, reminiscent of corporal punishment that had since been outlawed for being harsh,
unjust, and cruel, the CSC upgraded Pat-og’s offense from Simple Misconduct to Grave Misconduct
and ordered his dismissal from the service.

Pat-og filed a motion for reconsideration, questioning for the first time the jurisdiction of CSC over
the case. He contended that administrative charges against a public school teacher should have
been initially heard by a committee to be constituted pursuant to the Magna Carta for Public School
Teachers.
On November 5, 2007, the CSC denied his motion for reconsideration. 7 It ruled that Pat-og was
estopped from challenging its jurisdiction considering that he actively participated in the
administrative proceedings against him, raising the issue of jurisdiction only after his appeal was
dismissed by the CSC.

Ruling of the Court of Appeals

In its assailed April 6, 2011 Decision,8 the CA affirmed the resolutions of the CSC. It agreed that Pat-
og was estopped from questioning the jurisdiction of the CSC as the records clearly showed that he
actively participated in the proceedings. It was of the view that Pat-og was not denied due process
when he failed to cross-examine Bang-on and his witnesses because he was given the opportunity
to be heard and present his evidence before the CSC-CAR and the CSC.

The CA also held that the CSC committed no error in taking into account the conviction of Pat-og in
the criminal case. It stated that his conviction was not the sole basis of the CSC for his dismissal
from the service because there was substantial evidence proving that Pat-og had indeed hit Bang-
on.

In its assailed Resolution,9 dated September 13, 2011, the CA denied the motion for reconsideration
filed by Pat-og.

Hence, the present petition with the following

Assignment of Errors

WHETHER OR NOT RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION WHEN IT AFFIRMED THE SUPREME PENALTY OF DISMISSAL FROM SERVICE
WITH FORFEITURE OF RETIREMENT BENEFITS AGAINST THE PETITIONER WITHOUT
CONSIDERING PETITIONER’S LONG YEARS OF GOVERNMENT SERVICE?

WHETHER OR NOT RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION WHEN IT RULED THAT PETITIONER IS ESTOPPED FROM QUESTIONING THE
JURISDICTION OF THE CIVIL SERVICE COMMISSION TO HEAR AND DECIDE THE
ADMINISTRATIVE CASE AGAINST HIM?

WHETHER OR NOT RESPONDENT COURT OF APPEALS SERIOUSLY ERRED AND

COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING THE APPEAL DESPITE LACK
OF SUBSTANTIAL EVIDENCE?

On Jurisdiction

Pat-og contends that Section 9 of Republic Act (R.A.) No. 4670, otherwise known as the Magna
Carta for Public School Teachers, provides that administrative charges against a public school
teacher shall be heard initially by a committee constituted under said section. As no committee was
ever formed, the petitioner posits that he was denied due process and that the CSC did not have the
jurisdiction to hear and decide his administrative case. He further argues that notwithstanding the
fact that the issue of jurisdiction was raised for the first time on appeal, the rule remains that
estoppel does not confer jurisdiction on a tribunal that has no jurisdiction over the cause of action or
subject matter of the case.

The Court cannot sustain his position.

The petitioner’s argument that the administrative case against him can only proceed under R.A. No.
4670 is misplaced.

In Puse v. Santos-Puse,10 it was held that the CSC, the Department of Education (DepEd) and the
Board of Professional Teachers-Professional Regulatory Commission (PRC) have concurrent
jurisdiction over administrative cases against public school teachers.

Under Article IX-B of the 1987 Constitution, the CSC is the body charged with the establishment and
administration of a career civil service which embraces all branches and agencies of the
government.11 Executive Order (E.O.) No. 292 (the Administrative Code of 1987) 12 and Presidential
Decree (P.D.) No. 807 (the Civil Service Decree of the Philippines) 13 expressly provide that the CSC
has the power to hear and decide administrative disciplinary cases instituted with it or brought to it
on appeal. Thus, the CSC, as the central personnel agency of the government, has the inherent
power to supervise and discipline all members of the civil service, including public school teachers.

Indeed, under Section 9 of R.A. No. 4670, the jurisdiction over administrative cases of public school
teachers is lodged with the investigating committee constituted therein. 14 Also, under Section 23 of
R.A. No. 7836 (the Philippine Teachers Professionalization Act of 1994), the Board of Professional
Teachers is given the power, after due notice and hearing, to suspend or revoke the certificate of
registration of a professional teacher for causes enumerated therein. 15

Concurrent jurisdiction is that which is possessed over the same parties or subject matter at the
same time by two or more separate tribunals. When the law bestows upon a government body the
jurisdiction to hear and decide cases involving specific matters, it is to be presumed that such
jurisdiction is exclusive unless it be proved that another body is likewise vested with the same
jurisdiction, in which case, both bodies have concurrent jurisdiction over the matter. 16

Where concurrent jurisdiction exists in several tribunals, the body that first takes cognizance of the
complaint shall exercise jurisdiction to the exclusion of the others. In this case, it was CSC which first
acquired jurisdiction over the case because the complaint was filed before it. Thus, it had the
authority to proceed and decide the case to the exclusion of the DepEd and the Board of
Professional Teachers.17

In CSC v. Alfonso,18 it was held that special laws, such as R.A. No. 4670, do not divest the CSC of
its inherent power to supervise and discipline all members of the civil service, including public school
teachers. Pat-og, as a public school teacher, is first and foremost, a civil servant accountable to the
people and answerable to the CSC for complaints lodged against him as a public servant. To hold
that R.A. No. 4670 divests the CSC of its power to discipline public school teachers would negate
the very purpose for which the CSC was established and would impliedly amend the Constitution
itself.

To further drive home the point, it was ruled in CSC v. Macud 19 that R.A. No. 4670, in imposing a
separate set of procedural requirements in connection with administrative proceedings against public
school teachers, should be construed to refer only to the specific procedure to be followed in
administrative investigations conducted by the DepEd. By no means, then, did R.A. No. 4670 confer
an exclusive disciplinary authority over public school teachers on the DepEd.

At any rate, granting that the CSC was without jurisdiction, the petitioner is indeed estopped from
raising the issue. Although the rule states that a jurisdictional question may be raised at any time,
such rule admits of the exception where, as in this case, estoppel has supervened. 20 Here, instead of
opposing the CSC’s exercise of jurisdiction, the petitioner invoked the same by actively participating
in the proceedings before the CSC-CAR and by even filing his appeal before the CSC itself; only
raising the issue of jurisdiction later in his motion for reconsideration after the CSC denied his
appeal. This Court has time and again frowned upon the undesirable practice of a party submitting
his case for decision and then accepting the judgment only if favorable, but attacking it for lack of
jurisdiction when adverse.21

On Administrative Due Process

On due process, Pat-og asserts that the affidavits of the complainant and his witnesses are of
questionable veracity having been subscribed in Bontoc, which is nearly 30 kilometers from the
residences of the parties. Furthermore, he claimed that considering that the said affiants never
testified, he was never afforded the opportunity to cross-examine them. Therefore, their affidavits
were mere hearsay and insufficient to prove his guilt.

The petitioner does not persuade.

The essence of due process is simply to be heard, or as applied to administrative proceedings, a fair
and reasonable opportunity to explain one’s side, or an opportunity to seek a reconsideration of the
action or ruling complained of.22 Administrative due process cannot be fully equated with due
process in its strict judicial sense. In administrative proceedings, a formal or trial-type hearing is not
always necessary23 and technical rules of procedure are not strictly applied. Hence, the right to
cross-examine is not an indispensable aspect of administrative due process. 24 The petitioner cannot,
therefore, argue that the affidavit of Bang-on and his witnesses are hearsay and insufficient to prove
his guilt.

At any rate, having actively participated in the proceedings before the CSC-CAR, the CSC, and the
CA, the petitioner was apparently afforded every opportunity to explain his side and seek
reconsideration of the ruling against him. 1âwphi1

As to the issue of the veracity of the affidavits, such is a question of fact which cannot now be raised
before the Court under Rule 45 of the Rules of Court. The CSC-CAR, the CSC and the CA did not,
therefore, err in giving credence to the affidavits of the complainants and his witnesses, and in
consequently ruling that there was substantial evidence to support the finding of misconduct on the
part of the petitioner.

On the Penalty

Assuming that he did box Bang-on, Pat-og argues that there is no substantial evidence to prove that
he did so with a clear intent to violate the law or in flagrant disregard of the established rule, as
required for a finding of grave misconduct. He insists that he was not motivated by bad faith or ill will
because he acted in the belief that, as a teacher, he was exercising authority over Bang-on in loco
parentis, and was, accordingly, within his rights to discipline his student. Citing his 33 years in the
government service without any adverse record against him and the fact that he is at the edge of
retirement, being already 62 years old, the petitioner prays that, in the name of substantial and
compassionate justice, the CSC-CAR’s finding of simple misconduct and the concomitant penalty of
suspension should be upheld, instead of dismissal.

The Court agrees in part.

Misconduct means intentional wrongdoing or deliberate violation of a rule of law or standard of

behavior. To constitute an administrative offense, misconduct should relate to or be connected with
the performance of the official functions and duties of a public officer. In grave misconduct, as
distinguished from simple misconduct, the elements of corruption, clear intent to violate the law or
t1agrant disregard of an established rule must be manifest. 25

Teachers are duly licensed professionals who must not only be competent in the practice of their
noble profession, but must also possess dignity and a reputation with high moral values. They must
strictly adhere to, observe, and practice the set of ethical and moral principles, standards, and
values laid down in the Code of Ethics of Professional Teachers, which apply to all teachers in
schools in the Philippines, whether public or private, as provided in the preamble of the said
Code.26 Section 8 of Article VIII of the same Code expressly provides that "a teacher shall not inflict
corporal punishment on offending learners."

Clearly then, petitioner cannot argue that in punching Bang-on, he was exercising his right as a
teacher in loco parentis to discipline his student. It is beyond cavil that the petitioner, as a public
school teacher, deliberately violated his Code of Ethics. Such violation is a flagrant disregard for the
established rule contained in the said Code tantamount to grave misconduct.

Under Section 52(A)(2) of Rule IV of the Uniform Rules on Administrative Cases in the Civil Service,
the penalty for grave misconduct is dismissal from the service, which carries with it the cancellation
of eligibility, forfeiture of retirement benefits and perpetual disqualification from reemployment in the
government service.27 This penalty must, however, be tempered with compassion as there was
sut1icient provocation on the part of Bang-on. Considering further the mitigating circumstances that
the petitioner has been in the government service for 33 years, that this is his first offense and that
he is at the cusp of retirement, the Court finds the penalty of suspension for six months as
appropriate under the circumstances.

WHEREFORE, the Court PARTIALLY GRANTS the petition and MODIFIES the April 6, 2011
Decision of the Court of Appeals in CA-G.R. SP No. 101700. Accordingly, Alberto Pat-og, Sr. is
found GUlLTY of Grave Misconduct, but the penalty is reduced from dismissal from the service to
SUSPENSION for SIX MONTHS.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice
 EN BANC

G.R. No. 202836, June 19, 2018

FIRST SARMIENTO PROPERTY HOLDINGS, INC., Petitioner, v. PHILIPPINE BANK

OF COMMUNICATIONS, Respondent.

DECISION

LEONEN, J.:

To determine the nature of an action, whether or not its subject matter is capable or
incapable of pecuniary estimation, the nature of the principal action or relief sought
must be ascertained. If the principal relief is for the recovery of a sum of money or real
property, then the action is capable of pecuniary estimation. However, if the principal
relief sought is not for the recovery of sum of money or real property, even if a claim
over a sum of money or real property results as a consequence of the principal relief,
the action is incapable of pecuniary estimation.

This resolves the Petition for Review1 filed by First Sarmiento Property Holdings, Inc.
(First Sarmiento) assailing the April 3, 2012 Decision2 and July 25, 2012 Order3 of
Branch 11, Regional Trial Court, Malolos City, Bulacan in Civil Case No. 04-M-2012.

The facts as established by the parties are as follows:

On June 19, 2002,4 First Sarmiento obtained from Philippine Bank of Communications

(PBCOM) a P40,000,000.00 loan, which was secured by a real estate mortgage5 over
1,076 parcels of land.6

On March 15, 2003,7 the loan agreement was amended8 with the increase of the loan
amount to P51,200,000.00. On September 15, 2003, the loan agreement was further
amended9 when the loan amount was increased to P100,000,000.00.

On January 2, 2006,10 PBCOM filed a Petition for Extrajudicial Foreclosure of Real Estate

Mortgage.11 It claimed in its Petition that it sent First Sarmiento several demand letters,
yet First Sarmiento still failed to pay the principal amount and accrued interest on the
loan. This prompted PBCOM to resort to extrajudicial foreclosure of the mortgaged
properties, a recourse granted to it under the loan agreement.12

On December 27, 2011, First Sarmiento attempted to file a Complaint for annulment of
real estate mortgage with the Regional Trial Court. However, the Clerk of Court refused
to accept the Complaint in the absence of the mortgaged properties' tax declarations,
which would be used to assess the docket fees.13
On December 29, 2011, Executive Judge Renato C. Francisco (Judge Francisco), First
Vice-Executive Judge Ma. Theresa A. Mendoza Arcega, Second Vice-Executive Judge
Ma. Belen R. Liban, and Third Vice-Executive Judge Basilio R. Gabo, Jr. of the Regional
Trial Court of City of Malolos, Bulacan, granted First Sarmiento's Urgent Motion to
Consider the Value of Subject Matter of the Complaint as Not Capable of Pecuniary
Estimation, and ruled that First Sarmiento's action for annulment of real estate
mortgage was incapable of pecuniary estimation.14

Also on December 29, 2011, the mortgaged properties were auctioned and sold to
PBCOM as the highest bidder.15

On January 2, 2012, First Sarmiento filed a Complaint for annulment of real estate
mortgage and its amendments, with prayer for the issuance of temporary restraining
order and preliminary injunction.16 It paid a filing fee of P5,545.00.17

First Sarmiento claimed in its Complaint that it never received the loan proceeds of
P100,000,000.00 from PBCOM, yet the latter still sought the extrajudicial foreclosure of
real estate mortgage. It prayed for the issuance of a temporary restraining order and
preliminary injunction to enjoin the Ex-Officio Sheriff from proceeding with the
foreclosure of the real estate mortgage or registering the certificate of sale in PBCOM's
favor with the Registry of Deeds of Bulacan.18

That same day, Judge Francisco issued an ex-parte temporary restraining order for 72
hours, enjoining the registration of the certificate of sale with the Registry of Deeds of
Bulacan.19

On January 4, 2012, the Regional Trial Court directed the parties to observe the status
quo ante.20

On January 24, 2012, the Clerk of Court and Ex-Officio Sheriff of Malolos City, Bulacan
issued a certificate of sale to PBCOM.21

In its Opposition (Re: Application for Issuance of Temporary Restraining

Order),22 PBCOM asserted that the Regional Trial Court failed to acquire jurisdiction over
First Sarmiento's Complaint because the action for annulment of mortgage was a real
action; thus, the filing fees filed should have been based on the fair market value of the
mortgaged properties.23

PBCOM also pointed out that the Regional Trial Court's directive to maintain the status
quo order beyond 72 hours constituted an indefinite extension of the temporary
restraining order, a clear contravention of the rules.24

On April 3, 2012, Branch 11, Regional Trial Court,25 Malolos City, Bulacan dismissed the
Complaint for lack of jurisdiction:

Following the High Court's ruling in the case of Home Guaranty Corporation v. R. II
Builders, Inc. and National Housing Authority, G.R. No. 192549, March 9, 2011, cited
by the bank in its Rejoinder, which appears to be the latest jurisprudence on the matter
to the effect that an action for annulment or rescission of contract does not operate to
efface the true objective and nature of the action which is to recover real property, this
Court hereby RESOLVES TO DISMISS the instant case for lack of jurisdiction, plaintiff
having failed to pay the appropriate filing fees.

Accordingly, the instant case is hereby DISMISSED.

SO ORDERED.26
On July 25, 2012, the Regional Trial Court27 denied First Sarmiento's motion for
reconsideration.28

On August 17, 2012, First Sarmiento sought direct recourse to this Court with its
Petition for Review29 under Rule 45. It insists that its Complaint for the annulment of
real estate mortgage was incapable of pecuniary estimation.30 It points out that the
Executive Judge and Vice-Executive Judges of the Regional Trial Court likewise
acknowledged that its action was incapable of pecuniary estimation.31

Petitioner highlights that the Supreme Court En Banc in Lu v. Lu Ym held "that an

action for declaration of nullity of issuance of shares or an action questioning the
legality of a conveyance is one not capable of pecuniary estimation."32 Furthermore,
petitioner maintains that the Supreme Court En Banc in Bunayog v. Tunas also
established that a complaint questioning the validity of a mortgage is an action
incapable of pecuniary estimation.33

It emphasizes that Home Guaranty Corporation v. R-II Builders, which the Regional

Trial Court relied on to dismiss its complaint for lack of jurisdiction, was rendered by a
division of the Supreme Court; hence, it cannot modify or reverse a doctrine or
principle of law laid down by the Supreme Court En Banc.34

On September 19, 2012,35 this Court directed respondent PBCOM to comment on the

petition.

In its Comment,36 respondent contends that petitioner's action to annul the real estate
mortgage and enjoin the foreclosure proceedings did not hide the true objective of the
action, which is to restore petitioner's ownership of the foreclosed properties.37

Respondent maintains that this Court has already settled that "a complaint for
cancellation of sale which prayed for both permanent and preliminary injunction aimed
at the restoration of possession of the land in litigation is a real action."38

It likewise stresses that since petitioner's primary objective in filing its Complaint was
to prevent the scheduled foreclosure proceedings over the mortgaged properties and
the conveyance of their ownership to the highest bidder, the case was a real action.39

Finally, it denies that Home Guaranty Corporation modified and reversed Lu v. Lu

Ym because the factual and legal milieus of these two (2) cases were different.40

On November 26, 2012,41 this Court required petitioner to file a reply to the comment.
On February 1, 2013, petitioner filed its Reply42 where it denies that its Complaint was
for the annulment of the foreclosure sale, because when it filed its Complaint, the
foreclosure sale had not yet happened.43

It proclaims that its Complaint sought the removal of the lien on the mortgaged
properties and was not intended to recover ownership or possession since it was still
the registered owner with possession of the mortgaged properties when it filed its
Complaint.44

On February 27, 2013,45 this Court noted petitioner's reply and directed the parties to
submit their respective memoranda.

On May 30, 2013, the parties filed their respective memoranda.46

In its Memorandum,47 petitioner continues to insist that it did not receive the loan
proceeds from PBCOM which is why it filed its Complaint for annulment of real estate
mortgage in response to the latter's Petition for Extrajudicial Foreclosure of Real Estate
Mortgage.48

Petitioner reiterates that its Complaint for annulment of real estate mortgage was an
action incapable of pecuniary estimation because it merely sought to remove the lien on
its properties, not the recovery or reconveyance of the mortgaged properties.49

It states that it never expressly or impliedly sought the conveyance of the mortgaged
properties because it was still the registered owner of the mortgaged properties when
its Complaint was first presented for filing with the Clerk of Court.50

On the other hand, respondent in its Memorandum51 restates its stand that petitioner's
Complaint involved a real action; hence, the estimated value of the mortgaged
properties should have been alleged and used as the basis for the computation of the
docket fees.52

Respondent claims that the allegations in petitioner's Complaint reveal the latter's real
intention to assert its title and recover the real properties sold at the public auction.53

The only issue for this Court's resolution is whether or not the Regional Trial Court
obtained jurisdiction over First Sarmiento Corporation, Inc.'s Complaint for annulment
of real estate mortgage.

Rule 45 of the Rules of Court allows for a direct recourse to this Court by appeal from a
judgment, final order, or resolution of the Regional Trial Court. Rule 45, Section 1
provides:
Section 1. Filing of petition with Supreme Court. — A party desiring to appeal by
certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on certiorari. The petition
shall raise only questions of law which must be distinctly set forth.
Rule 41, Section 2(c) likewise provides:
Section 2. Modes of appeal. —

....

(c) Appeal by certiorari. — In all cases where only questions of law are raised or
involved, the appeal shall be to the Supreme Court by petition for review on certiorari
in accordance with Rule 45.
Thus, there is no question that a petitioner may file a verified petition for review
directly with this Court if only questions of law are at issue; however, if both questions
of law and of facts are present, the correct remedy is to file a petition for review with
the Court of Appeals.54

Doña Adela Export International v. Trade and Investment Development

Corp.55 differentiated between a question of law and a question of fact as follows:
We stress that a direct recourse to this Court from the decisions, final resolutions and
orders of the RTC may be taken where only questions of law are raised or involved.
There is a question of law when the doubt or difference arises as to what the law is on a
certain state of facts, which does not call for an examination of the probative value of
the evidence presented by the parties-litigants. On the other hand, there is a question
of fact when the doubt or controversy arises as to the truth or falsity of the alleged
facts. Simply put, when there is no dispute as to fact, the question of whether the
conclusion drawn therefrom is correct or not, is a question of law.56 (Citation omitted)
In the case at bar, the underlying question for this Court's resolution pertains to
jurisdiction, or to be more precise, whether the Regional Trial Court attained jurisdiction
over petitioner's Complaint with the amount of docket fees paid.

Considering that the issue of jurisdiction is a pure question of law,57 petitioner did not
err in filing its appeal directly with this Court pursuant to law and prevailing
jurisprudence.

II

Petitioner contends that its Complaint for annulment of real estate mortgage has a
subject incapable of pecuniary estimation because it was not intended to recover
ownership or possession of the mortgaged properties sold to respondent during the
auction sale.58 It insists that it had ownership and possession of the mortgaged
properties when it filed its Complaint; hence, it never expressly or impliedly sought
recovery of their ownership or possession.59

The petition is meritorious.

Jurisdiction is "the power and authority of a court to hear, try and decide a
case"60 brought before it for resolution.

Courts exercise the powers conferred on them with binding effect if they acquire
jurisdiction over: "(a) the cause of action or the subject matter of the case; (b) the
thing or the res; (c) the parties; and (d) the remedy."61
Jurisdiction over the thing or the res is a court's authority over the object subject of
litigation.62 The court obtains jurisdiction or actual custody over the object through the
seizure of the object under legal process or the institution of legal proceedings which
recognize the power and authority of the court.63

Jurisdiction over the parties is the court's power to render judgment that are binding on
the parties. The courts acquire jurisdiction over the plaintiffs when they file their
initiatory pleading, while the defendants come under the court's jurisdiction upon the
valid service of summons or their voluntary appearance in court.64

Jurisdiction over the cause of action or subject matter of the case is the court's
authority to hear and determine cases within a general class where the proceedings in
question belong. This power is conferred by law and cannot be acquired through
stipulation, agreement between the parties,65 or implied waiver due to the silence of a
party.66

Jurisdiction is conferred by the Constitution, with Congress given the plenary power, for
cases not enumerated in Article VIII, Section 567 of the Constitution, to define,
prescribe, and apportion the jurisdiction of various courts.68

Batas Pambansa Blg. 129, or the Judiciary Reorganization Act of 1980 as amended by
Republic Act No. 7691, provided for the jurisdictional division between the first and
second level courts by considering the complexity of the cases and the experience
needed of the judges assigned to hear the cases.

In criminal cases, first level courts are granted exclusive original jurisdiction to hear
complaints on violations of city or municipal ordinances69 and offenses punishable with
imprisonment not exceeding six (6) years.70 In contrast, second level courts, with more
experienced judges sitting at the helm, are granted exclusive original jurisdiction to
preside over all other criminal cases not within the exclusive jurisdiction of any other
court, tribunal, or body.71

The same holds true for civil actions and probate proceedings, where first level courts
have the power to hear cases where the value of personal property, estate, or amount
of the demand does not exceed P100,000.00 or P200,000.00 if in Metro Manila.72 First
level courts also possess the authority to hear civil actions involving title to, possession
of, or any interest in real property where the value does not exceed P20,000.00 or
P50,000.00 if the real property is situated in Metro Manila.73 Second level courts then
assume jurisdiction when the values involved exceed the threshold amounts reserved
for first level courts74 or when the subject of litigation is incapable of pecuniary
estimation.75

First level courts were also conferred with the power to hear the relatively
uncomplicated cases of forcible entry and unlawful detainer,76 while second level courts
are authorized to hear all actions in admiralty and maritime jurisdiction77 with claims
above a certain threshold amount. Second level courts are likewise authorized to hear
all cases involving the contract of marriage and marital relations,78 in recognition of the
expertise and probity required in deciding issues which traverse the marital sphere.
Section 19(1) of Batas Pambansa Blg. 129, as amended, provides Regional Trial Courts
with exclusive, original jurisdiction over "all civil actions in which the subject of the
litigation is incapable of pecuniary estimation."

Lapitan v. Scandia79 instructed that to determine whether the subject matter of an

action is incapable of pecuniary estimation, the nature of the principal action or remedy
sought must first be established. This finds support in this Court's repeated
pronouncement that jurisdiction over the subject matter is determined by examining
the material allegations of the complaint and the relief sought.80Heirs of Dela Cruz v.
Heirs of Cruz81 stated, thus:
It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or
government agency, over the nature and subject matter of a petition or complaint is
determined by the material allegations therein and the character of the relief prayed
for, irrespective of whether the petitioner or complainant is entitled to any or all such
reliefs.82
However, Lapitan stressed that where the money claim is only a consequence of the
remedy sought, the action is said to be one incapable of pecuniary estimation:
A review of the jurisprudence of this Court indicates that in determining whether an
action is one the subject matter of which is not capable of pecuniary estimation, this
Court has adopted the criterion of first ascertaining the nature of the principal action or
remedy sought. If it is primarily for the recovery of a sum of money, the claim is
considered capable of pecuniary estimation, and whether jurisdiction is in the municipal
courts or in the courts of first instance would depend on the amount of the claim.
However, where the basic issue is something other than the right to recover a sum of
money, or where the money claim is purely incidental to, or a consequence of, the
principal relief sought like in suits to have the defendant perform his part of the
contract (specific performance) and in actions for support, or for annulment of a
judgment or to foreclose a mortgage, this Court has considered such actions as cases
where the subject of the litigation may not be estimated in terms of money, and are
cognizable exclusively by courts of first instance. The rationale of the rule is plainly that
the second class cases, besides the determination of damages, demand an inquiry into
other factors which the law has deemed to be more within the competence of courts of
first instance, which were the lowest courts of record at the time that the first organic
laws of the Judiciary were enacted allocating jurisdiction (Act 136 of the Philippine
Commission of June 11, 1901).83 (Citation omitted)
Heirs of Sebe v. Heirs of Sevilla84 likewise stressed that if the primary cause of action is
based on a claim of ownership or a claim of legal right to control, possess, dispose, or
enjoy such property, the action is a real action involving title to real property.85

A careful reading of petitioner's Complaint convinces this Court that petitioner never
prayed for the reconveyance of the properties foreclosed during the auction sale, or
that it ever asserted its ownership or possession over them. Rather, it assailed the
validity of the loan contract with real estate mortgage that it entered into with
respondent because it supposedly never received the proceeds of the P100,000,000.00
loan agreement.86 This is evident in its Complaint, which read:
GROUNDS FOR THE APPLICATION OF PRELIMINARY INJUNCTION AND TEMPORARY
RESTRAINING ORDER

7. Defendant PBCOM knows fully well that plaintiff did not receive from it the loan it
(PBCOM) alleged to have granted in its favor.
8. Despite this, defendant PBCOM has filed with the Ex-Officio Sheriff of Bulacan, a
petition for extra judicial foreclosure of real estate mortgage, bent on foreclosing the
real estate properties of plaintiff, photocopy of the petition is hereto attached as Annex
"F".

9. The auction sale of the properties is set on December 29, 2011.

10. Defendant PBCOM, well knowing the facts narrated above and willfully disregarding
the property rights of plaintiff, wrongfully filed an extra judicial foreclosure of real
estate mortgage and pursuant to said petition, the Ex-Officio Sheriff now does offer for
sale, the real estate properties of the plaintiff as set forth in its (PBCOM) said petition.

11. Unless defendants PBCOM and Ex-Officio Sheriff are restrained by this Honorable
Court, they will infringe the property rights of the plaintiff in the manner herein before
related.87
Far East Bank and Trust Company v. Shemberg Marketing Corporation88 stated that an
action for cancellation of mortgage has a subject that is incapable of pecuniary
estimation:
Here, the primary reliefs prayed for by respondents in Civil Case No. MAN-4045 is the
cancellation of the real estate and chattel mortgages for want of consideration.
In Bumayog v. Tumas, this Court ruled that where the issue involves the validity of a
mortgage, the action is one incapable of pecuniary estimation. In the more recent case
of Russell v. Vestil, this Court, citing Bumayog, held that an action questioning the
validity of a mortgage is one incapable of pecuniary estimation. Petitioner has not
shown adequate reasons for this Court to revisit Bumayog and Russell. Hence,
petitioner's contention [cannot] be sustained. Since respondents paid the docket fees,
as computed by the clerk of court, consequently, the trial court acquired jurisdiction
over Civil Case No. MAN-4045.89
It is not disputed that even if the Complaint were filed a few days after the mortgaged
properties were foreclosed and sold at auction to respondent as the highest bidder, the
certificate of sale was only issued to respondent after the Complaint was filed.

Section 6 of Act No. 3135,90 as amended, provides that a property sold through an
extrajudicial sale may be redeemed "at any time within the term of one year from and
after the date of the sale":
Section 6. In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or
judgment creditor of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold, may
redeem the same at any time within the term of one year from and after the date of the
sale; and such redemption shall be governed by the provisions of sections four hundred
and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in
so far as these are not inconsistent with the provisions of this Act.
Mahinay v. Dura Tire & Rubber Industries Inc.91 clarified that "[t]he date of the sale'
referred to in Section 6 is the date the certificate of sale is registered with the Register
of Deeds. This is because the sale of registered land does not 'take effect as a
conveyance, or bind the land' until it is registered."92
The registration of the certificate of sale issued by the sheriff after an extrajudicial sale
is a mandatory requirement; thus, if the certificate of sale is not registered with the
Registry of Deeds, the property sold at auction is not conveyed to the new owner and
the period of redemption does not begin to run.93

In the case at bar, the Ex-Officio Sheriff of the City of Malolos, Bulacan was restrained
from registering the certificate of sale with the Registry of Deeds of Bulacan and the
certificate of sale was only issued to respondent after the Complaint for annulment of
real estate mortgage was filed. Therefore, even if the properties had already been
foreclosed when the Complaint was filed, their ownership and possession remained with
petitioner since the certificate of sale was not registered with the Registry of Deeds.
This supports petitioner's claim that it never asked for the reconveyance of or asserted
its ownership over the mortgaged properties when it filed its Complaint since it still
enjoyed ownership and possession over them.

Considering that petitioner paid the docket fees as computed by the clerk of court, upon
the direction of the Executive Judge, this Court is convinced that the Regional Trial
Court acquired jurisdiction over the Complaint for annulment of real estate mortgage.

Furthermore, even if it is assumed that the instant case were a real action and the
correct docket fees were not paid by petitioner, the case should not have been
dismissed; instead, the payment of additional docket fees should have been made a
lien on the judgment award. The records attest that in filing its complaint, petitioner
readily paid the docket fees assessed by the clerk of court; hence, there was no
evidence of bad faith or intention to defraud the government that would have rightfully
merited the dismissal of the Complaint.94

III

Although not raised in the Petition, this Court nonetheless deems it proper to pass upon
the legality of the Regional Trial Court January 4, 2012 Order, which directed the
parties to observe the status quo ante,95 effectively extending indefinitely its 72-hour
ex-parte temporary restraining order issued on January 2, 2012.96

Rule 58, Section 5 of the Rules of Court provides the instances when a temporary
restraining order may be issued:
Section 5. Preliminary injunction not granted without notice; exception. — No
preliminary injunction shall be granted without hearing and prior notice to the party or
person sought to be enjoined. If it shall appear from facts shown by affidavits or by the
verified application that great or irreparable injury would result to the applicant before
the matter can be heard on notice, the court to which the application for preliminary
injunction was made, may issue a temporary restraining order to be effective only for a
period of twenty (20) days from service on the party or person sought to be enjoined,
except as herein provided. Within the said twenty-day period, the court must order said
party or person to show cause, at a specified time and place, why the injunction should
not be granted, determine within the same period whether or not the preliminary
injunction shall be granted, and accordingly issue the corresponding order.

However, and subject to the provisions of the preceding sections, if the matter is of
extreme urgency and the applicant will suffer grave injustice and irreparable injury, the
executive judge of a multiple-sala court or the presiding judge of a single-sala court
may issue ex-parte a temporary restraining order effective for only seventy-two (72)
hours from issuance but he shall immediately comply with the provisions of the next
preceding section as to service of summons and the documents to be served therewith.
Thereafter, within the aforesaid seventy-two (72) hours, the judge before whom the
case is pending shall conduct a summary hearing to determine whether the temporary
restraining order shall be extended until the application for preliminary injunction can
be heard. In no case shall the total period of effectivity of the temporary restraining
order exceed twenty (20) days, including the original seventy-two hours provided
herein.

In the event that the application for preliminary injunction is denied or not resolved
within the said period, the temporary restraining order is deemed automatically
vacated. The effectivity of a temporary restraining order is not extendible without need
of any judicial declaration to that effect and no court shall have authority to extend or
renew the same on the same ground for which it was issued.

However, if issued by the Court of Appeals or a member thereof, the temporary

restraining order shall be effective for sixty (60) days from service on the party or
person sought to be enjoined. A restraining order issued by the Supreme Court or a
member thereof shall be effective until further orders.
It is clear that a temporary restraining order may be issued by a trial court in only two
(2) instances: first, when great or irreparable injury would result to the applicant even
before the application for writ of preliminary injunction can be heard; and second, if the
matter is of extreme urgency and the applicant will suffer grave injustice and
irreparable injury. The executive judge of a multi-sala court or the presiding judge of a
single-sala court may issue a 72-hour temporary restraining order.

In both instances, the temporary restraining order may be issued ex parte. However, in
the first instance, the temporary restraining order has an effectivity of only 20 days to
be counted from service to the party sought to be enjoined. Likewise, within those 20
days, the court shall order the enjoined party to show why the injunction should not be
granted and shall then determine whether or not the injunction should be granted.

In the second instance, when there is extreme urgency and the applicant will suffer
grave injustice and irreparable injury, the court shall issue a temporary restraining
order effective for only 72 hours upon issuance. Within those 72 hours, the court shall
conduct a summary hearing to determine if the temporary restraining order shall be
extended until the application for writ of preliminary injunction can be heard. However,
in no case shall the extension exceed 20 days.

If the application for preliminary injunction is denied or not resolved within the given
periods, the temporary restraining order is automatically vacated and the court has no
authority to extend or renew it on the same ground of its original issuance.

Despite the clear wording of the rules, the Regional Trial Court issued a status quo ante
order dated January 4, 2012, indefinitely extending the temporary restraining order on
the registration of the certificate of sale with the Registry of Deeds.

Petitioner applied for a writ of preliminary injunction, yet the Regional Trial Court did
not conduct any hearing for that purpose and merely directed the parties to observe the
status quo ante.

Miriam College Foundation, Inc v. Court of Appeals 97 explained the difference between
preliminary injunction and a restraining order as follows:
Preliminary injunction is an order granted at any stage of an action or proceeding prior
to the judgment or final order, requiring a party or a court, agency or a person to
perform to refrain from performing a particular act or acts. As an extraordinary remedy,
injunction is calculated to preserve or maintain the status quo of things and is generally
availed of to prevent actual or threatened acts, until the merits of the case can be
heard. A preliminary injunction persists until it is dissolved or until the termination of
the action without the court issuing a final injunction.

The basic purpose of restraining order, on the other hand, is to preserve the status quo
until the hearing of the application for preliminary injunction. Under the former A§5,
Rule 58 of the Rules of Court, as amended by A§5, Batas Pambansa Blg. 224, a judge
(or justice) may issue a temporary restraining order with a limited life of twenty days
from date of issue. If before the expiration of the 20-day period the application for
preliminary injunction is denied, the temporary order would thereby be deemed
automatically vacated. If no action is taken by the judge on the application for
preliminary injunction within the said 20 days, the temporary restraining order would
automatically expire on the 20th day by the sheer force of law, no judicial declaration to
that effect being necessary. In the instant case, no such preliminary injunction was
issued; hence, the TRO earlier issued automatically expired under the aforesaid
provision of the Rules of Court.98 (Citations omitted)
A temporary restraining order cannot be extended indefinitely to take the place of a
writ of preliminary injunction, since a temporary restraining order is intended only to
have a limited lifespan and is deemed automatically vacated upon the expiration of 72
hours or 20 days, as the case may be. As such, the temporary restraining order has
long expired and, in the absence of a preliminary injunction, there was nothing to stop
the sheriff from registering the certificate of sale with the Registry of Deeds.

This Court has repeatedly expounded on the nature of a temporary restraining

order99 and a preliminary injunction.100 Yet lower courts consistently interchange these
ancillary remedies and disregard the sunset clause101 inherent in a temporary
restraining order by erroneously extending it indefinitely. Such ignorance or defiance of
basic remedial measures is a gross disservice to the public, who look towards the court
for legal guidance and legal remedy. More importantly, this cavalier attitude towards
these injunctive reliefs might even be construed as a deliberate effort to look the other
way to favor a party, which will then sully the image of the entire judiciary. Henceforth,
this Court will demand stricter compliance with the rules from the members of the
bench as regards their issuances of these injunctive reliefs.

IV

Finally, there is a need to reassess the place of Home Guaranty v. R-II Builders102 in our
jurisprudence.

In Home Guaranty, R-II Builders, Inc. (R-II Builders) filed a Complaint for the rescission
of the Deed of Assignment and Conveyance it entered into with Home Guaranty
Corporation and National Housing Authority. The Complaint was initially determined to
have a subject that is incapable of pecuniary estimation and the docket fees were
assessed and paid accordingly.103

R-II Builders later filed a motion to admit its Amended and Supplemental Complaint,
which deleted its earlier prayer for the resolution of its Deed of Assignment and
Conveyance, and prayed for the conveyance of title to and/or possession of the entire
Asset Pool. The Regional Trial Court ruled that the Amended and Supplemental
Complaint involved a real action and directed R-II Builders to pay the correct docket
fees.104

Instead of paying the additional docket fees, R-II Builders withdrew its Amended and
Supplemental Complaint and instead filed a motion to admit its Second Amended
Complaint, which revived the prayer in its original Complaint to resolve the Deed of
Assignment and Conveyance and deleted the causes of action for conveyance of title to
and/or possession of the entire Asset Pool in its Amended and Supplemental
Complaint.105 The Regional Trial Court granted the motion to admit the Second
Amended Complaint, ratiocinating that the docket fees to the original Complaint had
been paid; that the Second Amended Complaint was not intended to delay the
proceedings; and that the Second Amended Complaint was consistent with R-II
Builders' previous pleadings.106

The Court of Appeals upheld the ruling of the Regional Trial Court and reiterated that
the case involved a subject that was incapable of pecuniary
estimation.107 However, Home Guaranty reversed the Court of Appeals Decision, ruling
that the Complaint and the Amended and Supplemental Complaint both involved
prayers for the conveyance and/or transfer of possession of the Asset Pool, causes of
action which were undoubtedly real actions. Thus, the correct docket fees had not yet
been paid:108
Although an action for resolution and/or the nullification of a contract, like an action for
specific performance, fall squarely into the category of actions where the subject matter
is considered incapable of pecuniary estimation, we find that the causes of action for
resolution and/or nullification of the [Deed of Assignment and Conveyance] was
erroneously isolated by the [Court of Appeals] from the other causes of action alleged
in R-II Builders' original complaint and Amended and Supplemental Complaint which
prayed for the conveyance and/or transfer of possession of the Asset Pool. In Gochan v.
Gochan, this Court held that an action for specific performance would still be considered
a real action where it seeks the conveyance or transfer of real property, or ultimately,
the execution of deeds of conveyance of real property.

....

Granted that R-II Builders is not claiming ownership of the Asset Pool because its
continuing stake is, in the first place, limited only to the residual value thereof, the
conveyance and/or transfer of possession of the same properties sought in the original
complaint and Amended and Supplemental Complaint both presuppose a real action for
which appropriate docket fees computed on the basis of the assessed or estimated
value of said properties should have been assessed and paid. . . .109 (Citations omitted)
Home Guaranty stated that to determine whether an action is capable or incapable of
pecuniary estimation, the nature of the principal action or remedy prayed for must first
be determined.110 Nonetheless, in citing Ruby Shelter Builders v. Formaran, Home
Guaranty looked beyond R-II Builder's principal action for annulment or rescission of
contract to purportedly unmask its true objective and nature of its action, which was to
recover real property.111

In a dissenting opinion in the Home Guaranty112 June 22, 2011 Resolution that

dismissed R-II Builders' motion for reconsideration, Associate Justice Presbitero
Velasco, Jr. stressed that one must first look at the principal action of the case to
determine if it is capable or incapable of pecuniary estimation:
Whether or not the case is a real action, and whether or not the proper docket fees
were paid, one must look to the main cause of action of the case. In all instances, in
the original Complaint, the Amended and Supplemental Complaint and the Amended
Complaint, it was all for the resolution or rescission of the [Deed of Assignment and
Conveyance], with the prayer for the provisional remedy of injunction and the
appointment of a trustee and subsequently a receiver. In the Second Amended
Complaint, the return of the remaining assets of the asset pool, if any, to respondent R-
II Builders would only be the result of the resolution or rescission of the [Deed of
Assignment and Conveyance].

Even if real property in the Asset Pool may change hands as a result of the case in the
trial court, the fact alone that real property is involved does not make that property the
basis of computing the docket fees. De Leon v. Court of Appeals has already settled the
matter. That case, citing Bautista v, Lim, held that a case for rescission or annulment of
contract is not susceptible of pecuniary estimation. On the other hand, in the Decision
We rendered on July 25, 2005 in Serrano v. Delica, We ruled that the action for
cancellation of contracts of sale and the titles is a real action. Similarly, on February 10,
2009, We ruled in Ruby Shelter Builders and Realty Development Corporation v.
Formaran III (Ruby Shelter) that an action for nullification of a Memorandum of
Agreement which required the lot owner to issue deeds of sale and cancellation of the.
Deeds of Sale is a real action.113 (Citations omitted)
Whatever confusion there might have been regarding the nature of actions for nullity of
contracts or legality of conveyances, which would also involve recovery of sum of
money or real property, was directly addressed by Lu v. Lu Ym.114Lu underscored that
"where the basic issue is something other than the right to recover a sum of money,
the money claim being only incidental to or merely a consequence of, the principal relief
sought, the action is incapable of pecuniary estimation."115

This finds support in numerous decisions where this Court proclaimed that the test to
determine whether an action is capable or incapable of pecuniary estimation is to
ascertain the nature of the principal action or relief sought. Thus, if the principal relief
sought is the recovery of a sum of money or real property, then the action is capable of
pecuniary estimation. However, if the principal relief sought is not for the recovery of
money or real property and the money claim is only a consequence of the principal
relief, then the action is incapable of pecuniary estimation.116

Considering that the principal remedy sought by R-II Builders was the resolution of the
Deed of Assignment and Conveyance, the action was incapable of pecuniary estimation
and Home Guaranty erred in treating it as a real action simply because the principal
action was accompanied by a prayer for conveyance of real property.
It is clear that subject matter jurisdiction cannot be dependent on the supposed
ultimate motive or true objective of the complaint because this will require the judge to
speculate on the defenses of the plaintiff beyond the material allegations contained in
the complaint. Likewise, in attempting to pinpoint the true objective of the complaint at
the initial stages of trial, the judge might end up dictating the result outside of the
evidence still to be presented during the trial, opening up the judge to charges of
partiality and even impropriety. Furthermore, the judge is not aware of the evidence to
be presented by either party when the complaint is filed; thus, there is no reliable basis
that can be used to infer the true objective of the complaint. It is imperative then that
the competing claims as basis of subject matter jurisdiction be textually based, finding
its basis in the body of the complaint and the relief sought without reference to
extraneous facts not alleged or evidence still to be presented.

Nonetheless, if subject matter jurisdiction is assailed during the course of the trial and
evidence is presented to prove the defense's allegation of lack of jurisdiction, this will
lead to an anomaly where the defense's evidence, instead of the complaint, will
effectively determine the remedy and cause of action.

In the case at bar, petitioner contends that its complaint prayed for the annulment of
the real estate mortgage it entered into with respondent and not for the recovery or
reconveyance of the mortgaged properties because it was still the registered owner
when it filed its complaint. The evidence on record supports petitioner's claim; hence,
there was no reason for the dismissal of its Complaint for lack of jurisdiction.

Home Guaranty likewise erred in dismissing the action because of non-payment of the

correct filing fees. Fedman Development Corporation v. Agcaoili117 reiterated that where
the assessed docket fees have been paid and the assessment turns out to be
insufficient, the court still acquires jurisdiction over the case, subject to payment of the
deficiency assessment.118 The only exception is when the deficiency in docket fees is
accompanied with bad faith and an intention to defraud the government.119 It is not
disputed that R-II Builders paid the assessed docket fees when it filed its Complaint,
negating bad faith or intent on its part to defraud the government.

In light of the foregoing, this Court reaffirms that the nature of an action is determined
by the principal relief sought in the complaint, irrespective of the other causes of
actions that may also crop up as a consequence of the principal relief prayed for. The
contrary rule espoused in Home Guaranty is thereby set aside.

WHEREFORE, this Court resolves to GRANT the Petition. The assailed April 3, 2012
Decision and July 25, 2012 Order of Branch 11, Regional Trial Court, City of Malolos,
Bulacan in Civil Case No. 04-M-2012 are REVERSED and SET ASIDE.

The case is ordered REMANDED to Branch 11, Regional Trial Court, City of Malolos,
Bulacan for continued trial on First Sarmiento Property Holdings, Inc.'s Complaint for
annulment of real estate mortgage and its amendments.

SO ORDERED.

Carpio, Acting C. J., Velasco, Jr., Leonardo-De Castro, Peralta, Bersamin, Del Castillo,
Perlas-Bernabe, Jardeleza, Caguioa, Martires, Tijam, Reyes, Jr., and Gesmundo, JJ.,
concur.

THIRD DIVISION

G.R. No. 138822       January 23, 2001

EVANGELINE ALDAY, petitioner,
vs.
FGU INSURANCE CORPORATION, respondent.

GONZAGA-REYES, J.:

On 5 May 1989, respondent FGU Insurance Corporation filed a complaint with the Regional Trial
Court of Makati1 alleging that petitioner Evangeline K. Alday owed it P114,650.76, representing
unliquidated cash advances, unremitted costs of premiums and other charges incurred by petitioner
in the course of her work as an insurance agent for respondent. 2 Respondent also prayed for
exemplary damages, attorney's fees, and costs of suit.3 Petitioner filed her answer and by way of
counterclaim, asserted her right for the payment of P104,893.45, representing direct commissions,
profit commissions and contingent bonuses earned from 1 July 1986 to 7 December 1986, and for
accumulated premium reserves amounting to P500,000.00. In addition, petitioner prayed for
attorney's fees, litigation expenses, moral damages and exemplary damages for the allegedly
unfounded action filed by respondent.4 On 23 August 1989, respondent filed a "Motion to Strike Out
Answer With Compulsory Counterclaim And To Declare Defendant In Default" because petitioner's
answer was allegedly filed out of time.5 However, the trial court denied the motion on 25 August
1989 and similarly rejected respondent's motion for reconsideration on 12 March 1990. 6 A few weeks
later, on 11 April 1990, respondent filed a motion to dismiss petitioner's counterclaim, contending
that the trial court never acquired jurisdiction over the same because of the non-payment of docket
fees by petitoner.7 In response, petitioner asked the trial court to declare her counterclaim as exempt
from payment of docket fees since it is compulsory and that respondent be declared in default for
having failed to answer such counterclaim.8

In its 18 September 1990 Order, the trial court9 granted respondent's motion to dismiss petitioner's
counterclaim and consequently, denied petitioner's motion. The court found petitioner's counterclaim
to be merely permissive in nature and held that petitioner's failure to pay docket fees prevented the
court from acquiring jurisdiction over the same.10 The trial court similar denied petitioner's motion for
reconsideration on 28 February 1991. 1âwphi1.nêt
On 23 December 1998, the Court of Appeals 11 sustained the trial court, finding that petitioner's own
admissions, as contained in her answer, show that her counterclaim is merely permissive. The
relevant portion of the appellate court's decision12 is quoted herewith -

Contrary to the protestations of appellant, mere reading of the allegations in the answer a
quo will readily show that her counterclaim can in no way be compulsory. Take note of the
following numbered paragraphs in her answer:

"(14) That, indeed, FGU's cause of action which is not supported by any document
other than the self-serving 'Statement of Account' dated March 28, 1988 x x x

(15) That it should be noted that the cause of action of FGU is not the enforcement of
the Special Agent's Contract but the alleged 'cash accountabilities which are not
based on written agreement x x x.

x      x      x      x

(19) x x x A careful analysis of FGU's three-page complaint will show that its cause of
action is not for specific performance or enforcement of the Special Agent's Contract
rather, it is for the payment of the alleged cash accountabilities incurred by defendant
during the period form [sic] 1975 to 1986 which claim is executory and has not been
ratified. It is the established rule that unenforceable contracts, like this purported
money claim of FGU, cannot be sued upon or enforced unless ratified, thus it is as if
they have no effect. x x x."

To support the heading "Compulsory Counterclaim" in her answer and give the impression
that the counterclaim is compulsory appellant alleged that "FGU has unjustifiably failed to
remit to defendant despite repeated demands in gross violation of their Special Agent's
Contract x x x." The reference to said contract was included purposely to mislead. While on
one hand appellant alleged that appellee's cause of action had nothing to do with the Special
Agent's Contract, on the other hand, she claim that FGU violated said contract which gives
rise of [sic] her cause of action. Clearly, appellant's cash accountabilities cannot be the
offshoot of appellee's alleged violation of the aforesaid contract.

On 19 May 1999, the appellate court denied petitioner's motion for reconsideration, 13 giving rise to
the present petition.

Before going into the substantive issues, the Court shall first dispose of some procedural matters
raised by the parties. Petitioner claims that respondent is estopped from questioning her non-
payment of docket fees because it did not raise this particular issue when it filed its motion - the
"Motion to Strike out Answer With Compulsory Counterclaim And To Declare Defendant In Default" -
with the trial court; rather, it was only nine months after receiving petitioner's answer that respondent
assailed the trial court's lack of jurisdiction over petitioner's counterclaims based on the latter's
failure to pay docket fees.14 Petitioner's position is unmeritorious. Estoppel by laches arises from the
negligence or omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned or declined to assert it. 15 In the case at bar,
respondent cannot be considered as estopped from assailing the trial court's jurisdiction over
petitioner's counterclaim since this issue was raised by respondent with the trial court itself - the
body where the action is pending - even before the presentation of any evidence by the parties and
definitely, way before any judgment could be rendered by the trial court.
Meanwhile, respondent questions the jurisdiction of the Court of Appeals over the appeal filed by
petitioner from the 18 September 1990 and 28 February 1991 orders of the trial court. It is significant
to note that this objection to the appellate court's jurisdiction is raised for the first time before this
Court; respondent never having raised this issue before the appellate court. Although the lack of
jurisdiction of a court may be raised at any stage of the action, a party may be estopped from raising
such questions if he has actively taken part in the very proceedings which he questions, belatedly
objecting to the court's jurisdiction in the event that the judgment or order subsequently rendered is
adverse to him.16 In this case, respondent actively took part in the proceedings before the Court of
Appeals by filing its appellee's brief with the same. 17 Its participation, when taken together with its
failure to object to the appellate court's jurisdiction during the entire duration of the proceedings
before such court, demonstrates a willingness to abide by the resolution of the case by such tribunal
and accordingly, respondent is now most decidedly estopped from objecting to the Court of Appeals'
assumption of jurisdiction over petitioner's appeal. 18

The basic issue for resolution in this case is whether or not the counterclaim of petitioner is
compulsory or permissive in nature. A compulsory counterclaim is one which, being cognizable by
the regular courts of justice, arises out of or is connected with the transaction or occurrence
constituting the subject matter of the opposing party's claim and does not require for its adjudication
the presence of third parties of whom the court cannot acquire jurisdiction. 19

In Valencia v. Court of Appeals,20 this Court capsulized the criteria or tests that may be used in
determining whether a counterclaim is compulsory or permissive, summarized as follows:

1. Are the issues of fact and law raised by the claim and counterclaim largely the same?

2. Would res judicata bar a subsequent suit on defendant's claim absent the compulsory

counterclaim rule?

3. Will substantially the same evidence support or refute plaintiff's claim as well s

defendant's counterclaim?

4. Is there any logical relation between the claim and the counterclaim?

Another test, applied in the more recent case of Quintanilla v. Court of Appeals,21 is the "compelling
test of compulsoriness" which requires "a logical relationship between the claim and counterclaim,
that is, where conducting separate trials of the respective claims of the parties would entail a
substantial duplication of effort and time by the parties and the court."

As contained in her answer, petitioner's counterclaims are as follows:

(20) That defendant incorporates and repleads by reference all the foregoing allegations as
may be material to her Counterclaim against FGU.

(21) That FGU is liable to pay the following just, valid and legitimate claims of defendant:

(a) the sum of at least P104,893.45 plus maximum interest thereon representing,
among others, direct commissions, profit commissions and contingent bonuses
legally due to defendant; and

(b) the minimum amount of P500,000.00 plus the maximum allowable interest
representing defendant's accumulated premium reserve for 1985 and previous years,
 which FGU has unjustifiably failed to remit to defendant despite repeated demands in gross
violation of their Special Agent's Contract and in contravention of the principle of law that
"every person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith."

(22) That as a result of the filing of this patently baseless, malicious and unjustified
Complaint, and FGU's unlawful, illegal and vindictive termination of their Special Agent's
Contract, defendant was unnecessarily dragged into this litigation and to defense [sic] her
side and assert her rights and claims against FGU, she was compelled to hire the services of
counsel with whom she agreed to pay the amount of P30,000.00 as and for attorney's fees
and stands to incur litigation expenses in the amount estimated to at least P20,000.00 and
for which FGU should be assessed and made liable to pay defendant.

(23) That considering further the malicious and unwarranted action of defendant in filing this
grossly unfounded action, defendant has suffered and continues to suffer from serious
anxiety, mental anguish, fright and humiliation. In addition to this, defendant's name, good
reputation and business standing in the insurance business as well as in the community
have been besmirched and for which FGU should be adjudged and made liable to pay moral
damages to defendant in the amount of P300,000.00 as minimum.

(24) That in order to discourage the filing of groundless and malicious suits like FGU's
Complaint, and by way of serving [as] an example for the public good, FGU should be
penalized and assessed exemplary damages in the sum of P100,000.00 or such amount as
the Honorable Court may deem warranted under the circumstances. 22

Tested against the abovementioned standards, petitioner's counterclaim for commissions, bonuses,
and accumulated premium reserves is merely permissive. The evidence required to prove
petitioner's claims differs from that needed to establish respondent's demands for the recovery of
cash accountabilities from petitioner, such as cash advances and costs of premiums. The recovery
of respondent's claims is not contingent or dependent upon establishing petitioner's counterclaim,
such that conducting separate trials will not result in the substantial duplication of the time and effort
of the court and the parties. One would search the records in vain for a logical connection between
the parties' claims. This conclusion is further reinforced by petitioner's own admissions since she
declared in her answer that respondent's cause of action, unlike her own, was not based upon the
Special Agent's Contract.23 However, petitioner's claims for damages, allegedly suffered as a result
of the filing by respondent of its complaint, are compulsory. 24

There is no need for need for petitioner to pay docket fees for her compulsory counterclaim. 25 On the
other hand, in order for the trial court to acquire jurisdiction over her permissive counterclaim,
petitioner is bound to pay the prescribed docket fees. 26 The rule on the payment of filing fees has
been laid down by the Court in the case of Sun Insurance Office, Ltd. V. Hon. Maximiano Asuncion27-

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 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.

The above mentioned ruling in Sun Insurance has been reiterated in the recent case of Susan v.
Court of Appeals.28 In Suson, the Court explained that although the payment of the prescribed docket
fees is a jurisdictional requirement, its non-payment does not result in the automatic dismissal of the
case provided the docket fees are paid within the applicable prescriptive or reglementary period.
Coming now to the case at bar, it has not been alleged by respondent and there is nothing in the
records to show that petitioner has attempted to evade the payment of the proper docket fees for her
permissive counterclaim. As a matter of fact, after respondent filed its motion to dismiss petitioner's
counterclaim based on her failure to pay docket fees, petitioner immediately filed a motion with the
trial court, asking it to declare her counterclaim as compulsory in nature and therefore exempt from
docket fees and, in addition, to declare that respondent was in default for its failure to answer her
counterclaim.29 However, the trial court dismissed petitioner's counterclaim. Pursuant to this Court's
ruling in Sun Insurance, the trial court should have instead given petitioner a reasonable time, but in
no case beyond the applicable prescriptive or reglementary period, to pay the filing fees for her
permissive counterclaim.

Petitioner asserts that the trial court should have declared respondent in default for having failed to
answer her counterclaim.30 Insofar as the permissive counterclaim of petitioner is concerned, there is
obviously no need to file an answer until petitioner has paid the prescribed docket fees for only then
shall the court acquire jurisdiction over such claim. 31 Meanwhile, the compulsory counterclaim of
petitioner for damages based on the filing by respondent of an allegedly unfounded and malicious
suit need not be answered since it is inseparable from the claims of respondent. If respondent were
to answer the compulsory counterclaim of petitioner, it would merely result in the former pleading the
same facts raised in its complaint.32

WHEREFORE, the assailed Decision of the Court of Appeals promulgated on 23 December 1998

and its 19 May 1999 Resolution are hereby MODIFIED. The compulsory counterclaim of petitioner
for damages filed in Civil Case No. 89-3816 is ordered REINSTATED. Meanwhile, the Regional Trial
Court of Makati (Branch 134) is ordered to require petitioner to pay the prescribed docket fees for
her permissive counterclaim (direct commissions, profit commissions, contingent bonuses and
accumulated premium reserves), after ascertaining that the applicable prescriptive period has not yet
set in.33

SO ORDERED. 1âwphi1.nêt

Melo, Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 169576              October 17, 2008

LEONIDES MERCADO, represented by his heirs: Racquel D. Mercado, Jimmy D. Mercado,
Henry D. Mercado, Louricar D. Mercado and Virgilio D. Mercado, petitioners,
vs.
COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents.

RESOLUTION

CORONA, J.:

Leonides Mercado had been distributing respondent San Miguel Corporation’s (SMC’s) beer
products in Quiapo, Manila since 1967. In 1991, SMC extended to him a ₱7.5 million credit line
allowing him to withdraw goods on credit. To secure his purchases, Mercado assigned three China
Banking Corporation (CBC) certificates of deposit amounting to ₱5 million 1 to SMC and executed a
continuing hold-out agreement stating:

Any demand made by [SMC] on [CBC], claiming default on my/our part shall be conclusive on [CBC]
and shall serve as absolute authority for [CBC] to encash the [CBC certificates of deposit] in
accordance with the third paragraph of this Hold-Out Agreement, whether or not I/we have in fact
defaulted on any of my/our obligations with [SMC], it being understood that the issue of whether or
not there was factual default must be threshed out solely between me/us and [SMC]

He also submitted three surety bonds from Eastern Assurance and Surety Corporation (EASCO)
totaling ₱2.6 million.2

On February 10, 1992, SMC notified CBC that Mercado failed to pay for the items he withdrew on
credit. Consequently, citing the continuing hold-out agreement, it asked CBC to release the
proceeds of the assigned certificates of deposit. CBC approved SMB’s request and informed
Mercado.

On March 2, 1992, Mercado filed an action to annul the continuing hold-out agreement and deed of
assignment in the Regional Trial Court (RTC) of Manila, Branch 55. 3 He claimed that the continuing
hold-out agreement allowed forfeiture without the benefit of foreclosure. It was therefore void
pursuant to Article 2088 of the Civil Code.4 Moreover, Mercado argued that he had already settled
his recent purchases on credit but SMC erroneously applied the said payments to his old accounts
not covered by the continuing hold-out agreement (i.e., purchases made prior to the extension of the
credit line).

On March 18, 1992, SMC filed its answer with counterclaim against Mercado. It contended that
Mercado delivered only two CBC certificates of deposit amounting to ₱4.5 million 5 and asserted that
the execution of the continuing hold-out agreement and deed of assignment was a recognized
business practice. Furthermore, because Mercado admitted his outstanding liabilities, SMC sought
payment of the lees products he withdrew (or purchased on credit) worth ₱7,468,153.75. 6

On April 23, 1992, SMC filed a third-party complaint against EASCO.7 It sought to collect the
proceeds of the surety bonds submitted by Mercado.

On September 14, 1994, Mercado filed an urgent manifestation and motion seeking the dismissal of
the complaint. He claimed that he was no longer interested in annulling the continuing hold-out
agreement and deed of assignment. The RTC, however, denied the motion. 8 Instead, it set the case
for pre-trial. Thereafter, trial ensued.
During trial, Mercado acknowledged the accuracy of SMC’s computation of his outstanding liability
as of August 15, 1991. Thus, the RTC dismissed the complaint and ordered Mercado and EASCO
(to the extent of ₱2.6 million or the value of its bonds) to jointly and severally pay SMC the amount of
₱7,468,153.75.9

Aggrieved, Mercado and EASCO appealed to the Court of Appeals (CA) 10 insisting that Mercado did
not default in the payment of his obligations to SMC.

On December 14, 2004, the CA affirmed the RTC decision in toto.11 Mercado and EASCO both
moved for reconsideration but their respective motions were denied. 12

On October 28, 2005, EASCO filed a petition for review on certiorari in this Court 13 but eventually
agreed to settle its liability with SMC.14 The petition was terminated on September 19, 2007. 15

Meanwhile, Mercado passed away and was substituted by his heirs, petitioners Racquel D.
Mercado, Jimmy D. Mercado, Henry D. Mercado, Louricar D. Mercado and Virgilio D. Mercado.

Petitioners subsequently filed this petition asserting that the CA erred in affirming the RTC
decision in toto. The said decision (insofar as it ordered Mercado to pay SMC ₱7,468,153.75) was
void. SMC’s counterclaim was permissive in nature. Inasmuch as SMC did not pay docket fees, the
RTC never acquired jurisdiction over the counterclaim.

We deny the petition.

A counterclaim (or a claim which a defending party may have against any party) 16 may be
compulsory17 or permissive. A counterclaim that (1) arises out of (or is necessarily connected with)
the transaction or occurrence that is the subject matter of the opposing party’s claim; (2) falls within
the jurisdiction of the court and (3) does not require for its adjudication the presence of third parties
over whom the court cannot acquire jurisdiction, is compulsory. 18 Otherwise, a counterclaim is merely
permissive.

When Mercado sought to annul the continuing hold-out agreement and deed of assignment (which
he executed as security for his credit purchases), he in effect sought to be freed from them. While he
admitted having outstanding obligations, he nevertheless asserted that those were not covered by
the assailed accessory contracts. For its part, aside from invoking the validity of the said
agreements, SMC therefore sought to collect the payment for the value of goods Mercado
purchased on credit. Thus, Mercado’s complaint and SMC’s counterclaim both touched the issues of
whether the continuing hold-out agreement and deed of assignment were valid and whether
Mercado had outstanding liabilities to SMC. The same evidence would essentially support or refute
Mercado’s claim and SMC’s counterclaim.

Based on the foregoing, had these issues been tried separately, the efforts of the RTC and the
parties would have had to be duplicated. Clearly, SMC’s counterclaim, being logically related to
Mercado’s claim, was compulsory in nature.19 Consequently, the payment of docket fees was not
necessary for the RTC to acquire jurisdiction over the subject matter.

WHEREFORE, the petition is hereby DENIED.

Costs against petitioners.

SO ORDERED.
 RENATO C. CORONA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice<brchairperson< p="">

ANTONIO T. CARPIO ADOLFO S. AZCUNA

Associate Justice Associate Justice

</brchairperson<>

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

THIRD DIVISION

G.R. No. 151242               June 15, 2005

PROTON PILIPINAS CORPORATION, AUTOMOTIVE PHILIPPINES, ASEA ONE CORPORATION

and AUTOCORP, Petitioners,
vs.
BANQUE NATIONALE DE PARIS,1 Respondent.

DECISION

CARPIO MORALES, J.:

It appears that sometime in 1995, petitioner Proton Pilipinas Corporation (Proton) availed of the
credit facilities of herein respondent, Banque Nationale de Paris (BNP). To guarantee the payment
of its obligation, its co-petitioners Automotive Corporation Philippines (Automotive), Asea One
Corporation (Asea) and Autocorp Group (Autocorp) executed a corporate guarantee 2 to the extent of
US$2,000,000.00. BNP and Proton subsequently entered into three trust receipt agreements dated
June 4, 1996,3 January 14, 1997,4 and April 24, 1997.5

Under the terms of the trust receipt agreements, Proton would receive imported passenger motor
vehicles and hold them in trust for BNP. Proton would be free to sell the vehicles subject to the
condition that it would deliver the proceeds of the sale to BNP, to be applied to its obligations to it. In
case the vehicles are not sold, Proton would return them to BNP, together with all the accompanying
documents of title.

Allegedly, Proton failed to deliver the proceeds of the sale and return the unsold motor vehicles.

Pursuant to the corporate guarantee, BNP demanded from Automotive, Asea and Autocorp the
payment of the amount of US$1,544,984.40 6 representing Proton's total outstanding obligations.
These guarantors refused to pay, however. Hence, BNP filed on September 7, 1998 before the
Makati Regional Trial Court (RTC) a complaint against petitioners praying that they be ordered to
pay (1) US$1,544,984.40 plus accrued interest and other related charges thereon subsequent to
August 15, 1998 until fully paid and (2) an amount equivalent to 5% of all sums due from petitioners
as attorney's fees.

The Makati RTC Clerk of Court assessed the docket fees which BNP paid at ₱352,116.30 7 which
was computed as follows:8

First Cause of Action  $ 844,674.07

Second Cause of Action  171,120.53
Third Cause of Action  529,189.80
$1,544,984.40
5% as Attorney's Fees  $ 77,249.22
TOTAL ………….. $1,622,233.62
Conversion rate to peso x 43_
TOTAL ………….. ₱69,756,000.00
(roundoff)

Computation based on Rule 141:

COURT JDF
₱ 69,756,000.00 ₱ 69.606.000.00
- 150,000.00 x .003
69,606,000.00 208,818.00
x .002 + 450.00
139,212.00 ₱ 209,268.00
+ 150.00
₱ 139,362.00
LEGAL : ₱139,362.00
+ 209,268.00
 ₱348,630.00 x 1% = ₱3,486.30
₱ 139,362.00
+ 209,268.00
3,486.00
₱ 352,116.30 - Total fees paid by the plaintiff

To the complaint, the defendants-herein petitioners filed on October 12, 1998 a Motion to
Dismiss9 on the ground that BNP failed to pay the correct docket fees to thus prevent the trial court
from acquiring jurisdiction over the case.10 As additional ground, petitioners raised prematurity of the
complaint, BNP not having priorly sent any demand letter. 11

By Order12 of August 3, 1999, Branch 148 of the Makati RTC denied petitioners' Motion to Dismiss,
viz:

Resolving the first ground relied upon by the defendant, this court believes and so hold that
the docket fees were properly paid. It is the Office of the Clerk of Court of this station that computes
the correct docket fees, and it is their duty to assess the docket fees correctly, which they did. 1avvphi1 .zw+

Even granting arguendo that the docket fees were not properly paid, the court cannot just dismiss
the case. The Court has not yet ordered (and it will not in this case) to pay the correct docket fees,
thus the Motion to dismiss is premature, aside from being without any legal basis.

As held in the case of National Steel Corporation vs. CA, G.R. No. 123215, February 2, 1999, the
Supreme Court said:

xxx

Although the payment of the proper docket fees is a jurisdictional requirement, the trial court may
allow the plaintiff in an action to pay the same within a reasonable time within the expiration of
applicable prescription or reglementary period. If the plaintiff fails to comply with this requirement,
the defendant should timely raise the issue of jurisdiction or else he would be considered in
estoppel. In the latter case, the balance between appropriate docket fees and the amount actually
paid by the plaintiff will be considered a lien or (sic) any award he may obtain in his favor.

As to the second ground relied upon by the defendants, in that a review of all annexes to the
complaint of the plaintiff reveals that there is not a single formal demand letter for defendants to fulfill
the terms and conditions of the three (3) trust agreements.

In this regard, the court cannot sustain the submission of defendant. As correctly pointed out by the
plaintiff, failure to make a formal demand for the debtor to pay the plaintiff is not among the legal
grounds for the dismissal of the case. Anyway, in the appreciation of the court, this is simply
evidentiary.

xxx

WHEREFORE, for lack of merit, the Motion to Dismiss interposed by the defendants is hereby
DENIED.13 (Underscoring supplied)
Petitioners filed a motion for reconsideration14 of the denial of their Motion to Dismiss, but it was
denied by the trial court by Order15 of October 3, 2000.

Petitioners thereupon brought the case on certiorari and mandamus 16 to the Court of Appeals which,
by Decision17 of July 25, 2001, denied it in this wise:

… Section 7(a) of Rule 141 of the Rules of Court excludes interest accruing from the principal
amount being claimed in the pleading in the computation of the prescribed filing fees. The complaint
was submitted for the computation of the filing fee to the Office of the Clerk of Court of the Regional
Trial Court of Makati City which made an assessment that respondent paid accordingly. What the
Office of the Clerk of Court did and the ruling of the respondent Judge find support in the decisions
of the Supreme Court in Ng Soon vs. Alday and Tacay vs. RTC of Tagum, Davao del Norte. In the
latter case, the Supreme Court explicitly ruled that "where the action is purely for recovery of money
or damages, the docket fees are assessed on the basis of the aggregate amount claimed, exclusive
only of interests and costs."

Assuming arguendo that the correct filing fees was not made, the rule is that the court may allow a
reasonable time for the payment of the prescribed fees, or the balance thereof, and upon such
payment, the defect is cured and the court may properly take cognizance of the action unless in the
meantime prescription has set in and consequently barred the right of action. Here respondent
Judge did not make any finding, and rightly so, that the filing fee paid by private respondent was
insufficient.

On the issue of the correct dollar-peso rate of exchange, the Office of the Clerk of Court of the RTC
of Makati pegged it at ₱ 43.21 to US$1. In the absence of any office guide of the rate of exchange
which said court functionary was duty bound to follow, the rate he applied is presumptively correct.

Respondent Judge correctly ruled that the matter of demand letter is evidentiary and does not form
part of the required allegations in a complaint. Section 1, Rule 8 of the 1997 Rules of Civil Procedure
pertinently provides:

"Every pleading shall contain in a methodical and logical form, a plain, concise and direct statement
of the ultimate facts on which the party pleading relies for his claim or defense, as the case may be,
omitted the statement of mere evidentiary facts."

Judging from the allegations of the complaint particularly paragraphs 6, 12, 18, and 23 where
allegations of imputed demands were made upon the defendants to fulfill their respective obligations,
annexing the demand letters for the purpose of putting up a sufficient cause of action is not required.

In fine, respondent Judge committed no grave abuse of discretion amounting to lack or excess of
jurisdiction to warrant certiorari and mandamus.18 (Underscoring supplied)

Their Motion for Reconsideration19 having been denied by the Court of Appeals, 20 petitioners filed the
present petition for review on certiorari 21 and pray for the following reliefs:

WHEREFORE, in view of all the foregoing, it is most respectfully prayed of this Honorable Court to
grant the instant petition by REVERSING and SETTING ASIDE the questioned Decision of July 25,
2001 and the Resolution of December 18, 2001 for being contrary to law, to Administrative Circular
No. 11-94 and Circular No. 7 and instead direct the court a quo to require Private Respondent
Banque to pay the correct docket fee pursuant to the correct exchange rate of the dollar to the peso
on September 7, 1998 and to quantify its claims for interests on the principal obligations in the first,
second and third causes of actions in its Complaint in Civil Case No. 98-2180. 22 (Underscoring
supplied)

Citing Administrative Circular No. 11-94,23 petitioners argue that BNP failed to pay the correct docket
fees as the said circular provides that in the assessment thereof, interest claimed should be
included. There being an underpayment of the docket fees, petitioners conclude, the trial court did
not acquire jurisdiction over the case.

Additionally, petitioners point out that the clerk of court, in converting BNP's claims from US dollars
to Philippine pesos, applied the wrong exchange rate of US $1 = ₱43.00, the exchange rate on
September 7, 1998 when the complaint was filed having been pegged at US $1 = ₱43.21. Thus, by
petitioners' computation, BNP's claim as of August 15, 1998 was actually ₱70,096,714.72, 24 not
₱69,756,045.66.

Furthermore, petitioners submit that pursuant to Supreme Court Circular No. 7, 25 the complaint
should have been dismissed for failure to specify the amount of interest in the prayer.

Circular No. 7 reads:

TO: JUDGES AND CLERKS OF COURT OF THE COURT OF TAX APPEALS, REGIONAL TRIAL
COURTS, METROPOLITAN TRIAL COURTS IN CITIES, MUNICIPAL TRIAL COURTS,
MUNICIPAL CIRCUIT TRIAL COURTS, SHARI'A DISTRICT COURTS;AND THE INTEGRATED
BAR OF THE PHILIPPINES

SUBJECT: ALL COMPLAINTS MUST SPECIFY AMOUNT OF DAMAGES SOUGHT NOT ONLY IN

THE BODY OF THE PLEADING, BUT ALSO IN THE PRAYER IN ORDER TO BE ACCEPTED
AND ADMITTED FOR FILING. THE AMOUNT OF DAMAGES SO SPECIFIED IN THE
COMPLAINT SHALL BE THE BASIS FOR ASSESSING THE AMOUNT OF THE FILING FEES.

In Manchester Development Corporation vs. Court of Appeals, No. L-75919, May 7, 1987, 149
SCRA 562, this Court condemned the practice of counsel who in filing the original complaint omitted
from the prayer any specification of the amount of damages although the amount of over P78 million
is alleged in the body of the complaint. This Court observed that "(T)his is clearly intended for no
other purpose than to evade the payment of the correct filing fees if not to mislead the docket clerk,
in the assessment of the filing fee. This fraudulent practice was compounded when, even as this
Court had taken cognizance of the anomaly and ordered an investigation, petitioner through another
counsel filed an amended complaint, deleting all mention of the amount of damages being asked for
in the body of the complaint. xxx"

For the guidance of all concerned, the WARNING given by the court in the afore-cited case is
reproduced hereunder:

"The Court serves warning that it will take drastic action upon a repetition of this unethical practice.

To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar
pleadings should specify the amount of damages being prayed for not only in the body of the
pleading but also in the prayer, and said damages shall be considered in the assessment of
the filing fees in any case. Any pleading that fails to comply with this requirement shall not be
accepted nor admitted, or shall otherwise be expunged from the record.
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 amount sought in the amended pleading. The
ruling in the Magaspi case (115 SCRA 193) in so far as it is inconsistent with this pronouncement is
overturned and reversed."

Strict compliance with this Circular is hereby enjoined.

Let this be circularized to all the courts hereinabove named and to the President and Board of
Governors of the Integrated Bar of the Philippines, which is hereby directed to disseminate this
Circular to all its members.

March 24, 1988.

(Sgd). CLAUDIO TEEHANKEE

Chief Justice

(Emphasis and underscoring supplied)

On the other hand, respondent maintains that it had paid the filing fee which was assessed by the
clerk of court, and that there was no violation of Supreme Court Circular No. 7 because the amount
of damages was clearly specified in the prayer, to wit:

2. On the FIRST CAUSE OF ACTION -

(c) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS EIGHT HUNDRED FORTY
FOUR THOUSAND SIX HUNDRED SEVENTY FOUR AND SEVEN CENTS (US$ 844,674.07), plus
accrued interests and other related charges thereon subsequent to August 15, 1998, until fully paid;
and (ii) an amount equivalent to 5% of all sums due from said Defendant, as and for attorney's fees;

3. On the SECOND CAUSE OF ACTION -

(d) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS ONE HUNDRED TWENTY
AND FIFTY THREE CENTS (US$171,120.53), plus accrued interests and other related charges
thereon subsequent to August 15, 1998 until fully paid; and (ii) an amount equivalent to 5% of all
sums due from said Defendant, as and for attorney's fees;

4. On the THIRD CAUSE OF ACTION -

(e) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS FIVE HUNDRED TWENTY
NINE THOUSAND ONE HUNDRED EIGHTY NINE AND EIGHTY CENTS (US$529,189.80), plus
accrued interests and other related charges thereon subsequent to August 15, 1998 until fully paid;
and (ii) an amount equivalent to 5% or all sums due from said Defendant, as and for attorney's fees;

5. On ALL THE CAUSES OF ACTION -

Defendants AUTOMOTIVE CORPORATION PHILIPPINES, ASEA ONE CORPORATION and

AUTOCORP GROUP to be ordered to pay Plaintiff BNP the aggregate sum of (i) US DOLLARS
ONE MILLION FIVE HUNDRED FORTY FOUR THOUSAND NINE HUNDRED EIGHTY FOUR AND
FORTY CENTS (US$1,544,984.40) (First through Third Causes of Action), plus accrued interest and
other related charges thereon subsequent to August 15, 1998 until fully paid; and (ii) an amount
equivalent to 5% of all sums due from said Defendants, as and for attorney's fees. 26

Moreover, respondent posits that the amount of US$1,544,984.40 represents not only the principal
but also interest and other related charges which had accrued as of August 15, 1998. Respondent
goes even further by suggesting that in light of Tacay v. Regional Trial Court of Tagum, Davao del
Norte27 where the Supreme Court held,

Where the action is purely for the recovery of money or damages, the docket fees are assessed on
the basis of the aggregate amount claimed, exclusive only of interests and costs.28 (Emphasis
and underscoring supplied),

it made an overpayment.

When Tacay was decided in 1989, the pertinent rule applicable was Section 5 (a) of Rule 141 which
provided for the following:

SEC. 5. Clerks of Regional Trial Courts. - (a) For filing an action or proceeding, or a permissive
counter-claim or cross-claim not arising out of the same transaction subject of the complaint, a third-
party complaint and a complaint in intervention and for all services in the same, if the sum
claimed, exclusive of interest, of the value of the property in litigation, or the value of the
estate, is:

1. Less than ₱ 5,000.00 ….……………………………… ₱ 32.00

2. ₱ 5,000.00 or more but less than ₱ 10,000.00 ………… 48.00
3. ₱ 10,000.00 or more but less than ₱ 20,000.00 ……….. 64.00
4. ₱ 20,000.00 or more but less than ₱ 40,000.00 ……….. 80.00
5. ₱ 40,000.00 or more but less than ₱ 60,000.00 ……….. 120.00
6. ₱ 60,000.00 or more but less than ₱ 80,000.00 ………. 160.00
7. ₱ 80,000.00 or more but less than ₱ 150,000.00 ……… 200.00
8. And for each ₱ 1,000.00 in excess of ₱ 150,000.00 ..... 4.00
9. When the value of the case cannot be estimated ……… 400.00
10. When the case does not concern property
(naturalization, adoption, legal separation, etc.) ..……... 64.00
11. In forcible entry and illegal detainer cases
appealed from inferior courts …………………………………. 40.00

If the case concerns real estate, the assessed value thereof shall be considered in computing the
fees.

In case the value of the property or estate or the sum claim is less or more in accordance with the
appraisal of the court, the difference of fees shall be refunded or paid as the case may be.

When the complaint in this case was filed in 1998, however, as correctly pointed out by petitioners,
Rule 141 had been amended by Administrative Circular No. 11-94 29 which provides:
BY RESOLUTION OF THE COURT, DATED JUNE 28, 1994, PURSUANT TO SECTION 5 (5) OF
ARTICLE VIII OF THE CONSTITUTION, RULE 141, SECTION 7 (a) AND (d), and SECTION 8 (a)
and (b) OF THE RULES OF COURT ARE HEREBY AMENDED TO READ AS FOLLOWS:

RULE 141
LEGAL FEES

xxx

Sec. 7. Clerks of Regional Trial Courts

(a) For filing an action or a permissive counterclaim or money claim against an estate not based on
judgment, or for filing with leave of court a third-party, fourth-party, etc. complaint, or a complaint in
intervention, and for all clerical services in the same, if the total sum claimed, inclusive of
interest, damages of whatever kind, attorney's fees, litigation expenses, and costs, or the
stated value of the property in litigation, is:

1. Not more than ₱ 100,000.00 …………………………… ₱ 400.00

2. ₱ 100,000.00, or more but not more than ₱ 150,000.00 … 600.00
3. For each ₱ 1,000.00 in excess of ₱ 150,000.00 …………. 5.00

xxx

Sec. 8. Clerks of Metropolitan and Municipal Trial Courts

(a) For each civil action or proceeding, where the value of the subject matter
involved, or the amount of the demand, inclusive of interest, damages or
whatever kind, attorney's fees, litigation expenses, and costs, is:

1. Not more than ₱ 20,000.00 …………………………… ... ₱ 120.00

2. More than ₱ 20,000.00 but not more than ₱ 100,000.00 …. 400.00
3. More than ₱ 100,000.00 but not more than ₱ 200,000.00 … 850.00

(Emphasis and underscoring supplied)

The clerk of court should thus have assessed the filing fee by taking into consideration "the total sum
claimed, inclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and
costs, or the stated value of the property in litigation." Respondent's and the Court of Appeals'
reliance then on Tacay was not in order.

Neither was, for the same reason, the Court of Appeals' reliance on the 1989 case of Ng Soon v.
Alday,30 where this Court held:

…The failure to state the rate of interest demanded was not fatal not only because it is the
Courts which ultimately fix the same, but also because Rule 141, Section 5(a) of the Rules of
Court, itemizing the filing fees, speaks of "the sum claimed, exclusive of interest." This
clearly implies that the specification of the interest rate is not that indispensable.
Factually, therefore, not everything was left to "guesswork" as respondent Judge has opined. The
sums claimed were ascertainable, sufficient enough to allow a computation pursuant to Rule 141,
section 5(a).

Furthermore, contrary to the position taken by respondent Judge, the amounts claimed need not
be initially stated with mathematical precision. The same Rule 141, section 5(a) (3rd
paragraph), allows an appraisal "more or less."31 Thus:

"In case the value of the property or estate or the sum claimed is less or more in accordance with the
appraisal of the court, the difference of fee shall be refunded or paid as the case may be."

In other words, a final determination is still to be made by the Court, and the fees ultimately found to
be payable will either be additionally paid by the party concerned or refunded to him, as the case
may be. The above provision clearly allows an initial payment of the filing fees corresponding to the
estimated amount of the claim subject to adjustment as to what later may be proved.

". . . there is merit in petitioner's claim that the third paragraph of Rule 141, Section 5(a) clearly
contemplates a situation where an amount is alleged or claimed in the complaint but is less or more
than what is later proved. If what is proved is less than what was claimed, then a refund will be
made; if more, additional fees will be exacted. Otherwise stated, what is subject to adjustment is the
difference in the fee and not the whole amount" (Pilipinas Shell Petroleum Corp., et als., vs. Court of
Appeals, et als., G.R. No. 76119, April 10, 1989). 32 (Emphasis and underscoring supplied)

Respecting the Court of Appeals' conclusion that the clerk of court did not err when he applied the
exchange rate of US $1 = ₱43.00 "[i]n the absence of any office guide of the rate of exchange which
said court functionary was duty bound to follow,[hence,] the rate he applied is presumptively correct,"
the same does not lie. The presumption of regularity of the clerk of court's application of the
exchange rate is not conclusive.33 It is disputable.34 As such, the presumption may be overturned by
the requisite rebutting evidence.35 In the case at bar, petitioners have adequately proven with
documentary evidence36 that the exchange rate when the complaint was filed on September 7, 1998
was US $1 = ₱43.21.

In fine, the docket fees paid by respondent were insufficient.

With respect to petitioner's argument that the trial court did not acquire jurisdiction over the case in
light of the insufficient docket fees, the same does not lie.

True, in Manchester Development Corporation v. Court of Appeals,37 this Court held that the court
acquires jurisdiction over any case only upon the payment of the prescribed docket fees, 38 hence, it
concluded that the trial court did not acquire jurisdiction over the case.

It bears emphasis, however, that the ruling in Manchester was clarified in Sun Insurance Office, Ltd.
(SIOL) v. Asuncion39 when this Court held that in the former there was clearly an effort to defraud the
government in avoiding to pay the correct docket fees, whereas in the latter the plaintiff
demonstrated his willingness to abide by paying the additional fees as required.

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.40 (Emphasis and underscoring supplied)

The ruling in Sun Insurance Office was echoed in the 2005 case of Heirs of Bertuldo Hinog v. Hon.
Achilles Melicor:41

Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its non-
payment at the time of filing does not automatically cause the dismissal of the case, as long as the
fee is paid within the applicable prescriptive or reglementary period, more so when the party involved
demonstrates a willingness to abide by the rules prescribing such payment. Thus, when
insufficient filing fees were initially paid by the plaintiffs and there was no intention to
defraud the government, the Manchester rule does not apply. (Emphasis and underscoring
supplied; citations omitted)

In the case at bar, respondent merely relied on the assessment made by the clerk of court which
turned out to be incorrect. Under the circumstances, the clerk of court has the responsibility of
reassessing what respondent must pay within the prescriptive period, failing which the complaint
merits dismissal.

Parenthetically, in the complaint, respondent prayed for "accrued interest… subsequent to August
15, 1998 until fully paid." The complaint having been filed on September 7, 1998, respondent's claim
includes the interest from August 16, 1998 until such date of filing.

Respondent did not, however, pay the filing fee corresponding to its claim for interest from August
16, 1998 until the filing of the complaint on September 7, 1998. As priorly discussed, this is required
under Rule 141, as amended by Administrative Circular No. 11-94, which was the rule applicable at
the time. Thus, as the complaint currently stands, respondent cannot claim the interest from August
16, 1998 until September 7, 1998, unless respondent is allowed by motion to amend its complaint
within a reasonable time and specify the precise amount of interest petitioners owe from August 16,
1998 to September 7, 199842 and pay the corresponding docket fee therefor.

With respect to the interest accruing after the filing of the complaint, the same can only be
determined after a final judgment has been handed down. Respondent cannot thus be made to pay
the corresponding docket fee therefor. Pursuant, however, to Section 2, Rule 141, as amended by
Administrative Circular No. 11-94, respondent should be made to pay additional fees which shall
constitute a lien in the event the trial court adjudges that it is entitled to interest accruing after the
filing of the complaint.

Sec. 2. Fees as lien. - Where the court in its final judgment awards a claim not alleged, or a relief
different or more than that claimed in the pleading, the party concerned shall pay the additional fees
which shall constitute a lien on the judgment in satisfaction of said lien. The clerk of court shall
assess and collect the corresponding fees.

In Ayala Corporation v. Madayag,43 in interpreting the third rule laid down in Sun Insurance regarding
awards of claims not specified in the pleading, this Court held that the same refers only to
damages arising after the filing of the complaint or similar pleading as to which the additional
filing fee therefor shall constitute a lien on the judgment.

… The amount of any claim for damages, therefore, arising on or before the filing of the complaint or
any pleading should be specified. While it is true that the determination of certain damages as
exemplary or corrective damages is left to the sound discretion of the court, it is the duty of the
parties claiming such damages to specify the amount sought on the basis of which the court may
make a proper determination, and for the proper assessment of the appropriate docket fees. The
exception contemplated as to claims not specified or to claims although specified are left for
determination of the court is limited only to any damages that may arise after the filing of the
complaint or similar pleading for then it will not be possible for the claimant to specify nor
speculate as to the amount thereof.44 (Emphasis and underscoring supplied; citation omitted) 1avvphi1.zw+

WHEREFORE, the petition is GRANTED in part. The July 25, 2001 Decision and the December 18,
2001 Resolution of the Court Appeals are hereby MODIFIED. The Clerk of Court of the Regional
Trial Court of Makati City is ordered to reassess and determine the docket fees that should be paid
by respondent, BNP, in accordance with the Decision of this Court, and direct respondent to pay the
same within fifteen (15) days, provided the applicable prescriptive or reglementary period has not yet
expired. Thereafter, the trial court is ordered to proceed with the case with utmost dispatch.

SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Associate Justice
Chairman

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Associate Justice

CANCIO C. GARCIA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 175914               February 10, 2009

RUBY SHELTER BUILDERS AND REALTY DEVELOPMENT CORPORATION, Petitioner,

vs.
HON. PABLO C. FORMARAN III, Presiding Judge of Regional Trial Court Branch 21, Naga
City, as Pairing Judge for Regional Trial Court Branch 22, Formerly Presided By HON.
NOVELITA VILLEGAS-LLAGUNO (Retired 01 May 2006), ROMEO Y. TAN, ROBERTO L.
OBIEDO and ATTY. TOMAS A. REYES, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking
the reversal of the Decision1 dated 22 November 2006 of the Court of Appeals in CA-G.R. SP No.
94800. The Court of Appeals, in its assailed Decision, affirmed the Order 2 dated 24 March 2006 of
the Regional Trial Court (RTC), Branch 22, of Naga City, in Civil Case No. RTC-2006-0030, ordering
petitioner Ruby Shelter Builders and Realty Development Corporation to pay additional docket/filing
fees, computed based on Section 7(a) of Rule 141 of the Rules of Court, as amended.

The present Petition arose from the following facts:

Petitioner obtained a loan3 in the total amount of ₱95,700,620.00 from respondents Romeo Y. Tan
(Tan) and Roberto L. Obiedo (Obiedo), secured by real estate mortgages over five parcels of land,
all located in Triangulo, Naga City, covered by Transfer Certificates of Title (TCTs) No. 38376, 4 No.
29918,5 No. 38374,6 No. 39232,7 and No. 39225,8 issued by the Registry of Deeds for Naga City, in
the name of petitioner. When petitioner was unable to pay the loan when it became due and
demandable, respondents Tan and Obiedo agreed to an extension of the same.
In a Memorandum of Agreement9 dated 17 March 2005, respondents Tan and Obiedo granted
petitioner until 31 December 2005 to settle its indebtedness, and condoned the interests, penalties
and surcharges accruing thereon from 1 October 2004 to 31 December 2005 which amounted to
₱74,678,647.00. The Memorandum of Agreement required, in turn, that petitioner execute
simultaneously with the said Memorandum, "by way of dacion en pago," Deeds of Absolute Sale in
favor of respondents Tan and Obiedo, covering the same parcels of land subject of the mortgages.
The Deeds of Absolute Sale would be uniformly dated 2 January 2006, and state that petitioner sold
to respondents Tan and Obiedo the parcels of land for the following purchase prices:

TCT No. Purchase Price

38376 ₱ 9,340,000.00
29918 ₱ 28,000,000.00
38374 ₱ 12,000,000.00
39232 ₱ 1,600,000.00
39225 ₱ 1,600,000.00

Petitioner could choose to pay off its indebtedness with individual or all five parcels of land; or it
could redeem said properties by paying respondents Tan and Obiedo the following prices for the
same, inclusive of interest and penalties:

TCT No. Redemption Price

38376 ₱ 25,328,939.00
29918 ₱ 35,660,800.00
38374 ₱ 28,477,600.00
39232 ₱ 6,233,381.00
39225 ₱ 6,233,381.00

In the event that petitioner is able to redeem any of the afore-mentioned parcels of land, the Deed of
Absolute Sale covering the said property shall be nullified and have no force and effect; and
respondents Tan and Obiedo shall then return the owner’s duplicate of the corresponding TCT to
petitioner and also execute a Deed of Discharge of Mortgage. However, if petitioner is unable to
redeem the parcels of land within the period agreed upon, respondents Tan and Obiedo could
already present the Deeds of Absolute Sale covering the same to the Office of the Register of Deeds
for Naga City so respondents Tan and Obiedo could acquire TCTs to the said properties in their
names.

The Memorandum of Agreement further provided that should petitioner contest, judicially or
otherwise, any act, transaction, or event related to or necessarily connected with the said
Memorandum and the Deeds of Absolute Sale involving the five parcels of land, it would pay
respondents Tan and Obiedo ₱10,000,000.00 as liquidated damages inclusive of costs and
attorney’s fees. Petitioner would likewise pay respondents Tan and Obiedo the condoned interests,
surcharges and penalties.10 Finally, should a contest arise from the Memorandum of Agreement, Mr.
Ruben Sia (Sia), President of petitioner corporation, personally assumes, jointly and severally with
petitioner, the latter’s monetary obligation to respondent Tan and Obiedo.
Respondent Atty. Tomas A. Reyes (Reyes) was the Notary Public who notarized the Memorandum
of Agreement dated 17 March 2005 between respondent Tan and Obiedo, on one hand, and
petitioner, on the other.

Pursuant to the Memorandum of Agreement, petitioner, represented by Mr. Sia, executed separate
Deeds of Absolute Sale,11 over the five parcels of land, in favor of respondents Tan and Obiedo. On
the blank spaces provided for in the said Deeds, somebody wrote the 3 rd of January 2006 as the
date of their execution. The Deeds were again notarized by respondent Atty. Reyes also on 3
January 2006.

Without payment having been made by petitioner on 31 December 2005, respondents Tan and
Obiedo presented the Deeds of Absolute Sale dated 3 January 2006 before the Register of Deeds of
Naga City on 8 March 2006, as a result of which, they were able to secure TCTs over the five
parcels of land in their names.

On 16 March 2006, petitioner filed before the RTC a Complaint 12 against respondents Tan, Obiedo,
and Atty. Reyes, for declaration of nullity of deeds of sales and damages, with prayer for the
issuance of a writ of preliminary injunction and/or temporary restraining order (TRO). The Complaint
was docketed as Civil Case No. 2006-0030.

On the basis of the facts already recounted above, petitioner raised two causes of action in its
Complaint.

As for the first cause of action, petitioner alleged that as early as 27 December 2005, its President
already wrote a letter informing respondents Tan and Obiedo of the intention of petitioner to pay its
loan and requesting a meeting to compute the final amount due. The parties held meetings on 3 and
4 January 2006 but they failed to arrive at a mutually acceptable computation of the final amount of
loan payable. Respondents Tan and Obiedo then refused the request of petitioner for further
dialogues. Unbeknownst to petitioner, despite the ongoing meetings, respondents Tan and Obiedo,
in evident bad faith, already had the pre-executed Deeds of Absolute Sale notarized on 3 January
2006 by respondent Atty. Reyes. Atty. Reyes, in connivance with respondents Tan and Obiedo,
falsely made it appear in the Deeds of Absolute Sale that Mr. Sia had personally
acknowledged/ratified the said Deeds before Atty. Reyes.

Asserting that the Deeds of Absolute Sale over the five parcels of land were executed merely as
security for the payment of its loan to respondents Tan and Obiedo; that the Deeds of Absolute Sale,
executed in accordance with the Memorandum of Agreement, constituted pactum commisorium and
as such, were null and void; and that the acknowledgment in the Deeds of Absolute Sale were
falsified, petitioner averred:

13. That by reason of the fraudulent actions by the [herein respondents], [herein petitioner] is
prejudiced and is now in danger of being deprived, physically and legally, of the mortgaged
properties without benefit of legal processes such as the remedy of foreclosure and its attendant
procedures, solemnities and remedies available to a mortgagor, while [petitioner] is desirous and
willing to pay its obligation and have the mortgaged properties released. 13

In support of its second cause of action, petitioner narrated in its Complaint that on 18 January 2006,
respondents Tan and Obiedo forcibly took over, with the use of armed men, possession of the five
parcels of land subject of the falsified Deeds of Absolute Sale and fenced the said properties with
barbed wire. Beginning 3 March 2006, respondents Tan and Obiedo started demolishing some of
the commercial spaces standing on the parcels of land in question which were being rented out by
petitioner. Respondents Tan and Obiedo were also about to tear down a principal improvement on
the properties consisting of a steel-and-concrete structure housing a motor vehicle terminal operated
by petitioner. The actions of respondents Tan and Obiedo were to the damage and prejudice of
petitioner and its tenants/lessees. Petitioner, alone, claimed to have suffered at least ₱300,000.00 in
actual damages by reason of the physical invasion by respondents Tan and Obiedo and their armed
goons of the five parcels of land.

Ultimately, petitioner’s prayer in its Complaint reads:

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that upon
the filing of this complaint, a 72-hour temporary restraining order be forthwith issued ex parte:

(a) Restraining [herein respondents] Tan and Obiedo, their agents, privies or
representatives, from committing act/s tending to alienate the mortgaged properties from the
[herein petitioner] pending the resolution of the case, including but not limited to the acts
complained of in paragraph "14", above;

(b) Restraining the Register of Deeds of Naga City from entertaining moves by the
[respondents] to have [petitioner’s] certificates of title to the mortgaged properties cancelled
and changed/registered in [respondents] Tan’s and Obiedo’s names, and/or released to
them;

(c) After notice and hearing, that a writ of preliminary injunction be issued imposing the same
restraints indicated in the next preceding two paragraphs of this prayer; and

(d) After trial, judgment be rendered:

1. Making the injunction permanent;

2. Declaring the provision in the Memorandum of Agreement requiring the [petitioner]

to execute deed of sales (sic) in favor of the [respondents Tan and Obiedo] as dacion
en pago in the event of non-payment of the debt as pactum commissorium;

3. Annulling the Deed[s] of Sale for TCT Nos. 29918, 38374, 38376, 39225 and
39232, all dated January 3, 2006, the same being in contravention of law;

4. Ordering the [respondents] jointly and solidarily to pay the [petitioner] actual
damages of at least ₱300,000.00; attorney’s fees in the amount of ₱100,000.00 plus
P1,000.00 per court attendance of counsel as appearance fee; litigation expenses in
the amount of at least ₱10,000.00 and exemplary damages in the amount of
₱300,000.00, plus the costs.

[Petitioner] further prays for such other reliefs as may be proper, just and equitable under the
premises.14

Upon filing its Complaint with the RTC on 16 March 2006, petitioner paid the sum of ₱13,644.25 for
docket and other legal fees, as assessed by the Office of the Clerk of Court. The Clerk of Court
initially considered Civil Case No. 2006-0030 as an action incapable of pecuniary estimation and
computed the docket and other legal fees due thereon according to Section 7(b)(1), Rule 141 of the
Rules of Court.
Only respondent Tan filed an Answer15 to the Complaint of petitioner. Respondent Tan did admit that
meetings were held with Mr. Sia, as the representative of petitioner, to thresh out Mr. Sia’s charge
that the computation by respondents Tan and Obiedo of the interests, surcharges and penalties
accruing on the loan of petitioner was replete with errors and uncertainties. However, Mr. Sia failed
to back up his accusation of errors and uncertainties and to present his own final computation of the
amount due. Disappointed and exasperated, respondents Tan and Obiedo informed Mr. Sia that
they had already asked respondent Atty. Reyes to come over to notarize the Deeds of Absolute
Sale. Respondent Atty. Reyes asked Mr. Sia whether it was his signature appearing above his
printed name on the Deeds of Absolute Sale, to which Mr. Sia replied yes. On 4 January 2006, Mr.
Sia still failed to establish his claim of errors and uncertainties in the computation of the total amount
which petitioner must pay respondent Tan and Obiedo. Mr. Sia, instead, sought a nine-month
extension for paying the loan obligation of petitioner and the reduction of the interest rate thereon to
only one percent (1%) per month. Respondents Tan and Obiedo rejected both demands.

Respondent Tan maintained that the Deeds of Absolute Sale were not executed merely as securities
for the loan of petitioner. The Deeds of Absolute Sale over the five parcels of land were the
consideration for the payment of the total indebtedness of petitioner to respondents Tan and Obiedo,
and the condonation of the 15-month interest which already accrued on the loan, while providing
petitioner with the golden opportunity to still redeem all or even portions of the properties covered by
said Deeds. Unfortunately, petitioner failed to exercise its right to redeem any of the said properties.

Belying that they forcibly took possession of the five parcels of land, respondent Tan alleged that it
was Mr. Sia who, with the aid of armed men, on board a Sports Utility Vehicle and a truck, rammed
into the personnel of respondents Tan and Obiedo causing melee and disturbance. Moreover, by the
execution of the Deeds of Absolute Sale, the properties subject thereof were, ipso jure, delivered to
respondents Tan and Obiedo. The demolition of the existing structures on the properties was
nothing but an exercise of dominion by respondents Tan and Obiedo.

Respondent Tan, thus, sought not just the dismissal of the Complaint of petitioner, but also the grant
of his counterclaim. The prayer in his Answer is faithfully reproduced below:

Wherefore, premises considered, it is most respectfully prayed that, after due hearing, judgment be
rendered dismissing the complaint, and on the counterclaim, [herein petitioner] and Ruben Sia, be
ordered to indemnify, jointly and severally [herein respondents Tan and Obiedo] the amounts of not
less than ₱10,000,000.00 as liquidated damages and the further sum of not less than ₱500,000.00
as attorney’s fees. In the alternative, and should it become necessary, it is hereby prayed that
[petitioner] be ordered to pay herein [respondents Tan and Obiedo] the entire principal loan of
₱95,700,620.00, plus interests, surcharges and penalties computed from March 17, 2005 until the
entire sum is fully paid, including the amount of ₱74,678,647.00 foregone interest covering the
period from October 1, 2004 to December 31, 2005 or for a total of fifteen (15) months, plus
incidental expenses as may be proved in court, in the event that Annexes "G" to "L" be nullified.
Other relief and remedies as are just and equitable under the premises are hereby prayed for. 16

Thereafter, respondent Tan filed before the RTC an Omnibus Motion in which he contended that
Civil Case No. 2006-0030 involved real properties, the docket fees for which should be computed in
accordance with Section 7(a), not Section 7(b)(1), of Rule 141 of the Rules of Court, as amended by
A.M. No. 04-2-04-SC which took effect on 16 August 2004. Since petitioner did not pay the
appropriate docket fees for Civil Case No. 2006-0030, the RTC did not acquire jurisdiction over the
said case. Hence, respondent Tan asked the RTC to issue an order requiring petitioner to pay the
correct and accurate docket fees pursuant to Section 7(a), Rule 141 of the Rules of Court, as
amended; and should petitioner fail to do so, to deny and dismiss the prayer of petitioner for the
annulment of the Deeds of Absolute Sale for having been executed in contravention of the law or of
the Memorandum of Agreement as pactum commisorium.

As required by the RTC, the parties submitted their Position Papers on the matter. On 24 March
2006, the RTC issued an Order17 granting respondent Tan’s Omnibus Motion. In holding that both
petitioner and respondent Tan must pay docket fees in accordance with Section 7(a), Rule 141 of
the Rules of Court, as amended, the RTC reasoned:

It must be noted that under paragraph (b) 2. of the said Section 7, it is provided that QUIETING OF
TITLE which is an action classified as beyond pecuniary estimation "shall be governed by paragraph
(a)". Hence, the filing fee in an action for Declaration of Nullity of Deed which is also classified as
beyond pecuniary estimation, must be computed based on the provision of Section 7(A) herein-
above, in part, quoted.

Since [herein respondent], Romeo Tan in his Answer has a counterclaim against the plaintiff, the
former must likewise pay the necessary filling (sic) fees as provided for under Section 7 (A) of
Amended Administrative Circular No. 35-2004 issued by the Supreme Court. 18

Consequently, the RTC decreed on the matter of docket/filing fees:

WHEREFORE, premises considered, the [herein petitioner] is hereby ordered to pay additional filing
fee and the [herein respondent], Romeo Tan is also ordered to pay docket and filing fees on his
counterclaim, both computed based on Section 7(a) of the Supreme Court Amended Administrative
Circular No. 35-2004 within fifteen (15) days from receipt of this Order to the Clerk of Court,
Regional Trial Court, Naga City and for the latter to compute and to collect the said fees
accordingly.19

Petitioner moved20 for the partial reconsideration of the 24 March 2006 Order of the RTC, arguing
that Civil Case No. 2006-0030 was principally for the annulment of the Deeds of Absolute Sale and,
as such, incapable of pecuniary estimation. Petitioner submitted that the RTC erred in applying
Section 7(a), Rule 141 of the Rules of Court, as amended, to petitioner’s first cause of action in its
Complaint in Civil Case No. 2006-0030.

In its Order21 dated 29 March 2006, the RTC refused to reconsider its 24 March 2006 Order, based
on the following ratiocination:

Analyzing, the action herein pertains to real property, for as admitted by the [herein petitioner], "the
deeds of sale in question pertain to real property" x x x. The Deeds of Sale subject of the instant
case have already been transferred in the name of the [herein respondents Tan and Obiedo].

Compared with Quieting of Title, the latter action is brought when there is cloud on the title to real
property or any interest therein or to prevent a cloud from being cast upon title to the real property
(Art. 476, Civil Code of the Philippines) and the plaintiff must have legal or equitable title to or
interest in the real property which is the subject matter of the action (Art. 447, ibid.), and yet plaintiff
in QUIETING OF TITLE is required to pay the fees in accordance with paragraph (a) of Section 7 of
the said Amended Administrative Circular No. 35-2004, hence, with more reason that the [petitioner]
who no longer has title to the real properties subject of the instant case must be required to pay the
required fees in accordance with Section 7(a) of the Amended Administrative Circular No. 35-2004
afore-mentioned.
Furthermore, while [petitioner] claims that the action for declaration of nullity of deed of sale and
memorandum of agreement is one incapable of pecuniary estimation, however, as argued by the
[respondent Tan], the issue as to how much filing and docket fees should be paid was never raised
as an issue in the case of Russell vs. Vestil, 304 SCRA 738.

xxxx

WHEREFORE, the Motion for Partial Reconsideration is hereby DENIED. 22

In a letter dated 19 April 2006, the RTC Clerk of Court computed, upon the request of counsel for the
petitioner, the additional docket fees petitioner must pay for in Civil Case No. 2006-0030 as directed
in the afore-mentioned RTC Orders. Per the computation of the RTC Clerk of Court, after excluding
the amount petitioner previously paid on 16 March 2006, petitioner must still pay the amount of
₱720,392.60 as docket fees.23

Petitioner, however, had not yet conceded, and it filed a Petition for Certiorari with the Court of
Appeals; the petition was docketed as CA-G.R. SP No. 94800. According to petitioner, the
RTC24 acted with grave abuse of discretion, amounting to lack or excess of jurisdiction, when it
issued its Orders dated 24 March 2006 and 29 March 2006 mandating that the docket/filing fees for
Civil Case No. 2006-0030, an action for annulment of deeds of sale, be assessed under Section
7(a), Rule 141 of the Rules of Court, as amended. If the Orders would not be revoked, corrected, or
rectified, petitioner would suffer grave injustice and irreparable damage.

On 22 November 2006, the Court of Appeals promulgated its Decision wherein it held that:

Clearly, the petitioner’s complaint involves not only the annulment of the deeds of sale, but also the
recovery of the real properties identified in the said documents. In other words, the objectives of the
petitioner in filing the complaint were to cancel the deeds of sale and ultimately, to recover
possession of the same. It is therefore a real action.

Consequently, the additional docket fees that must be paid cannot be assessed in accordance with
Section 7(b). As a real action, Section 7(a) must be applied in the assessment and payment of the
proper docket fee.

Resultantly, there is no grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the court a quo. By grave abuse of discretion is meant capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, and mere abuse of discretion is not enough – it must
be grave. The abuse must be grave and patent, and it must be shown that the discretion was
exercised arbitrarily and despotically.
1avvphi1

Such a situation does not exist in this particular case. The evidence is insufficient to prove that the
court a quo acted despotically in rendering the assailed orders. It acted properly and in accordance
with law. Hence, error cannot be attributed to it.25

Hence, the fallo of the Decision of the appellate court reads:

WHEREFORE, the petition for certiorari is DENIED. The assailed Orders of the court a quo are
AFFIRMED.26

Without seeking reconsideration of the foregoing Decision with the Court of Appeals, petitioner filed
its Petition for Review on Certiorari before this Court, with a lone assignment of error, to wit:
18. The herein petitioner most respectfully submits that the Court of Appeals committed a grave and
serious reversible error in affirming the assailed Orders of the Regional Trial Court which are clearly
contrary to the pronouncement of this Honorable Court in the case of Spouses De Leon v. Court of
Appeals, G.R. No. 104796, March 6, 1998, not to mention the fact that if the said judgment is
allowed to stand and not rectified, the same would result in grave injustice and irreparable damage
to herein petitioner in view of the prohibitive amount assessed as a consequence of said Orders. 27

In Manchester Development Corporation v. Court of Appeals, 28 the Court explicitly pronounced that
"[t]he court acquires jurisdiction over any case only upon the payment of the prescribed docket fee."
Hence, the payment of docket fees is not only mandatory, but also jurisdictional.

In Sun Insurance Office, Ltd. (SIOL) v. Asuncion, 29 the Court laid down guidelines for the
implementation of its previous pronouncement in Manchester under particular circumstances, to wit:

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.

In the Petition at bar, the RTC found, and the Court of Appeals affirmed, that petitioner did not pay
the correct amount of docket fees for Civil Case No. 2006-0030. According to both the trial and
appellate courts, petitioner should pay docket fees in accordance with Section 7(a), Rule 141 of the
Rules of Court, as amended. Consistent with the liberal tenor of Sun Insurance, the RTC, instead of
dismissing outright petitioner’s Complaint in Civil Case No. 2006-0030, granted petitioner time to pay
the additional docket fees. Despite the seeming munificence of the RTC, petitioner refused to pay
the additional docket fees assessed against it, believing that it had already paid the correct amount
before, pursuant to Section 7(b)(1), Rule 141 of the Rules of Court, as amended.

Relevant to the present controversy are the following provisions under Rule 141 of the Rules of
Court, as amended by A.M. No. 04-2-04-SC30 and Supreme Court Amended Administrative Circular
No. 35-200431 :

SEC. 7. Clerks of Regional Trial Courts. –

(a) For filing an action or a permissive OR COMPULSORY counterclaim, CROSS-CLAIM, or money

claim against an estate not based on judgment, or for filing a third-party, fourth-party, etc. complaint,
or a complaint-in-intervention, if the total sum claimed, INCLUSIVE OF INTERESTS, PENALTIES,
SURCHARGES, DAMAGES OF WHATEVER KIND, AND ATTORNEY’S FEES, LITIGATIO
NEXPENSES AND COSTS and/or in cases involving property, the FAIR MARKET value of the
REAL property in litigation STATED IN THE CURRENT TAX DECLARATION OR CURRENT
ZONAL VALUATION OF THE BUREAU OF INTERNAL REVENUE, WHICHEVER IS HIGHER, OR
IF THERE IS NONE, THE STATED VALUE OF THE PROPERTY IN LITIGATION OR THE VALUE
OF THE PERSONAL PROPERTY IN LITIGATION OR THE VALUE OF THE PERSONAL
PROPERTY IN LITIGATION AS ALLEGED BY THE CLAIMANT, is:

[Table of fees omitted.]

If the action involves both a money claim and relief pertaining to property, then THE fees will be
charged on both the amounts claimed and value of property based on the formula prescribed in this
paragraph a.

(b) For filing:

1. Actions where the value of the subject matter cannot be estimated

2. Special civil actions, except judicial foreclosure of mortgage, EXPROPRIATION

PROCEEDINGS, PARTITION AND QUIETING OF TITLE which will

3. All other actions not involving property

[Table of fees omitted.]

The docket fees under Section 7(a), Rule 141, in cases involving real property depend on the fair
market value of the same: the higher the value of the real property, the higher the docket fees due.
In contrast, Section 7(b)(1), Rule 141 imposes a fixed or flat rate of docket fees on actions incapable
of pecuniary estimation.

In order to resolve the issue of whether petitioner paid the correct amount of docket fees, it is
necessary to determine the true nature of its Complaint. The dictum adhered to in this jurisdiction is
that the nature of an action is determined by the allegations in the body of the pleading or Complaint
itself, rather than by its title or heading.32 However, the Court finds it necessary, in ascertaining the
true nature of Civil Case No. 2006-0030, to take into account significant facts and circumstances
beyond the Complaint of petitioner, facts and circumstances which petitioner failed to state in its
Complaint but were disclosed in the preliminary proceedings before the court a quo.

Petitioner persistently avers that its Complaint in Civil Case No. 2006-0030 is primarily for the
annulment of the Deeds of Absolute Sale. Based on the allegations and reliefs in the Complaint
alone, one would get the impression that the titles to the subject real properties still rest with
petitioner; and that the interest of respondents Tan and Obiedo in the same lies only in the Deeds of
Absolute Sale sought to be annulled.

What petitioner failed to mention in its Complaint was that respondents Tan and Obiedo already had
the Memorandum of Agreement, which clearly provided for the execution of the Deeds of Absolute
Sale, registered on the TCTs over the five parcels of land, then still in the name of petitioner. After
respondents Tan and Obiedo had the Deeds of Absolute Sale notarized on 3 January 2006 and
presented the same to Register of Deeds for Naga City on 8 March 2006, they were already issued
TCTs over the real properties in question, in their own names. Respondents Tan and Obiedo have
also acquired possession of the said properties, enabling them, by petitioner’s own admission, to
demolish the improvements thereon.
It is, thus, suspect that petitioner kept mum about the afore-mentioned facts and circumstances
when they had already taken place before it filed its Complaint before the RTC on 16 March 2006.
Petitioner never expressed surprise when such facts and circumstances were established before the
RTC, nor moved to amend its Complaint accordingly.  Even though the Memorandum of Agreement
1avvphi1.zw+

was supposed to have long been registered on its TCTs over the five parcels of land, petitioner did
not pray for the removal of the same as a cloud on its title. In the same vein, although petitioner
alleged that respondents Tan and Obiedo forcibly took physical possession of the subject real
properties, petitioner did not seek the restoration of such possession to itself. And despite learning
that respondents Tan and Obiedo already secured TCTs over the subject properties in their names,
petitioner did not ask for the cancellation of said titles. The only logical and reasonable explanation is
that petitioner is reluctant to bring to the attention of the Court certain facts and circumstances,
keeping its Complaint safely worded, so as to institute only an action for annulment of Deeds of
Absolute Sale. Petitioner deliberately avoided raising issues on the title and possession of the real
properties that may lead the Court to classify its case as a real action.

No matter how fastidiously petitioner attempts to conceal them, the allegations and reliefs it sought
in its Complaint in Civil Case No. 2006-0030 appears to be ultimately a real action, involving as they
do the recovery by petitioner of its title to and possession of the five parcels of land from
respondents Tan and Obiedo.

A real action is one in which the plaintiff seeks the recovery of real property; or, as indicated in what
is now Section 1, Rule 4 of the Rules of Court, a real action is an action affecting title to or recovery
of possession of real property.33

Section 7, Rule 141 of the Rules of Court, prior to its amendment by A.M. No. 04-2-04-SC, had a
specific paragraph governing the assessment of the docket fees for real action, to wit:

In a real action, the assessed value of the property, or if there is none, the estimated value thereof
shall be alleged by the claimant and shall be the basis in computing the fees.

It was in accordance with the afore-quoted provision that the Court, in Gochan v. Gochan, 34 held that
although the caption of the complaint filed by therein respondents Mercedes Gochan, et al. with the
RTC was denominated as one for "specific performance and damages," the relief sought was the
conveyance or transfer of real property, or ultimately, the execution of deeds of conveyance in their
favor of the real properties enumerated in the provisional memorandum of agreement. Under these
circumstances, the case before the RTC was actually a real action, affecting as it did title to or
possession of real property. Consequently, the basis for determining the correct docket fees shall be
the assessed value of the property, or the estimated value thereof as alleged in the complaint. But
since Mercedes Gochan failed to allege in their complaint the value of the real properties, the Court
found that the RTC did not acquire jurisdiction over the same for non-payment of the correct docket
fees.

Likewise, in Siapno v. Manalo, 35 the Court disregarded the title/denomination of therein plaintiff
Manalo’s amended petition as one for Mandamus with Revocation of Title and Damages; and
adjudged the same to be a real action, the filing fees for which should have been computed based
on the assessed value of the subject property or, if there was none, the estimated value thereof. The
Court expounded in Siapno that:

In his amended petition, respondent Manalo prayed that NTA’s sale of the property in dispute to
Standford East Realty Corporation and the title issued to the latter on the basis thereof, be declared
null and void. In a very real sense, albeit the amended petition is styled as one for "Mandamus with
Revocation of Title and Damages," it is, at bottom, a suit to recover from Standford the realty in
question and to vest in respondent the ownership and possession thereof. In short, the amended
petition is in reality an action in res or a real action. Our pronouncement in Fortune Motors (Phils.),
Inc. vs. Court of Appeals is instructive. There, we said:

A prayer for annulment or rescission of contract does not operate to efface the true objectives and
nature of the action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)

An action for the annulment or rescission of a sale of real property is a real action. Its prime objective
is to recover said real property. (Gavieres v. Sanchez, 94 Phil. 760, 1954)

An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a
private sale of real property. (Muñoz v. Llamas, 87 Phil. 737, 1950).

While it is true that petitioner does not directly seek the recovery of title or possession of the property
in question, his action for annulment of sale and his claim for damages are closely intertwined with
the issue of ownership of the building which, under the law, is considered immovable property, the
recovery of which is petitioner's primary objective. The prevalent doctrine is that an action for the
annulment or rescission of a sale of real property does not operate to efface the fundamental and
prime objective and nature of the case, which is to recover said real property. It is a real action.

Unfortunately, and evidently to evade payment of the correct amount of filing fee, respondent
Manalo never alleged in the body of his amended petition, much less in the prayer portion thereof,
the assessed value of the subject res, or, if there is none, the estimated value thereof, to serve as
basis for the receiving clerk in computing and arriving at the proper amount of filing fee due thereon,
as required under Section 7 of this Court’s en banc resolution of 04 September 1990 (Re: Proposed
Amendments to Rule 141 on Legal Fees).

Even the amended petition, therefore, should have been expunged from the records.

In fine, we rule and so hold that the trial court never acquired jurisdiction over its Civil Case No. Q-
95-24791.36

It was in Serrano v. Delica,37 however, that the Court dealt with a complaint that bore the most
similarity to the one at bar. Therein respondent Delica averred that undue influence, coercion, and
intimidation were exerted upon him by therein petitioners Serrano, et al. to effect transfer of his
properties. Thus, Delica filed a complaint before the RTC against Serrano, et al., praying that the
special power of attorney, the affidavit, the new titles issued in the names of Serrano, et al., and the
contracts of sale of the disputed properties be cancelled; that Serrano, et al. be ordered to pay
Delica, jointly and severally, actual, moral and exemplary damages in the amount of ₱200,000.00,
as well as attorney’s fee of ₱200,000.00 and costs of litigation; that a TRO and a writ of preliminary
injunction be issued ordering Serrano, et al. to immediately restore him to his possession of the
parcels of land in question; and that after trial, the writ of injunction be made permanent. The Court
dismissed Delica’s complaint for the following reasons:

A careful examination of respondent’s complaint is that it is a real action. In Paderanga vs. Buissan,
we held that "in a real action, the plaintiff seeks the recovery of real property, or, as stated in Section
2(a), Rule 4 of the Revised Rules of Court, a real action is one ‘affecting title to real property or for
the recovery of possession of, or for partition or condemnation of, or foreclosure of a mortgage on a
real property.’"
Obviously, respondent’s complaint is a real action involving not only the recovery of real properties,
but likewise the cancellation of the titles thereto.

Considering that respondent’s complaint is a real action, the Rule requires that "the assessed value
of the property, or if there is none, the estimated value thereof shall be alleged by the claimant and
shall be the basis in computing the fees."

We note, however, that neither the "assessed value" nor the "estimated value" of the questioned
parcels of land were alleged by respondent in both his original and amended complaint. What he
stated in his amended complaint is that the disputed realties have a "BIR zonal valuation" of
₱1,200.00 per square meter. However, the alleged "BIR zonal valuation" is not the kind of valuation
required by the Rule. It is the assessed value of the realty. Having utterly failed to comply with the
requirement of the Rule that he shall allege in his complaint the assessed value of his real properties
in controversy, the correct docket fee cannot be computed. As such, his complaint should not have
been accepted by the trial court. We thus rule that it has not acquired jurisdiction over the present
case for failure of herein respondent to pay the required docket fee. On this ground alone,
respondent’s complaint is vulnerable to dismissal.38

Brushing aside the significance of Serrano, petitioner argues that said decision, rendered by the
Third Division of the Court, and not by the Court en banc, cannot modify or reverse the doctrine laid
down in Spouses De Leon v. Court of Appeals.39 Petitioner relies heavily on the declaration of this
Court in Spouses De Leon that an action for annulment or rescission of a contract of sale of real
property is incapable of pecuniary estimation.

The Court, however, does not perceive a contradiction between Serrano and the Spouses De Leon.
The Court calls attention to the following statement in Spouses De Leon: "A review of the
jurisprudence of this Court indicates that in determining whether an action is one the subject matter
of which is not capable of pecuniary estimation, this Court has adopted the criterion of first
ascertaining the nature of the principal action or remedy sought." Necessarily, the determination
must be done on a case-to-case basis, depending on the facts and circumstances of each. What
petitioner conveniently ignores is that in Spouses De Leon, the action therein that private
respondents instituted before the RTC was "solely for annulment or rescission" of the contract of
sale over a real property.40 There appeared to be no transfer of title or possession to the adverse
party. Their complaint simply prayed for:

1. Ordering the nullification or rescission of the Contract of Conditional Sale (Supplementary

Agreement) for having violated the rights of plaintiffs (private respondents) guaranteed to
them under Article 886 of the Civil Code and/or violation of the terms and conditions of the
said contract.

2. Declaring void ab initio the Deed of Absolute Sale for being absolutely simulated; and

3. Ordering defendants (petitioners) to pay plaintiffs (private respondents) attorney's fees in

the amount of ₱100,000.00.41

As this Court has previously discussed herein, the nature of Civil Case No. 2006-0030 instituted by
petitioner before the RTC is closer to that of Serrano, rather than of Spouses De Leon, hence,
calling for the application of the ruling of the Court in the former, rather than in the latter.

It is also important to note that, with the amendments introduced by A.M. No. 04-2-04-SC, which
became effective on 16 August 2004, the paragraph in Section 7, Rule 141 of the Rules of Court,
pertaining specifically to the basis for computation of docket fees for real actions was deleted.
Instead, Section 7(1) of Rule 141, as amended, provides that "in cases involving real property, the
FAIR MARKET value of the REAL property in litigation STATED IN THE CURRENT TAX
DECLARATION OR CURRENT ZONAL VALUATION OF THE BUREAU OF INTERNAL REVENUE,
WHICH IS HIGHER, OR IF THERE IS NONE, THE STATED VALUE OF THE PROPERTY IN
LITIGATION x x x" shall be the basis for the computation of the docket fees. Would such an
amendment have an impact on Gochan, Siapno, and Serrano? The Court rules in the negative.

A real action indisputably involves real property. The docket fees for a real action would still be
determined in accordance with the value of the real property involved therein; the only difference is
in what constitutes the acceptable value. In computing the docket fees for cases involving real
properties, the courts, instead of relying on the assessed or estimated value, would now be using the
fair market value of the real properties (as stated in the Tax Declaration or the Zonal Valuation of the
Bureau of Internal Revenue, whichever is higher) or, in the absence thereof, the stated value of the
same.

In sum, the Court finds that the true nature of the action instituted by petitioner against respondents
is the recovery of title to and possession of real property. It is a real action necessarily involving real
property, the docket fees for which must be computed in accordance with Section 7(1), Rule 141 of
the Rules of Court, as amended. The Court of Appeals, therefore, did not commit any error in
affirming the RTC Orders requiring petitioner to pay additional docket fees for its Complaint in Civil
Case No. 2006-0030.

The Court does not give much credence to the allegation of petitioner that if the judgment of the
Court of Appeals is allowed to stand and not rectified, it would result in grave injustice and
irreparable injury to petitioner in view of the prohibitive amount assessed against it. It is a sweeping
assertion which lacks evidentiary support. Undeniably, before the Court can conclude that the
amount of docket fees is indeed prohibitive for a party, it would have to look into the financial
capacity of said party. It baffles this Court that herein petitioner, having the capacity to enter into
multi-million transactions, now stalls at paying ₱720,392.60 additional docket fees so it could
champion before the courts its rights over the disputed real properties. Moreover, even though the
Court exempts individuals, as indigent or pauper litigants, from paying docket fees, it has never
extended such an exemption to a corporate entity.

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED. The
Decision, dated 22 November 2006, of the Court of Appeals in CA-G.R. SP No. 94800, which
affirmed the Orders dated 24 March 2006 and 29 March 2006 of the RTC, Branch 22, of Naga City,
in Civil Case No. RTC-2006-0030, ordering petitioner Ruby Shelter Builders and Realty
Development Corporation to pay additional docket/filing fees, computed based on Section 7(a), Rule
141 of the Rules of Court, as amended, is hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ANTONIO EDUARDO B. NACHURA

 Associate Justice Associate Justice

DIOSDADO M. PERALTA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 187104               August 3, 2010

SAINT LOUIS UNIVERSITY, INC., Petitioner,

vs.
EVANGELINE C. COBARRUBIAS, Respondent.

DECISION

BRION, J.:

We resolve the present petition for review on certiorari1 filed by petitioner Saint Louis University, Inc.
(SLU), to challenge the decision2 and the resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
101708.4

The Factual Background

The facts of the case, gathered from the records, are briefly summarized below.

Respondent Evangeline C. Cobarrubias is an associate professor of the petitioner’s College of

Human Sciences. She is an active member of the Union of Faculty and Employees of Saint Louis
University (UFESLU).

The 2001-20065 and 2006-20116 Collective Bargaining Agreements (CBAs) between SLU and

UFESLU contain the following common provision on forced leave:

Section 7.7. For teaching employees in college who fail the yearly evaluation, the following
provisions shall apply:

(a) Teaching employees who are retained for three (3) cumulative years in five (5) years shall be on
forced leave for one (1) regular semester during which period all benefits due them shall be
suspended.7

SLU placed Cobarrubias on forced leave for the first semester of School Year (SY) 2007-2008 when
she failed the evaluation for SY 2002-2003, SY 2005-2006, and SY 2006-2007, with the rating of 85,
77, and 72.9 points, respectively, below the required rating of 87 points.
To reverse the imposed forced leave, Cobarrubias sought recourse from the CBA’s grievance
machinery. Despite the conferences held, the parties still failed to settle their dispute, prompting
Cobarrubias to file a case for illegal forced leave or illegal suspension with the National Conciliation
and Mediation Board of the Department of Labor and Employment, Cordillera Administrative Region,
Baguio City. When circulation and mediation again failed, the parties submitted the issues between
them for voluntary arbitration before Voluntary Arbitrator (VA) Daniel T. Fariñas.

Cobarrubias argued that the CA already resolved the forced leave issue in a prior case between the
parties, CA-G.R. SP No. 90596, 8 ruling that the forced leave for teachers who fail their evaluation for
three (3) times within a five-year period should be coterminous with the CBA in force during the
same five-year period.9

SLU, for its part, countered that the CA decision in CA-G.R. SP No. 90596 cannot be considered in
deciding the present case since it is presently on appeal with this Court (G.R. No. 176717) 10 and,
thus, is not yet final. It argued that the forced leave provision applies irrespective of which CBA is
applicable, provided the employee fails her evaluation three (3) times in five (5) years. 11

The Voluntary Arbitrator Decision

On October 26, 2007, VA Daniel T. Fariñas dismissed the case. 12 He found that the CA decision in
CA-G.R. SP No. 90596 is not yet final because of the pending appeal with this Court. He noted that
the CBA clearly authorized SLU to place its teaching employees on forced leave when they fail in the
evaluation for three (3) years within a five-year period, without a distinction on whether the three
years fall within one or two CBA periods. Cobarrubias received the VA’s decision on November 20,
2007.13

On December 5, 2007, Cobarrubias filed with the CA a petition for review under Rule 43 of the Rules
of Court, but failed to pay the required filing fees and to attach to the petition copies of the material
portions of the record.14

Thus, on January 14, 2008, the CA dismissed the petition outright for Cobarrubias’ procedural
lapses.15 Cobarrubias received the CA resolution, dismissing her petition, on January 31, 2008. 16

On February 15, 2008, Cobarrubias filed her motion for reconsideration, arguing that the ground
cited is technical. She, nonetheless, attached to her motion copies of the material portions of the
record and the postal money orders for ₱4,230.00. She maintained that the ends of justice and fair
play are better served if the case is decided on its merits. 17

On July 30, 2008, the CA reinstated the petition. It found that Cobarrubias substantially complied
with the rules by paying the appeal fee in full and attaching the proper documents in her motion for
reconsideration.18

SLU insisted that the VA decision had already attained finality for Cobarrubias’ failure to pay the
docket fees on time.

The CA Decision

The CA brushed aside SLU’s insistence on the finality of the VA decision and annulled it, declaring
that the "three (3) cumulative years in five (5) years" phrase in Section 7.7(a) of the 2006-2011 CBA
means within the five-year effectivity of the CBA. Thus, the CA ordered SLU to pay all the benefits
due Cobarrubias for the first semester of SY 2007-2008, when she was placed on forced leave. 19
When the CA denied20 the motion for reconsideration that followed, 21 SLU filed the present petition
for review on certiorari.22

The Petition

SLU argues that the CA should not have reinstated the appeal since Cobarrubias failed to pay the
docket fees within the prescribed period, and rendered the VA decision final and executory. Even if
Cobarrubias’ procedural lapse is disregarded, SLU submits that Section 7.7(a) of the 2006-2011
CBA should apply irrespective of the five-year effectivity of each CBA. 23

The Case for Cobarrubias

Cobarrubias insists that the CA settled the appeal fee issue, in its July 30, 2008 resolution, when it
found that she had substantially complied with the rules by subsequently paying the docket fees in
full. She submits that the CA’s interpretation of Section 7.7(a) of the 2006-2011 CBA is more in
accord with law and jurisprudence. 24

The Issues

The core issues boil down to whether the CA erred in reinstating Cobarrubias’ petition despite her
failure to pay the appeal fee within the reglementary period, and in reversing the VA decision. To
state the obvious, the appeal fee is a threshold issue that renders all other issues unnecessary if
SLU’s position on this issue is correct.

The Court’s Ruling

We find the petition meritorious.

Payment of Appellate Court Docket Fees

Appeal is not a natural right but a mere statutory privilege, thus, appeal must be made strictly in
accordance with the provision set by law.25 Rule 43 of the Rules of Court provides that appeals from
the judgment of the VA shall be taken to the CA, by filing a petition for review within fifteen (15) days
from the receipt of the notice of judgment.26 Furthermore, upon the filing of the petition, the petitioner
shall pay to the CA clerk of court the docketing and other lawful fees; 27 non-compliance with the
procedural requirements shall be a sufficient ground for the petition’s dismissal. 28 Thus, payment in
full of docket fees within the prescribed period is not only mandatory, but also jurisdictional. 29 It is an
essential requirement, without which, the decision appealed from would become final and executory
as if no appeal has been filed. 30

As early as the 1932 case of Lazaro v. Endencia and Andres, 31 we stressed that the payment of the
full amount of the docket fee is an indispensable step for the perfection of an appeal. In Lee v.
Republic,32 we decided that even though half of the appellate court docket fee was deposited, no
appeal was deemed perfected where the other half was tendered after the period within which
payment should have been made. In Aranas v. Endona, 33 we reiterated that the appeal is not
perfected if only a part of the docket fee is deposited within the reglementary period and the
remainder is tendered after the expiration of the period.

The rulings in these cases have been consistently reiterated in subsequent cases: Guevarra v. Court
of Appeals,34 Pedrosa v. Spouses Hill,35 Gegare v. Court of Appeals,36 Lazaro v. Court of
Appeals,37 Sps. Manalili v. Sps. de Leon,38 La Salette College v. Pilotin, 39 Saint Louis University v.
Spouses Cordero,40 M.A. Santander Construction, Inc. v. Villanueva, 41 Far Corporation v.
Magdaluyo,42 Meatmasters Int’l. Corp. v. Lelis Integrated Dev’t. Corp., 43 Tamayo v. Tamayo,
Jr.,44 Enriquez v. Enriquez,45 KLT Fruits, Inc. v. WSR Fruits, Inc.,46 Tan v. Link,47 Ilusorio v. Ilusorio-
Yap,48 and most recently in Tabigue v. International Copra Export Corporation (INTERCO), 49 and
continues to be the controlling doctrine.

In the present case, Cobarrubias filed her petition for review on December 5, 2007, fifteen (15) days
from receipt of the VA decision on November 20, 2007, but paid her docket fees in full only after
seventy-two (72) days, when she filed her motion for reconsideration on February 15, 2008 and
attached the postal money orders for ₱4,230.00. Undeniably, the docket fees were paid late, and
without payment of the full docket fees, Cobarrubias’ appeal was not perfected within the
reglementary period.

Exceptions to the Rule on Payment of Appellate Court Docket Fees not applicable

Procedural rules do not exist for the convenience of the litigants; the rules were established primarily
to provide order to and enhance the efficiency of our judicial system. 50 While procedural rules are
liberally construed, the provisions on reglementary periods are strictly applied, indispensable as they
are to the prevention of needless delays, and are necessary to the orderly and speedy discharge of
judicial business.51

Viewed in this light, procedural rules are not to be belittled or dismissed simply because their non-
observance may have prejudiced a party's substantive rights; like all rules, they are required to be
followed. However, there are recognized exceptions to their strict observance, such as: (1) most
persuasive and weighty reasons; (2) to relieve a litigant from an injustice not commensurate with his
failure to comply with the prescribed procedure; (3) good faith of the defaulting party by immediately
paying within a reasonable time from the time of the default; (4) the existence of special or
compelling circumstances; (5) the merits of the case; (6) a cause not entirely attributable to the fault
or negligence of the party favored by the suspension of the rules; (7) a lack of any showing that the
review sought is merely frivolous and dilatory; (8) the other party will not be unjustly prejudiced
thereby; (9) fraud, accident, mistake or excusable negligence without the appellant's fault; (10)
peculiar, legal and equitable circumstances attendant to each case; (11) in the name of substantial
justice and fair play; (12) importance of the issues involved; and (13) exercise of sound discretion by
the judge, guided by all the attendant circumstances. 52 Thus, there should be an effort, on the part of
the party invoking liberality, to advance a reasonable or meritorious explanation for his/her failure to
comply with the rules. 1avvphi1

In Cobarrubias' case, no such explanation has been advanced. Other than insisting that the
ends of justice and fair play are better served if the case is decided on its merits, Cobarrubias
offered no excuse for her failure to pay the docket fees in full when she filed her petition for review.
To us, Cobarrubias’ omission is fatal to her cause.

We, thus, find that the CA erred in reinstating Cobarrubias’ petition for review despite the
nonpayment of the requisite docket fees within the reglementary period. The VA decision had lapsed
to finality when the docket fees were paid; hence, the CA had no jurisdiction to entertain the appeal
except to order its dismissal.

WHEREFORE, the present petition is GRANTED. The assailed decision and resolution of the Court
of Appeals in CA-G.R. SP No. 101708 are hereby DECLARED VOID and are consequently SET
ASIDE. The decision of the voluntary arbitrator, that the voided Court of Appeals decision and
resolution nullified, stands. No pronouncement as to costs.
SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice

LUCAS P. BERSAMIN ROBERTO A. ABAD*

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No.177425               June 18, 2014

ALONZO GIPA, IMELDA MARO LLANO, JUANITO LUDOVICE, VIRGILIO GOJIT, DEMAR BIT
ANGCOR, FELIPE MONTALBAN AND DAISY M. PLACER,  Petitioners, 1

vs.
SOUTHERN LUZON INSTITUTE as represented by its Vice-President For Operations and
Corporate Secretary, RUBEN G. ASUNCION, Respondent.

DECISION

DEL CASTILLO, J.:

Suffice it to say that "[ c ]oncomitant to the liberal interpretation of the rules of procedure should be
an effort on the part of the party invoking liberality to adequately explain his failure to abide by the
rules."  Those who seek exemption from the application of the rule have the burden of proving the
2

existence of exceptionally meritorious reasons warranting such departure.  Assailed in this Petition
3

for Review on Certiorari is the December 20, 2006 Resolution  of the Court of Appeals (CA) in CA-
4

G.R. CV No. 85215 which dismissed for non-perfection herein petitioners' appeal from the January
5, 2005 Decision' of the Regional Trial Court (RTC), Branch 65, Sorsogon City in Civil Case No. 547-
37. Likewise questioned is the CA Resolution  dated March 30, 2007 which denied the Motion for
6

Reconsideration thereto.

Factual Antecedents

On February 26, 1996, respondent Southern Luzon Institute (SLI), an educational institution in
Bulan, Sorsogon, filed a Complaint  for Recovery of Ownership and Possession with Damages
7
against petitioners Alonzo Gipa, Imelda Marollano, Juanito Ludovice, Demar Bitangcor, Virgilio Gojit,
Felipe Montalban and four others namely, Arturo Rogacion, Virgilio Gracela, Rosemarie Alvarez and
Rosita Montalban (Rosita). During trial, defendant Rosita executed a Special Power of Attorney  in8

favor of her sister Daisy M. Placer (Placer) authorizing the latter to represent her in the case and to
sign any and all papers in relation thereto.

SLI alleged that it is the absolute owner of a 7,516-squaremeter parcel of land situated in Brgy.
Poblacion, Bulan, Sorsogon covered by Original Certificate of Title (OCT) No. P-28928. However,
petitioners and their co-defendants who had been informally occupying a portion of the said property
refused to vacate the same despite demand. Hence, SLI sought that they be ordered to immediately
vacate the premises, turn over the same to SLI, and pay compensatory damages, attorney’s fees
and cost of suit.

In their Answer with Counterclaim,  petitioners and their co-defendants asserted that they did not
9

heed SLI’s demand to vacate as they believed that they have the right to stay on the said property.
They relied on their occupation thereof and that of their predecessors-in-interest which, according to
them, dates back to as early as 1950. Impugning SLI’s claims, petitioners and their co-defendants
averred that SLI had not even for a single moment taken possession of the subject property and was
merely able to procure a title over the same thru fraud, bad faith and misrepresentation. By way of
counterclaim, they prayed that they be declared the lawful possessors of the property; that OCT No.
P-28928 be declared null and void; and, that SLI be ordered to pay them moral damages and
litigation expenses.

Ruling of the Regional Trial Court

Finding SLI to have proven its ownership of the property by preponderance of evidence, the RTC
rendered a Decision  in its favor on January 5, 2005. The said court gave weight to SLI’s
10

documentary evidence showing the grant of its Miscellaneous Sales Application (MSA) over the
subject property which became the basis for the issuance of title under its name, and the testimony
of the Supervising Draftsman of the National Housing Authority (NHA) who categorically stated that
the houses occupied by petitioners and their co-defendants were within the property of SLI per
NHA’s survey. It rejected, on the other hand, petitioners and their co-defendants’ claim of title to the
property. For one, the fact that SLI had an existing MSA over the property as far back as 1969 could
not have been unknown to them. This is because several of the petitioners and their codefendants
filed Revocable Permit Applications over the same property which were denied on March 4, 1964,
precisely because the areas applied for were already included in SLI’s MSA. For another, the
documentary evidence submitted by them consisted mostly of tax declarations and other documents
which were self-serving and could not be considered as conclusive evidence of ownership. Hence,
the RTC ruled:

WHEREFORE, premises considered, judgment is hereby rendered –

a) Declaring plaintiff-SLI as absolute owner of that portion of Lot 4705 containing an area of
SEVEN THOUSAND FIVE HUNDRED SIXTEEN (7,516) SQUARE METERS covered by
"Katibayan ng Orihinal na Titulo Blg. P-28928".

b) Ordering herein defendants to vacate and relinquish the portions of lot 4705 belonging to
the SLI that they are presently occupying illegally and to demolish the residential houses
existing thereon at their own expense.

c) To pay attorney’s fee in the amount of Php10,000.00 jointly.

 d) And to pay the costs.

SO ORDERED. 11

Petitioners and their co-defendants filed a Notice of Appeal  which was granted by the RTC in its
12

Order  of January 27, 2005.

13

Ruling of the Court of Appeals

The CA, however, dismissed the appeal in its Resolution  of August 26, 2005 since it was not shown
14

that the appellate court docket fees and other lawful fees were paid.  Petitioners and their co-
15

defendants promptly filed a Motion for Reconsideration  to which they attached a Certification  from
16 17

the RTC that they paid the appeal fee in the amount of₱3,000.00 under Official Receipt No.
18091130 dated January 25, 2005. In view of this, the CA granted the said motion and consequently
reinstated the appeal through a Resolution  dated November 2, 2005.
18

Subsequently, however, the CA further required petitioners and their codefendants, through a Minute
Resolution  dated March 1, 2006,to remit within ten days from notice the amount of ₱30.00 for legal
19

research fund, which apparently was not included in the ₱3,000.00 appeal fee previously paid by
them. Copy of the said resolution was received on March 13,2006 by petitioners’ counsel, Atty. Jose
G. Gojar of the Public Attorney’s Office. 20

Despite the lapse of nine months from their counsel’s receipt of the said resolution, petitioners and
their co-defendants, however, failed to comply with the CA’s directive. Hence, the said court
dismissed the appeal through its Resolution  of December 20, 2006in this wise:
21

Jurisprudence is replete that the nonpayment of the docket and other lawful fees within the
reglementary period as provided under Section 4 of Rule 41 of the Revised Rules of [C]ourt is a
ground for the dismissal of an appeal, as provided for under Section 1(c)[,] Rule 50 of the same
Rule. We quote:

SECTION 1. Grounds for dismissal of appeal. – An appeal may be dismissed by the Court of
Appeals, on its own motion or on that of the appellee, on the following grounds:

x x x           x x x          x x x

c. Failure of the appellant to pay the docket and other lawful fees as provided in Section 4 of Rule
41; x x x

xxxx

In the instant case, appellants were given sufficient time to complete the payment of the appeal fees.
Unfortunately, appellants still failed to comply with the said directive [despite the fact] that the
amount of ₱30.00 involved is very little. Hence, appellants failed to perfect their appeal for failure to
fully pay the appeal fees. They are deemed to have lost interest over the instant appeal. x x x x

WHEREFORE, premises considered, the instant Appeal is hereby DISMISSED.

SO ORDERED. 22
Petitioners and their co-defendants filed a Motion for Reconsideration  invoking the principle of
23

liberality in the application of technical rules considering that they have paid the substantial amount
of ₱3,000.00 for docket and other legal fees and fell short only by the meager amount of ₱30.00.
Ascompliance, they attached to the said motion a postal money order in the sum of ₱30.00 payable
to the Clerk of Court of the CA.24

The CA, however, was not swayed, hence, the denial of the Motion for Reconsideration in its
Resolution  of March 30, 2007.
25

Issue

Petitioners and Placer now file this Petition for Review on Certiorari raising the lone issue of:

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN DISMISSING THE APPEAL FILED
BY THE PETITIONERS FOR FAILURE TO REMIT THE MEAGERAMOUNT OF THIRTY PESOS
(₱30.00) AFTER HAVING ADVANCED A SUBSTANTIAL PORTION OF THE DOCKET FEES. 26

It must, however, be noted at the outset that the caption of the present Petition includes Placer as
one of the petitioners. In fact, the other petitioners even authorized her to sign the verification and
certification of non-forum shopping in their behalf.  A review of the records, however, shows that she
27

was not one of the defendants before the RTC. Her only participation therein was that she
represented her sister Rosita as one of the defendants by virtue of a Special Power of Attorney
which the latter executed in her favor.  Notably in the present Petition, Placer appears to have been
28

impleaded in her personal capacity and not as Rosita’s representative. This cannot be done. It bears
emphasizing that an appeal on certiorari, as in this case, is a continuation of the original
suit.  Hence, the parties in the original suit must also be the parties in such an appeal.  Placer,
29 30

therefore, not being a party in the complaint before the RTC has no personality to continue the same
on appeal and cannot be considered as a petitioner. At the most, her only role in this Petition was to
sign the verification and certification of non-forum shopping for and in behalf of petitioners.

The Parties’ Arguments

Initially, petitioners invoke the liberal application of technical rules  and contend that the fact that
31

only the amount of ₱30.00 was not paid justifies relaxation of the same. Later in their
Reply,  however, petitioners concede that the payment of docket fees is not a mere technicality.
32

Nevertheless, they point out that while full payment of docket fees is indispensable in the perfection
of an appeal, the same admits of exceptions.  Their case falls under one of the exceptions, that is, in
33

the name of substantial justice and fair play. According to petitioners, the dismissal of their appeal
for failure to pay ₱30.00 runs counter to substantial justice and fair play as the same would deprive
them of their right to justice and render ineffective the amount of ₱3,000.00, which despite being
indigents, they undertook to pay. To support their case, petitioners cited Andrea Camposagrado v.
Pablo Camposagrado  and Spouses Gutierrez v. Spouses Valiente  wherein the Court excused the
34 35

insufficient payment of docket fees.  Moreover, petitioners raise in the said Reply, albeit for the first
1âwphi1

time, the argument that while Republic Act (RA) No. 9406  was still in existent at the time their
36

appeal was filed before the CA, Section 6  thereof which exempts PAO clients like themselves from
37

the payment of docket and other fees should be given retroactive application.

For its part, SLI argues that since petitioners’ appeal was not perfected due to insufficient payment
of docket and other legal fees, the January 5, 2005 Decision of the RTC had already become final
and executory. Further, the CA correctly dismissed petitioners’ appeal because aside from the fact
that petitioners failed to comply with the CA’s directive to pay the lacking amount of ₱30.00 for a
period of more than nine months from their counsel’s receipt of notice, no plausible explanation was
tendered by them for such failure.

Our Ruling

The Petition fails.

Payment of the full amount of appellate

court docket and lawful fees is
mandatory and jurisdictional;
Relaxation of the rule on payment of
appeal fee is unwarranted in this case.

Section 4, Rule 41 of the Rules of Court provides:

Sec. 4. Appellate court docket and other lawful fees. – Within the period for taking an appeal, the
appellant shall pay to the clerk of court which rendered the judgment or final order appealed from,
the full amount of the appellate court docket and other lawful fees. Proof of payment of said fees
shall be transmitted to the appellate court together with the original record or the record on appeal.
(Emphases supplied)

In Gonzales v. Pe,  the Court’s explanation anent the requirement of full payment of docket and
38

other lawful fees under the above-quoted provision was iterated, viz:

In Far Corporation v. Magdaluyo, as with other subsequent cases of the same ruling, the Court
explained that the procedural requirement under Section 4 of Rule 41 is not merely directory, as the
payment of the docket and other legal fees within the prescribed period is both mandatory and
jurisdictional. It bears stressing that an appeal is not a right, but a mere statutory privilege. An
ordinary appeal from a decision or final order of the RTC to the CA must be made within 15 days
from notice. And within this period, the full amount of the appellate court docket and other lawful fees
must be paid to the clerk of the court which rendered the judgment or final order appealed from. The
requirement of paying the full amount of the appellate docket fees within the prescribed period is not
a mere technicality of law or procedure. The payment of docket fees within the prescribed period is
mandatory for the perfection of an appeal. Without such payment, the appeal is not perfected. The
appellate court does not acquire jurisdiction over the subject matter of the action and the Decision
sought to be appealed from becomes final and executory. Further, under Section 1 (c), Rule 50, an
appeal may be dismissed by the CA, on its own motion or on that of the appellee, on the ground of
the non-payment of the docket and other lawful fees within the reglementary period as provided
under Section 4 of Rule 41. The payment of the full amount of the docket fee is an indispensable
step for the perfection of an appeal. In both original and appellate cases, the court acquires
jurisdiction over the case only upon the payment of the prescribed docket fees. 39

Here, petitioners concede that payment of the full amount of docket fees within the prescribed period
is not a mere technicality of law or procedure but a jurisdictional requirement. Nevertheless, they
want this Court to relax the application of the rule on the payment of the appeal fee in the name of
substantial justice and equity.

The Court is not persuaded.

The liberality which petitioners pray for has already been granted to them by the CA at the outset. It
may be recalled that while petitioners paid a substantial part of the docket fees, they still failed to pay
the full amount thereof since their payment was short of ₱30.00.Based on the premise that the
questioned Decision of the RTC has already become final and executory due to non-perfection, the
CA could have dismissed the appeal outright. But owing to the fact that only the meager amount of
₱30.00 was lacking and considering that the CA may opt not to proceed with the case until the
docket fees are paid,  it still required petitioners, even if it was already beyond the reglementary
40

period, to complete their payment of the appeal fee within 10 days from notice. Clearly, the CA acted
conformably with the pronouncement made in Camposagrado, a case cited by petitioners, that "[a]
party’s failure to pay the appellate docket fee within the reglementary period confers only a
discretionary and not a mandatory power to dismiss the proposed appeal. Such discretionary power
should be used in the exercise of the court’s sound judgment in accordance with the tenets of justice
and fair play with great deal of circumspection, considering all attendant circumstances and must be
exercised wisely and prudently, never capriciously, with a view to substantial justice." 41

The CA’s leniency over petitioners’ cause did not end there. Although they were given only 10 days
to remit the ₱30.00 deficiency, the said court allowed an even longer period of nine months to lapse,
apparently in the hope that petitioners’ compliance would be on its way. But as no payment was
remitted, it was constrained to finally dismiss the appeal for non-perfection. Surprisingly, petitioners
were again heard of when they filed a Motion for Reconsideration to which they attached a postal
money order of ₱30.00. Nevertheless, they did not offer any plausible explanation either as to why
they, at the start, failed to pay the correct docket fees or why they failed to comply with the CA’s
directive for them to remit the ₱30.00-deficiency. Instead, they focused on begging the CA for
leniency, arguing that the meager amount of the deficiency involved justifies relaxation of the rules.
What is worse is that even if the CA already took note of the lack of such explanation in its
Resolution denying petitioners’ motion for reconsideration, petitioners, up to now, have not
attempted to tender one in this Petition and instead continue to capitalize on substantial justice, fair
play and equity to secure a reversal of the dismissal of their appeal. The Court cannot, therefore,
help but conclude that there is really no plausible reason behind the said omission.

Suffice it to say that "[c]oncomitant to the liberal interpretation of the rules of procedure should be an
effort on the part of the party invoking liberality to adequately explain his failure to abide by the
rules."  Those who seek exemption from the application of the rule have the burden of proving the
42

existence of exceptionally meritorious reason warranting such departure.  Petitioners’ failure to

43

advance any explanation as to why they failed to pay the correct docket fees or to complete payment
of the same within the period allowed by the CA is thus fatal to their cause. Hence, a departure from
the rule on the payment of the appeal fee is unwarranted. Neither do the cases cited by petitioners
help because they are not in point. Unlike in this case, the CA in Camposagrado no longer required
the petitioners therein to complete the payment of the appeal fee by remitting the ₱5.00 deficiency
but just dismissed the appeal outright. Moreover, a justifiable reason for the insufficient payment was
tendered by petitioners in the said case, i.e., that they relied on the assessment made by the
collection officer of the court and honestly believed that the amount collected from them was that
which is mandated by the Rules. 1âwphi1

The same thing goes true with Gutierrez. In fact, the pronouncement made in Sun Insurance Office,
Ltd. v. Asuncion,  as cited in Gutierrez, even militates against petitioners. It was reiterated therein
44

that the rule that "a court acquires jurisdiction over any case only upon payment of the prescribed
docket fees does not apply where the party does not deliberately intend to defraud the court in
payment of docket fees, and manifests its willingness to abide by the rules by paying additional
docket fees when required by the court."  As may be recalled, petitioners in this case did not
45

immediately remit the deficient amount of ₱30.00 when required by the CA and only did so after the
lapse of more than nine months when their appeal was already dismissed.
The Court need not belabor the issue
of the retroactive application of Section 6
of RA 9406.

"The purpose of a reply is to deny or allege facts in denial of new matters alleged by way of defense
in the answer,"  or in this case, in the comment to the petition. "It is not the office or function of a
46

reply to set up or introduce a new [issue] or to amend or amplify the [Petition]."  The issue of
47

whether Section 6 of RA 9406 should be given retroactive application in order to exempt petitioners
from payment of docket fees was therefore improperly introduced in petitioners’ Reply. Moreover,
"[t]he rule in pleadings and practice is that no new issue in a case can be raised in a pleading which
by due diligence could have been raised in previous pleadings."  Here, petitioners at the outset
48

could have very well raised the said issue in the Petition since at the time of its filing on June 7,
2007, RA 9406 was already in effect.  However, they failed to do so. Besides, for this Court to take
49

cognizance of the same is to offend the basic rules of fair play, justice and due process since SLI
had no chance to propound its argument in connection thereto. This is because even if it wanted to,
SLI could not anymore do so in its Memorandum as no new issues or arguments may be raised in
the said pleading, it being only the summation of the parties’ previous pleadings.  For these reasons,
50

the Court sees no need to belabor the issue of the retroactive application of Section 6 of RA 9406.

All told, the Court finds the CA’s dismissal of the appeal interposed by petitioners in order.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed Resolutions dated
December 20, 2006 and March 30, 2007 of the Court of Appeals in CA-G.R. CV No. 85215 are
AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ARTURO D. BRION*
Associate Justice
Acting Chairperson

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA**

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE

Associate Justice

FIRST DIVISION
[ G.R. No. 221062, October 05, 2016 ]
ELIZABETH SY-VARGAS, PETITIONER, VS. THE ESTATE OF ROLANDO OGSOS,
SR. AND ROLANDO OGSOS, JR., RESPONDENTS.
 DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[1] are the Decision[2] dated February 28, 2014
and the Resolution[3] dated October 1, 2015 of the Court of Appeals (CA) in CA G.R. CV No.
03710, which affirmed with modification the Decision[4] dated July 2, 2007 of the Regional
Trial Court of Dumaguete City, Branch 36 (RTC) in Civil Case No. 12708, thereby: ( a) ordering
petitioner Elizabeth Sy-Vargas (petitioner) and her sister, Kathryn T. Sy (Kathryn), to pay
respondents the Estate of Rolando Ogsos, Sr. (Ogsos, Sr.) and Rolando Ogsos, Jr., (Ogsos, Jr.;
collectively, respondents) the amount of P10,391,981.76, representing the value of the sugar
and molasses that could have been produced from 1999 to 2004, if only respondents were not
deprived by petitioner and Kathryn of possession and enjoyment of the leased agricultural
farm; and (b) deleting the awards for moral and exemplary damages, as well as the attorney's
fees and costs of suit against respondents.

The Facts

On February 10, 1994, Ogsos, Sr. and the Heirs of Fermina Pepico (Fermina), represented by
their Attorney-in-Fact, Catalino V. Noel, entered into a Contract of Lease [5] (lease contract)
covering five (5) parcels of agricultural land owned by the latter, with an aggregate area of 23
hectares, more or less, situated in Maaslum Manjuyod, Negros Oriental (leased premises).
Based on the contract, Ogsos, Sr. agreed to pay the Heirs of Fermina 230 piculs or 290.95
liquid-kilogram (lkg.) of centrifugal sugar every crop year, starting from crop year 1994-1995 to
crop year 2000-2001, as lease rental.[6]

On June 5, 1996, the term of the lease contract was extended for three (3) years, or until the
end of crop year 2004, due to Ogsos, Sr.'s introduction of improvements on the leased
premises.[7] Thereafter, or on December 30, 1996, the said contract was amended, modifying
the lease rental from 230 piculs or 290.95 lkg. of centrifugal sugar every crop year to
P150,000.00 cash, beginning the crop year 1996-1997.[8]

Petitioner and Kathryn, who are among the heirs of Fermina, claimed that the lease rentals
from crop year 1994-1995 to crop year 1998-1999 were not paid. Thus, on April 27, 2000,
[9]
 they filed a Complaint[10] for Specific Performance and Damages against respondents,
before the RTC, docketed as Civil Case No. 12708, to recover the unpaid lease rentals.
Pertinently, they did not include in their claim the lease rental for crop year 1999-2000
because respondents had already abandoned the leased premises since the said crop year. [11]

Summons was served in May 2000, but respondent Ogsos, Jr. only filed a motion to admit
answer[12] and answer[13] to the complaint after more than two (2) years, or on December 17,
2002.[14] Thus, petitioner and Kathryn filed on January 28, 2003, an opposition thereto, and
moved to declare respondents in default, which the RTC granted in an Order dated March 7,
2003.[15]

Their motion for reconsideration having been denied by the RTC, respondents, then, elevated
the matter via a petition for certiorari to the CA, docketed as CA-G.R. SP No. 79463, wherein
the CA granted respondents petition and remanded the case to the RTC. The CA ordered the
RTC to admit respondents' answer so as to give them the opportunity to be heard and to
present their side on the merits of the case.[16]

In their answer,[17] respondents alleged that they had faithfully complied with their obligations
as embodied in the lease contract and its subsequent amendments. [18] They denied
abandoning the leased premises and claimed that sometime in December 1998, petitioner and
Kathryn unlawfully took possession of the leased premises and appropriated for themselves
the sugarcane ready for harvest under the pretext that they would apply the proceeds thereof
to the unpaid rent.[19] They likewise alleged that in the same year, Ogsos, Sr. and his wife fell
ill, which incidents forced respondents to obtain loans from several businessmen, namely:
Emiliano "Nonette" Bacang, Zaldy Roleda, and Pastor Domocol.[20] The arrangement regarding
the foregoing loans was that the said creditors would be allowed to harvest the sugarcane
from the leased premises and apply the proceeds thereof to the loans. [21] However, when the
creditors were about to harvest the sugarcane, they were prevented by petitioner and
Kathryn; resulting in respondents' default in the payment of their debts. [22] On March 22, 2000,
Ogsos, Sr. died.[23]

Respondents also averred that since crop years 1994 to 1997-1998, the average production of
sugarcane is 1,308.68 lkg. of sugar and 30.409 tons of molasses per year, as computed on the
basis of the Planter's Production Reports. Thus, when petitioner and Kathryn took possession
of the leased premises, respondents lost their profits equivalent to the aforesaid production
starting from crop year 1999-2000 until the termination of the lease contract on crop year
2003-2004.[24] Accordingly, respondents filed a counterclaim for these lost profits plus
damages.[25]

On June 6, 2005, respondents moved for the dismissal of the complaint in view of the absence
of the required Certificate of Non-Forum Shopping. In a Resolution dated November 9, 2005,
the RTC dismissed the case without prejudice.[26]

On December 15, 2005, respondents moved for the hearing of their counterclaim, to which the
RTC required petitioner and Kathryn to submit a comment, but none was filed. Hence, in an
Order dated February 9, 2006, the RTC set the case for reception of evidence on respondents'
counterclaim.[27]

On February 28, 2006, respondents filed an Ex-Parte Motion to Set Case for Pre-Trial, which
was granted by the RTC on March 1, 2006, setting the pre-trial on March 30, 2006. Petitioner,
Kathryn, and their counsel failed to appear at the pre-trial and to file their pre-trial brief. Thus,
respondents filed a manifestation with motion to present evidence ex-parte on June 7, 2006,
praying that petitioner and Kathryn be declared in default, and that respondents be allowed to
present evidence on their counterclaim ex-parte, which the RTC granted in an Order dated
June 28,2006.[28]

Thereafter, or on August 16, 2006, petitioner and Kathryn moved to quash the June 28, 2006
Order, which was, however, denied on September 1, 2006 on the ground that the period to ask
for reconsideration or for the lifting of the order had already lapsed. [29]

On October 17, 2006, petitioner and Kathryn filed a motion to dismiss respondents'
counterclaim arguing that the same were permissive and that respondents had not paid the
appropriate docket fees.[30] However, the RTC, in its November 16, 2006 Order,[31] denied the
said motion, declaring respondents' counterclaim as compulsory; thus, holding that the
payment of the required docket fees was no longer necessary. [32]

The RTC Ruling

In a Decision[33] dated July 2, 2007, the RTC granted respondents' counterclaim, and

consequently, ordered petitioner and Kathryn to pay respondents the following amounts: ( a)
P10,391,981.76 worth of sugar and molasses produced representing the value of 1,308.68 lkg.
of sugar and 30.409 tons of molasses for each crop year that defendant and Ogsos, Sr. were
deprived of possession and enjoyment of the leased premises; (b) P500,000.00 as moral
damages; (c) P100,000.00 as exemplary damages; (d) P100,000.00 as attorney's fees and
P1,000.00 for each personal appearance of respondents' counsel before the RTC; and ( e)
P50,000.00 as costs of suit.[34] In so ruling, it found that Ogsos, Sr. faithfully paid the lease
rentals during the crop years 1994 to 1997[35] but eventually stopped their payments when
petitioner and Kathryn took possession and harvested the sugarcane in the leased premises
sometime in December 1998, despite respondents' objection.[36] Accordingly, petitioner and
Kathryn reneged on their obligation to maintain respondents' peaceful and adequate
enjoyment of the leased premises when the former forcibly and unlawfully deprived the latter
of possession thereof in December 1998, despite payment of the lease rentals. Due to this,
petitioner and Kathryn were held liable for breach of the lease contract. [37]

Dissatisfied, petitioner and Kathryn appealed to the CA.[38]

The CA Ruling

In a Decision[39] dated February 28, 2014 (CA Decision), the CA affirmed the ruling of the RTC
but deleted the awards for moral and exemplary damages, as well as the attorney's fees and
costs of suit due to the absence of proof that petitioner and Kathryn acted fraudulently or in
bad faith.[40]

The CA ruled that the RTC was correct in ruling that respondents' counterclaim is not
permissive but compulsory; hence, payment of docket fees was not necessary. [41] Further, the
CA ruled that even though the counterclaim was compulsory, the same would not be
automatically dismissed upon the dismissal of the action if the dismissal was caused by the
fault of the plaintiff, as in this case.[42]

The counsel of petitioner and Kathryn received the CA Decision on March 14, 2014. [43] On
March 31, 2014, petitioner and Kathryn filed their motion for reconsideration, [44] which was
denied in the Resolution[45] dated October 1, 2015 for being filed out of time; hence, the
instant petition solely filed by petitioner.[46]

The Issues Before the Court

The essential issues for resolution in this case are whether or not the CA correctly ruled that:
(a) petitioner's motion for reconsideration was filed out of time; ( b) respondents' counterclaim
for damages is compulsory and not permissive in nature, and thus, no payment of docket fees
is required; and (c) respondents are entitled to such counterclaim.

The Court's Ruling

I.

Records bear out that in the assailed October 1, 2015 Resolution, the CA denied petitioner's
motion for reconsideration for being purportedly filed out of time. The CA explained that since
the registry return receipt showed that petitioner and Kathryn's counsel received the assailed
March 14, 2014 Decision, it only had until March 29, 2014 to file a motion for reconsideration.
However, they only filed such motion on March 31, 2014, thus, rendering the assailed CA
Decision final and executory.

Notably, however, the CA failed to take into consideration that March 29, 2014 fell on a
Saturday. In these situations, Section 1, Rule 22 of the Rules of Court provides that:
Section. 1. How to compute time. - In computing any period of time prescribed or allowed by
these Rules, or by order of the court, or by any applicable statute, the day of the act or event
from which the designated period of time begins to run is to be excluded and the date of
performance included. If the last day of the period, as thus computed, falls on a Saturday, a
Sunday, or a legal holiday in the place where the court sits, the time shall not run until the
next working day.
Since March 29, 2014 fell on a Saturday, petitioner and Kathryn were completely justified in
filing their motion for reconsideration on the next working day: Monday, March 31, 2014.
Accordingly, the CA should not have considered it filed out of time, and instead, resolved such
motion on the merits. In such an instance, court procedure dictates that the instant case be
remanded to the CA for resolution on the merits. However, when there is already enough basis
on which a proper evaluation of the merits may be had - as in this case - the Court may
dispense with the time-consuming procedure of remand in order to prevent further delays in
the disposition of the case and to better serve the ends of justice. [47] In view of the foregoing
as well as the fact that petitioner prayed for the resolution of the substantive issues on the
merits[48] - the Court finds it appropriate to resolve the substantive issues of this case.

II.

Essentially, the nature of a counterclaim is determinative of whether or not the

counterclaimant is required to pay docket fees. The rule in permissive counterclaims is that
for the trial court to acquire jurisdiction, the counterclaimant is bound to pay the prescribed
docket fees.[49] On the other hand, the prevailing rule with respect to compulsory
counterclaims is that no filing fees are required for the trial court to acquire jurisdiction over
the subject matter.[50]

In general, a counterclaim is any claim which a defending party may have against an opposing
party. A compulsory counterclaim is one which, being cognizable by the regular courts of
justice, arises out of or is connected with the transaction or occurrence constituting the
subject matter of the opposing party's claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction. A compulsory
counterclaim is barred if not set up in the same action.[51]

On the other hand, a counterclaim is permissive if it does not arise out of or is not necessarily
connected with the subject matter of the opposing party's claim. It is essentially an
independent claim that may be filed separately in another case. [52]

In Spouses Mendiola v. CA,[53] the Court had devised tests m determining whether or not a
counterclaim is compulsory or permissive:
The four tests to determine whether a counterclaim is compulsory or not are the following, to
wit: (a) Are the issues of fact or law raised by the claim and the counterclaim largely the
same? (b) Would res judicata bar a subsequent suit on defendant's claims, absent the
compulsory counterclaim rule? (c) Will substantially the same evidence support or refute
plaintiff's claim as well as the defendant's counterclaim? and (d) Is there any logical relation
between the claim and the counterclaim, such that the conduct of separate trials of the
respective claims of the parties would entail a substantial duplication of effort and time by the
parties and the court? Of the four, the one compelling test of compulsoriness is the logical
relation between the claim alleged in the complaint and that in the counterclaim. Such
relationship exists when conducting separate trials of the respective claims of the parties
would entail substantial duplication of time and effort by the parties and the court; when the
multiple claims involve the same factual and legal issues; or when the claims are offshoots of
the same basic controversy between the parties. If these tests result in affirmative answers,
the counterclaim is compulsory.[54] (Emphases and underscoring supplied)
Based on the abovementioned standards, the Court finds that the counterclaim of respondents
is permissive in nature. This is because: (a) the issue in the main case, i.e., whether or not
respondents are liable to pay lease rentals, is entirely different from the issue in the
counterclaim, i.e., whether or not petitioner and Kathryn are liable for damages for taking
over the possession of the leased premises and harvesting and appropriating respondents'
crops planted therein; (b) since petitioner and respondents' respective causes of action arose
from completely different occurrences, the latter would not be barred by res judicata had
they opted to litigate its counterclaim in a separate proceeding; ( c) the evidence required to
prove petitioner's claim that respondents failed to pay lease rentals is likewise different from
the evidence required to prove respondents' counterclaim that petitioner and Kathryn are
liable for damages for performing acts in bad faith; and ( d) the recovery of petitioner's claim is
not contingent or dependent upon proof of respondents' counterclaim, such that conducting
separate trials will not result in the substantial duplication of the time and effort of the court
and the parties.

In view of the finding that the counterclaim is permissive, and not compulsory as held by the
courts a quo, respondents are required to pay docket fees. However, it must be clarified that
respondents' failure to pay the required docket fees, per se, should not necessarily lead to the
dismissal of their counterclaim. It has long been settled that while the court acquires
jurisdiction over any case only upon the payment of the prescribed docket fees, its non-
payment at the time of filing of the initiatory pleading does not automatically cause its
dismissal provided that: (a) the fees are paid within a reasonable period; and (b) there was no
intention on the part of the claimant to defraud the government. [55]

Here, respondents cannot be faulted for non-payment of docket fees in connection with their
counterclaim, primarily because as early as November 16, 2006, the RTC had already found
such counterclaim to be compulsory in nature.[56] Such finding was then upheld in the July 2,
2007 RTC Decision and affirmed on appeal by the CA in its assailed Decision. As such, the
lower courts did not require respondents to pay docket fees and even proceeded to rule on
their entitlement thereto. Verily, respondents' reliance on the findings of the courts a quo,
albeit erroneous, exhibits their good faith in not paying the docket fees, much more their
intention not to defraud the government. Thus, the counterclaim should not be dismissed for
nonpayment of docket fees. Instead, the docket fees required shall constitute a judgment lien
on the monetary awards in respondents'  favor. In Intercontinental Broadcasting Corporation
v. Legasto,[57] citing, Section 2, Rule 141[58] of the Rules of Court, the Court held that in
instances where a litigant's non-payment of docket fees was made in good faith and without
any intention of defrauding the government, the clerk of court of the court a quo should be
ordered to assess the amount of deficient docket fees due from such litigant, which will
constitute a judgment lien on the amount awarded to him, and enforce such lien, [59] as in this
case.

That being said, the Court now resolves whether or not respondents are indeed entitled to
their counterclaim.

III.

In this case, the RTC found that under the lease contract, petitioner and Kathryn were bound
to keep respondents in peaceful and adequate enjoyment of the leased premises for the entire
duration of the lease and that respondents faithfully paid their lease rentals for a period of four
(4) years, or until crop year 1998. Despite the foregoing, petitioner and Kathryn unlawfully took
possession (sometime in December 1998) and harvested respondents' crops over their
objections. The RTC further found that due to such unlawful dispossession of the leased
premises, respondents were deprived of profits for six (6) crop years ( i.e., from crop year 1999
to crop year 2004, which was the last crop year of the lease) in the amount of P1,731,996.96
per year, or a grand total of P10,391,987.76.[60] Such factual findings were then affirmed by the
CA in its assailed ruling. It has long been settled that factual findings of the trial court,
affirmed by the CA, are final and conclusive and may not be reviewed on appeal, [61] save for
certain exceptions,[62] which petitioner failed to show in this case. As such, the grant of said
counterclaim is upheld.
Nonetheless, the Court finds it proper to deduct from the counterclaim award of
P10,391,987.76 the amount of P900,000.00, which represents the lease rentals that should
have been paid by the lessee, i.e., respondents, during the six (6) crop years (i.e., crop years
1999 to 2004) that they were deprived possession of the leased premises. As the Court's
counterclaim award of lost profits during the said period stems from the recognition that the
lessor, i.e., petitioner and Kathryn, should have complied with their obligations to keep
respondents in peaceful and adequate enjoyment of the leased premises for the entire
duration of the lease, it is but fair and just that respondents be also held to their obligations
thereunder that is, to pay the lease rentals for the entire duration of the contract. Perceptibly,
respondents' gain of profits during such period presupposes a valid and subsisting lease
contract, which is rendered legally possible if only they themselves discharged their own
obligation to pay the lease rentals therefor.

WHEREFORE, the petition is DENIED. The Decision dated February 28, 2014 and the
Resolution dated October 1, 2015 of the Court of Appeals in CA G.R. CV No. 03710 are
hereby AFFIRMED with MODIFICATION deducting from the counterclaim award of
P10,391,987.76 in favor of the Estate of Rolando Ogsos, Sr. and Rolando Ogsos, Jr.
(respondents) the amount of P900,000.00, which represents the unpaid lease rentals for the
crop years 1999 to 2004 as above-discussed. Moreover, a judgment lien shall be imposed on
the monetary award given to respondents corresponding to the unpaid docket fees on the
permissive counterclaim. Accordingly, the Clerk of Court of the Regional Trial Court of
Dumaguete City, Branch 36, or his duly authorized deputy, is hereby ordered to enforce the
judgment lien and to assess and collect the appropriate docket fees from respondents.

SO ORDERED.

Sereno, C. J., on official business.

Leonardo-De Castro,** (Acting Chairperson), Bersamin, and Caguioa, JJ., concur.
798 Phil. 208

FIRST DIVISION
[ G.R. No. 223290, November 07, 2016 ]
WOODROW B. CAMASO, PETITIONER, VS. TSM SHIPPING (PHILS), INC.,
UTKILEN, AND/OR JONES TULOD, RESPONDENTS.

DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[1] are the Resolutions dated August 12,
2015[2] and March 4, 2016[3] of the Court of Appeals (CA) in CA-G.R. SP No. 141278-UDK which
dismissed petitioner Woodrow B. Camaso's (Camaso) petition for certiorari before it for non-
payment of the required docket fees.

The Facts

Camaso alleged that on July 15, 2014, he signed a contract of employment with respondents
TSM Shipping (Phils), Inc., Utkilen, artd Jones Tulod (respondents) to work as a Second Mate
on-board the vessel "M/V Golfstraum," for a period of six (6) months and with basic monthly
salary of US$1,178.00.[4] On October 18, 2014, he joined his vessel of assignment.[5] Prior to
said contract, Camaso claimed to have been working for respondents for almost five (5) years
and boarded eight (8) of their vessels.[6]
Sometime in November 2013, Camaso complained of a noticeable obstruction in his throat
which he described as akin to a "fishbone coupled [with] coughing." [7] By February 2014, his
situation worsened as he developed lymph nodules on his jawline, prompting him to request
for a medical check-up while in Amsterdam. As Camaso was initially diagnosed with tonsillar
cancer, he was recommended for medical repatriation to undergo extensive treatment. Upon
repatriation to the Philippines on September 8, 2014, he reported at respondents' office and
was referred to a certain Dr. Nolasco of St. Luke's Medical Center for testing. After a series of
tests, it was confirmed that Camaso was indeed suffering from tonsillar cancer.
[8]
 Consequently, he underwent eight (8) chemotherapy sessions and radiation therapy for 35
cycles which were all paid for by respondents. He likewise received sickwage allowances
from the latter.[9] Thereafter, respondents refused to shoulder Camaso's medical expenses,
thus, forcing the latter to pay for his treatment. Believing that his sickness was work-related
and that respondents remained silent on their obligation, Camaso filed the instant complaint
for disability benefits, sickwage allowance, reimbursement of medical and hospital expenses,
and other consequential damages before the National Labor Relations Commission (NLRC),
docketed as NLRC Case No. OFW (M) 07-09270-14. After efforts for an amicable settlement
between the parties failed, they were ordered to file their respective position papers. [10]

The LA and NLRC Rulings

In a Decision[11] dated November 28, 2014, the Labor Arbiter (LA) ruled in Camaso's favor and,
accordingly, ordered respondents to pay him his total and permanent disability benefits in the
amount of US$60,000.00, plus ten percent (10%) of the total money claims as attorney's fees.
However, the LA dismissed his other monetary claims for lack of merit. [12]

On appeal, docketed as NLRC LAC No. (OFW-M) 01-000088-15, [13] the NLRC promulgated a
Decision[14] dated March 19, 2015 reversing the LA ruling and, consequently, dismissed
Camaso's complaint for lack of merit. Camaso moved for its reconsideration, but was denied in
a Resolution[15] dated April 28, 2015. Aggrieved, he filed a petition for certiorari before the
CA.[16]

The CA Ruling

In a Resolution[17] dated August 12, 2015, the CA dismissed Camaso's petition "for non-
payment of the required docketing fees as required under Section 3, Rule 46 of the Revised
Rules of Court."[18]

Dissatisfied, Camaso filed a Motion for Reconsideration[19] dated August 29, 2015,

arguing, inter alia, that a check representing the payment of the required docket fees was
attached to a copy of his petition filed before the CA. He further claimed that upon verification
of his counsel's messenger, the Division Clerk of Court admitted that it was simply overlooked.
[20]

In a Resolution[21] dated March 4, 2016, the CA denied Camaso's motion for lack of merit.
Citing the presumption of regularity of official duties, the CA gave credence to the explanation
of Myrna D. Almira, Officer-in-Charge of the CA Receiving Section, that there was no cash,
postal money order, or check attached to Camaso's petition when it was originally filed before
the CA. In any event, the CA held that assuming that a check was indeed attached to the
petition, such personal check, i.e., Metrobank check dated July 6, 2015 under the personal
account of a certain Pedro L. Linsangan, is not a mode of payment sanctioned by the 2009
Internal Rules of the Court of Appeals (2009 IRCA), which allows only payment in cash, postal
money order, certified, manager's or cashier's checks payable to the CA. [22]
Hence, this petition.

The Issue Before the Court

The primordial issue for the Court's resolution is whether or not the CA correctly dismissed
Camaso's petition for certiorari before it for nonpayment of docket fees.

The Court's Ruling

The petition is meritorious.

Section 3, Rule 46 of the Rules of Court provides that in original actions filed before the CA,
such as a petition for certiorari, the payment of the corresponding docket fees is required,
and that the failure to comply with the same shall be sufficient ground for the dismissal of
such action, viz.:
Section 3. Contents and filing of petition, effect of non-compliance with requirements . - The
petition shall contain the full names and actual addresses of all the petitioners and
respondents, a concise statement of the matters involved, the factual background of the case,
and the grounds relied upon for the relief prayed for.

In actions filed under Rule 65, the petition shall further indicate the material dates showing
when notice of the judgment or final order or resolution subject thereof was received, when a
motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof
was received.

xxxx

The petitioner shall pay the corresponding docket and other lawful fees to the clerk of
court and deposit the amount of P500.00 for costs at the time of the filing of the petition.

The failure of the petitioner to comply with any of the foregoing requirements shall be
sufficient ground for the dismissal of the petition. (Emphases and underscoring supplied)
In Bibiana Farms & Mills, Inc. v. NLRC,[23] the Court nevertheless explained that while non-
payment of docket fees may indeed render an original action dismissible, the rule on payment
of docket fees may be relaxed whenever the attending circumstances of the case so warrant:
Under the foregoing rule, non-compliance with any of the requirements shall be a sufficient
ground for the dismissal of the petition. Corollarily, the rule is that a court cannot acquire
jurisdiction over the subject matter of a case, unless the docket fees are paid. And where the
filing of the initiatory pleading is not accompanied by payment of the docket fees, the court
may allow payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.

In several cases, however, the Court entertained certain exceptions due to the peculiar
circumstances attendant in these cases, which warrant a relaxation of the rules on payment
of docket fees. It was held in La Salette College v. Pilotin [463 Phil. 785 (2003)], that the
strict application of the rule may be qualified by the following: first, failure to pay those fees
within the reglementary period allows only discretionary, not automatic, dismissal; second,
such power should be used by the court in conjunction with its exercise of sound discretion in
accordance with the tenets of justice and fair play, as well as with a great deal of
circumspection in consideration of all attendant circumstances.

Thus, in Villamor v.  [CA] [478 Phil. 728 (2004)], the Court sustained the decision of the CA to
reinstate the private respondents', appeal despite having paid the docket fees almost one year
after the notice of appeal was filed, finding that there is no showing that the private
respondents deliberately refused to pay the requisite fee within the reglementary period and
abandon their appeal. The Court also found that it was imperative for the CA to review the
ruling of the trial court to avoid a miscarriage of justice. Thus, the Court concluded, "Under
the circumstances obtaining in the case at bar, we see no cogent reason to reverse the
resolutions of the respondent court. It is the policy of the court to encourage hearing of
appeals on their merits. To resort to technicalities which the petitioner capitalizes on in the
instant petition would only tend to frustrate rather than promote substantial
justice."[24] (Emphases and underscoring supplied)
Verily, the failure to pay the required docket fees per se should not necessarily lead to the
dismissal of a case. It has long been settled that while the court acquires jurisdiction over any
case only upon the payment of the prescribed docket fees, its non-payment at the time of
filing of the initiatory pleading does not automatically cause its dismissal provided that: ( a)
the fees are paid within a reasonable period; and (b) there was no intention on the part of the
claimant to defraud the government.[25]

Here, it appears that when Camaso filed his certiorari petition through his counsel and via
mail, a Metrobank check dated July 6, 2015 under the account name of Pedro L. Linsangan
was attached thereto to serve as payment of docket fees.[26] Although this was not an
authorized mode of payment under Section 6, Rule VIII[27] of the 2009 IRCA, the attachment of
such personal check shows that Camaso exerted earnest efforts to pay the required docket
fees. Clearly, this exhibits good faith and evinces his intention not to defraud the government.
In this relation, the assertion of the Officer-in-Charge of the CA Receiving Section that there
was no check attached to Camaso's certiorari petition is clearly belied by the fact that when
it was examined at the Office of the Division Clerk of Court, the check was found to be still
stapled thereto.[28]

In light of the foregoing circumstances, the Court deems it appropriate to relax the technical
rules of procedure in the interest of substantial justice and, hence, remands the instant case
to the CA for the resolution of its substantial merits.[29] Upon remand, the CA is directed to
order Camaso to pay the required docket fees within a reasonable period of thirty (30) days
from notice of such order.

WHEREFORE, the petition is GRANTED. The Resolutions dated August 12, 2015 and March 4,
2016 of the Court of Appeals (CA) in CA G.R. SP No. 141278-UDK are hereby SET ASIDE.
Accordingly, the instant case is REMANDED to the CA for further proceedings as discussed in
this Decision.

SO ORDERED.

Sereno, C. J., Leonardo-De Castro, Bersamin, and Caguioa, JJ., concur.

Republic of the Philippines

SUPREME COURT
Baguio City

EN BANC

G.R. No. 174202               April 7, 2015

DYNAMIC BUILDERS & CONSTRUCTION CO. (PHIL.), INC., Petitioner,
vs.
HON. RICARDO P. PRESBITERO, JR., MAYOR AND HEAD OF PROCURING UNIT OF THE
MUNICIPALITY OF VALLADOLID, NEGROS OCCIDENTAL; BIDS AND A WARDS COMMITTEE,
MUNICIPALITY OF VALLADOLID, NEGROS OCCIDENTAL; AND HENRY L. JORDAN AND/OR
HLJ CONSTRUCTION AND ENTERPRISE, Respondents.

DECISION

LEONEN, J.:

Republic Act No. 8975 does not sanction splitting a cause of action in order for a party to avail itself
of the ancillary remedy of a temporary restraining order from this court. Also, this law covers only
national government infrastructure projects. This case involves a local government infrastructure
project.

For local government infrastructure projects, Regional Trial Courts may issue provisional injunctive
reliefs against government infrastructure projects only when (1) there are compelling and substantial
constitutional violations; (2) there clearly exists a right in esse; (3) there is a need to prevent grave
and irreparable injuries; (4) there is a demonstrable urgency to the issuance of the injunctive relief;
and (5) when there are public interest at stake in restraining or enjoining the project while the action
is pending that far outweighs (a) the inconvenience or costs to the party to whom the project is
awarded and (b) the public benefits that will result from the completion of the project. The time
periods for the validity of temporary restraining orders issued by trial courts should be strictly
followed. No preliminary injunction should issue unless the evidence to support the injunctive relief is
clear and convincing.

We are asked by Dynamic Builders & Construction Co. (Phil.), Inc. (Dynamic Builders) through this
Petition for prohibition with application for issuance of a temporary restraining order and/or writ of
preliminary injunction  that:
1

1. Upon the filing of this petition, a temporary restraining order and/or writ of preliminary
injunction be immediately issued restraining and enjoining:

(a) the enforcement or execution of the 12 June 2006 Decision and the 30 June 2006
Resolution by the Hon. Ricardo P. Presbitero, Jr., Mayor of the Municipality of
Valladolid and Head of the Procuring Entity in Protest Case No. BPC-01-06 entitled
"Dynamic Builders & Construction Company (Phil.), Inc. v. Bids And Awards
Committee, Municipality of Valladolid, Negros Occidental" by the respondents, or
their agents, or anyone acting in their behalf, or anyone who stands to benefit from
such order, in any manner, during the pendency of the proceedings in Civil Case No.
1459 in order not to render further proceedings in Civil Case No. 1459 moot and
academic and any judgment in the said case ineffectual;

(b) the implementation of the award of the Construction Shoreline Protection Project
subject of Protest Case No. BPC-01-06, during the pendency of Civil Case No. 1459,
by the respondents, or their agents, or anyone acting in their behalf, or anyone who
stands to benefit from such implementation, in any manner, during the pendency of
the proceedings in Civil Case No. 1459 in order not to render further proceedings in
Civil Case No. 1459 moot and any judgment in the said case ineffectual; and
 2. Thereafter, a writ of prohibition be issued and/or the preliminary injunction be made
permanent and continuing, during the pendency of Civil Case No. 1459 before the Regional
Trial Court of Bago City. Other reliefs just and equitable in the premises are likewise prayed
for. 2

On December 28, 2005, the Municipality of Valladolid, Negros Occidental, through its Bids and
Awards Committee, published an invitation to bid for the construction of a 1,050-lineal-meter rubble
concrete seawall along the municipality’s shoreline.  This infrastructure venture is known as the
3

"Construction Shoreline Protection Project." 4

On January 17, 2006, the Bids and Awards Committee conducted a pre-bid conference attended by
six (6) prospective contractors including Dynamic Builders. 5

On January 31, 2006, three (3) out of the seven (7) contractors that had secured bidding documents
in order to bid "submitted letters of withdrawal."  Thus, only the remaining four(4) bidders "were
6

considered during the opening of the bids."  The prices offered were the following:
7 8

Mig-wells Const Corp ₱35,561,015.33 Highest Bidder

ADP Const & Supply ₱34,778,496.72 3rd Lowest Bidder
Dynamic Builders & Const ₱29,750,000.00 Lowest Bidder
HLJ Const & Ent. ₱31,922,420.27 2nd Lowest Bidder

On March 27, 2006, the Bids and Awards Committee issued Resolution No. 6 recommending the
award in favor of HLJ Construction and Enterprise. 9

On April 18, 2006, the Municipality of Valladolid received its "NO OBJECTION" letter from World
Bank through the LOGOFIND  project director, advising the Bids and Awards Committee to proceed
10

with the issuance of the notice of award, letter of acceptance, signing of contract, and notice to
proceed.11

On April 21, 2006, the Bids and Awards Committee issued Resolution No. 7 affirming the award of
contract to HLJ Construction and Enterprise for the construction of the 1,050-lineal-meter
Construction Shoreline Protection Project amounting to ₱31,922,420.37. 12

On April 25, 2006, Bids and Awards Committee Chairperson Celina C. Segunla wrote Engr. Raul F.
Balandra of Dynamic Builders and the other participating losing bidders, ADP Construction and Mig-
Wells Construction Corporation, to inform them of the Bids and Awards Committee’s findings and
decision.  Dynamic Builders was informed that "its bid proposal had been found to be ‘not
13

substantially responsive.’"  Dynamic Builders received this decision on May 11, 2006.
14 15

Dynamic Builders alleged that on May 5, 2006, it submitted the letter dated April 7, 2006 containing
a request for the Bids and Awards Committee to furnish it with all submitted bid documents and
relevant Bids and Awards Committee resolutions, but this was denied by the letter dated May 5,
2006 invoking confidentiality under Section 2.46 of the LOGOFIND guidelines. 16

On May 15, 2006, the Bids and Awards Committee received the letter from Dynamic Builders
seeking reconsideration of the April 25, 2006 decision declaring Dynamic Builders’ bid as not
substantially responsive.17
On May 22, 2006, the Bids and Awards Committee wrote Dynamic Builders denying the request for
reconsideration. It informed Dynamic Builders of the post-evaluation examination results showing
Dynamic Builders’ failure in its Financial Contracting Capability. 18

On June 6, 2006, Dynamic Builders lodged a formal protest with the head of the procuring entity,
Mayor Ricardo P. Presbitero, Jr. (Mayor Presbitero), to set aside the Bids and Awards Committee
decision declaring Dynamic Builders’ bid as not substantially responsive. 19

Mayor Presbitero dismissed the protest in the Decision  dated June 12, 2006.
20

According to Mayor Presbitero’s June 12, 2006 Decision, the bidders underwent preliminary
examination and were "subjected to the criteria of Verification, Eligibility, Bid Security, Completeness
of Bid, Substantial Responsiveness, and Acceptance for Detailed Examination[.]"  Mig-wells
21

Construction Corporation did not pass the preliminary examination, while the remaining three that
passed were subjected to detailed examination. All three passed and qualified for post-evaluation
examination. 22

The June 12, 2006 Decision also stated that during the post-evaluation examination, the three
bidders submitted their financial statements for the last five (5) years and other documents expressly
provided in Volume 2 of the Procurement Guidelines Manual of LOGOFIND World Bank.  The 23

examination showed that Dynamic Builders had a negative Financial Contracting Capability of
₱64,579,119.13 due to numerous other contractual commitments or balance of works.  HLJ 24

Construction and Enterprise had a positive Financial Contracting Capability of 30,921,063.86, while
ADP Construction had a positive Financial Contracting Capability of only ₱12,770,893.78.  Section 25

4.5.e of the Instruction To Bidders requires a minimum Financial Contracting Capability of

₱13,000,000.00. 26

Mayor Presbitero denied Dynamic Builders’ Motion for Reconsideration in the Resolution  dated 27

June 30, 2006.

On September 4, 2006 and pursuant to Article XVII, Section 58 of Republic Act No. 9184, otherwise
known as the Government Procurement Reform Act, Dynamic Builders filed the Petition for Certiorari
before the Regional Trial Court of Bago City, Negros Occidental, assailing Mayor Presbitero’s
Decision and Resolution. 28

Simultaneously, Dynamic Builders filed this Petition  dated September 4, 2006 for prohibition with
29

application for temporary restraining order and/or writ of preliminary injunction before this
court.  This was received by this court on September 6, 2006.
30 31

Petitioner Dynamic Builders submits that Article XVII, Section 58 of Republic Act No. 9184 implicitly
allowed it to simultaneously file a Petition for Certiorari before the Regional Trial Court assailing the
protest case on the merits, and another Petition before this court for injunctive remedies. 32

Petitioner argues that in Section 58, the "law conferring on the Supreme Court the sole jurisdiction to
issue temporary restraining orders and injunctions relating to Infrastructure Project of Government"
refers to Republic Act No. 8975  in relation to Presidential Decree No. 1818.  Petitioner then submits
33 34

that "while R.A. No. 8975 appears to apply only to national government infrastructure projects . . .
the resulting amendment to P.D. No. 1818 (by virtue of Sections 3 and 9 of R.A. No. 8975) removing
any restriction upon the Honorable Supreme Court to issue injunctive relief, would similarly apply to
the infrastructure projects . . . subject of, or covered by, P.D. No. 1818, which would include those
infrastructure projects undertaken for or by local governments." 35
Petitioner asserts that J.V. Lagon Construction v. Pangarungan  clarified that Regional Trial Courts
36

can issue injunctive relief when it is of "extreme urgency involving a constitutional

issue."  Nevertheless, petitioner argues that this ruling was an obiter dictum, and J.V. Lagon
37

involved a national government project.  Thus, it only exercised prudence when it took twin remedial
38

routes.39

The Petition alleges that respondent HLJ Construction and Enterprise already commenced
construction and "obtained the release of the 15% advance . . . for mobilization costs as well as
partial payments for the portion . . . completed."  Petitioner argues that the issuance of a temporary
40

restraining order and/or preliminary injunction was of extreme urgency, as it was illegally deprived of
its constitutional rights to due process and equal protection of law. 41

The Petition then incorporates by reference its Civil Case No. 1459 Petition’s discussion on the
following arguments:

(1) Petitioner was denied due process when the contract was awarded to private respondent
HLJ Construction and Enterprise without first giving the former an opportunity to avail itself of
the remedies under R.A. No. 9184[;]

(2) The award of the contract to private respondent HLJ Construction and Enterprise violated
Section 57 of R.A. No. 9184[;]

(3) Contrary to the findings of public respondents, the bid submitted by petitioner was
responsive[;] [and]

(4) For having in fact submitted the Lowest Calculated Responsive Bid, petitioner should be
awarded the contract for the Construction of 1,050 Lineal Meter Rubble Concrete Seawall of
the Municipality of Valladolid, Negros Occidental. 42

By Resolution dated September 18,2006, this court ordered the parties to "MAINTAIN THE STATUS
QUO as of September 18, 2006 effective immediately until further orders from the Court." 43

In their Comment  on the Petition, public respondents counter that petitioner "grossly violated the
44

rules against splitting a single cause of action, multiplicity of suits, and forum shopping . . . [and]
availed of an improper remedy and disregarded the rule on ‘hierarchy of courts[.]’"  The project
45

undertaken by HLJ Construction and Enterprise was almost near completion, and prohibition "[was]
not intended to provide a remedy for acts already executed or accomplished."  Petitioner should
46

have asked for injunctive relief in Civil Case No. 1459 filed before the trial court. 47

Public respondents argue that Article XVII, Section 58 of Republic Act No. 9184, Presidential Decree
No. 1818, and Republic Act No. 8975 do not envision simultaneous resort to remedies before the
trial court and this court.  They submit that Section 58 provides for alternative remedies between an
48

action under Rule 65 before the Regional Trial Court and a proper action directly before this court. 49

Public respondents agree that Republic Act No. 8975 only governs national government projects but
disagree insofar as petitioner’s submission that since Republic Act No. 8975 amended Presidential
Decree No. 1818 by removing the restriction on this court to issue injunctive relief, it now covers
local government projects. 50

Respondent HLJ Construction and Enterprise similarly raises the issue of petitioner’s forum
shopping.  It adds that due process was not denied, as public respondent notified petitioner of its
51
findings and decision, heard petitioner’s arguments, and entertained petitioner’s motion for
reconsideration.  Respondent HLJ Construction and Enterprise stresses that the Construction
52

Shoreline Protection Project’s delay will only result in grave injustice and irreparable injury affecting
the people of the Municipality of Valladolid, Negros Occidental. 53

On December 13, 2006, petitioner filed a verified Petition to Cite Respondents for
Contempt,  alleging that respondents did not cease work on the project in disregard of this court’s
54

status quo order.  Respondents filed their respective comments.

55 56

The issues for our resolution are as follows:

First, whether Article XVII, Section 58 of Republic Act No. 9184 contemplates simultaneous filing of
a petition for prohibition seeking injunctive reliefs from this court and a petition for certiorari before
the Regional Trial Court; consequently:

a) Whether petitioner violated the rules against the splitting of a cause of action, multiplicity
of suits, and forum shopping;

b) Whether petitioner violated the doctrine on hierarchy of courts; and

c) Whether petitioner resorted to an improper remedy when it filed a petition for prohibition
with this court.

Second, whether Article XVII, Section 58 of Republic Act No. 9184, in relation to Republic Act No.
8975 and Presidential Decree No. 1818, allows Regional Trial Courts to issue injunctive relief
subject to the presence of certain conditions; and

Lastly, whether respondents violated this court’s September 18, 2006 status quo Order in relation to
the ongoing Construction Shoreline Protection Project.

We proceed with the procedural issue of whether petitioner availed itself of the wrong remedy in
simultaneously filing (1) a petition for certiorari before the trial court alleging that public respondent
gravely abused its discretion in rendering its June 12, 2006 Decision and June 30, 2006 Resolution
and (2) a petition for prohibition seeking injunctive reliefs from this court to enjoin the enforcement of
public respondent’s June 12, 2006 Decision and June 30, 2006 Resolution during the pendency of
the case before the trial court.

Public respondents submit that a simple reading of the Petition in Civil Case No. 1459 readily
reveals that petitioner also asked the trial court to nullify the same Decision and Resolution on the
identical ground of grave abuse of discretion amounting to lack or excess of jurisdiction.  Petitioner
57

counters that it was compelled to file the separate petitions pursuant to, and in view of, Article XVII,
Section 58 of Republic Act No. 9184: 58

Sec. 58. Report to Regular Courts; Certiorari. – Court action may be resorted to only after the
protests contemplated in this Article shall have been completed. Cases that are filed in violation of
the process specified in this Article shall be dismissed for lack of jurisdiction. The regional trial court
shall have jurisdiction over final decisions of the head of the procuring entity. Court actions shall be
governed by Rule 65 of the 1997 Rules of Civil Procedure.
This provision is without prejudice to any law conferring on the Supreme Court the sole jurisdiction to
issue temporary restraining orders and injunctions relating to Infrastructure Projects of Government.
(Emphasis supplied)

Section 58 could not have envisioned a simultaneous resort to this court by one that had already
filed an action before the Regional Trial Court without violating the basic rules on proscription
against the splitting of a cause of action, multiplicity of suits, and forum shopping.

Rule 2, Section 3 of the Rules of Court provides that "[a] party may not institute more than one suit
for a single cause of action." Moreover, Section 4 discusses the splitting of a single cause of action
in that "if two or more suits are instituted on the basis of the same cause of action, the filing of one or
a judgment upon the merits in any one is available as a ground for the dismissal of the others." The
splitting of a cause of action "violate[s] the policy against multiplicity of suits, whose primary objective
[is] to avoid unduly burdening the dockets of the courts." 59

This Petition seeks to enjoin the execution of public respondent’s Decision and Resolution on the
protest — the same Decision and Resolution sought to be set aside in the Petition before the
Regional Trial Court. In essence, petitioner seeks the same relief through two separate Petitions
filed before separate courts. This violates the rule against forum shopping.

Rule 7, Section 5 of the Rules of Court requires the plaintiff or principal party to certify under oath
that he or she has not commenced any action involving the same issues in any court. This court has
discussed this rule against forum shopping:

In essence, forum shopping is the practice of litigants resorting to two different for a for the purpose
of obtaining the same relief, to increase their chances of obtaining a favorable judgment. In
determining whether forum shopping exists, it is important to consider the vexation caused to the
courts and the parties-litigants by a person who asks appellate courts and/or administrative entities
to rule on the same related causes and/or to grant the same or substantially the same relief, in the
process creating the possibility of conflicting decisions by the different courts or for a on the same
issues. We have ruled that forum shopping is present when, in two or more cases pending, there is
identity of (1) parties (2) rights or causes of action and reliefs prayed for and (3) the identity of the
two preceding particulars is such that any judgment rendered in the other action, will, regardless of
which party is successful, amount to res judicata in the action under consideration. 60

Private respondent alleges that petitioner did not even notify the Regional Trial Court of Bago City,
Negros Occidental, of its Petition filed before this court.61

The second paragraph of Article XVII, Section 58 of Republic Act No. 9184 simply means it does not
preclude a direct filing before this court in proper cases.

The Rules of Court provides for original concurrent jurisdiction by the Regional Trial Court, the Court
of Appeals, and this court in entertaining petitions for certiorari, prohibition, or mandamus.  However,
62

parties must adhere to the principle of hierarchy of courts. This was discussed in Dimson (Manila),
Inc., et al. v. Local Water Utilities Administration:
63

Clearly, the proper recourse to a court action from decisions of the BAC, such as this one, is to file a
certiorari not before the Supreme Court but before the regional trial court which is vested by R.A. No.
9184 with jurisdiction to entertain the same. In the recent case of First United Constructors
Corporation v. Poro Point Management Corporation, we held that while indeed the certiorari
jurisdiction of the regional trial court is concurrent with this Court’s, that fact alone does not allow an
unrestricted freedom of choice of the court forum. But since this is not an iron-clad rule and the full
discretionary power to take cognizance of and assume jurisdiction over special civil actions for
certiorari directly filed with the Court may actually be exercised by it, it is nevertheless imperative
that the Court’s intervention be called for by exceptionally compelling reasons or be warranted by the
nature of the issues involved. In other words, a direct invocation of the Supreme Court’s original
jurisdiction to issue the writ will be allowed only when there are special and important reasons clearly
and specifically set out in the petition.  (Citations omitted)
64

The hierarchy of courts must be respected. The doctrine with respect to hierarchy of courts was
designed so that this court will have more time to focus on its constitutional tasks without the need to
deal with causes that also fall within the lower courts’ competence.  This court acts on petitions for
65

extraordinary writs under Rule 65 "only when absolutely necessary or when serious and important
reasons exist to justify an exception to the policy."
66

Consistent with these rules and doctrines, the remedy contemplated by Article XVII, Section 58 of
Republic Act No. 9184 is either an action under Rule 65 before the Regional Trial Court or the
proper action filed before this court. However, direct resort to this court can prosper only when the
requisites for direct invocation of this court’s original jurisdiction are present.

II

Prohibition is a preventive remedy. This court has held that injunctive remedies will not lie for acts
already accomplished. 67

The acts sought to be enjoined in this case included the implementation of the Construction
Shoreline Protection Project awarded to private respondent HLJ Construction and Enterprise. The
project had already commenced and had been ongoing at the time petitioner filed this case.
Moreover, the issue of whether these acts infringed on petitioner’s rights is a matter interrelated with
the issues raised in the Petition before the trial court, emphasizing the existence of the splitting of a
cause of action.

In any case, this court has stressed that extraordinary writs of certiorari, prohibition, and mandamus
are "prerogative writs of equity[.]"  It is within the court’s sound discretion whether these writs should
68

be granted, and it will need to ensure that there is a clear right to the relief.
69

Prohibition is defined as "an extraordinary remedy available to compel any tribunal, corporation,
board, or person exercising judicial or ministerial functions, to desist from further [proceeding] in an
action or matter when the proceedings in such tribunal, corporation, board or person are without or
in excess of jurisdiction or with grave abuse of discretion[.]"
70

Grave abuse of discretion will prosper as a ground for prohibition when it is shown that "there
was . . . capricious and whimsical exercise of judgment . . . equivalent to lack of jurisdiction or that
the tribunal, corporation, board or person has exercised its power in an arbitrary or despotic manner
by reason of passion or personal hostility." 71

First, public respondent had jurisdiction to rule on the protest since it was then head of the procuring
entity.
72

Second, this court need not look into petitioner’s allegation that its Petition before the Regional Trial
Court raised grounds warranting the reversal of public respondent’s Decision.  The merits of
73

whether there was grave abuse of discretion by public respondent were already subject of the
Petition before the trial court. Petitioner cannot be allowed to seek the same relief from this court.
Rule 65 likewise requires that there be "no appeal or any . . . plain, speedy, [or] adequate remedy in
the ordinary course of law."  Section 3 of Republic Act No. 8975 provides for such a remedy when it
74

gave an exception to the general rule prohibiting lower courts from issuing provisional injunctive
relief against national government projects:

Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions. – No court, except the Supreme Court, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory injunction against the government,
or any of its subdivisions, officials or any person or entity, whether public or private, acting under the
government’s direction, to restrain, prohibit or compel the following acts: . . . .

This prohibition shall apply in all cases, disputes or controversies instituted by a private party,
including but not limited to cases filed by bidders or those claiming to have rights through such
bidders involving such contract/project. This prohibition shall not apply when the matter is of extreme
urgency involving a constitutional issue, such that unless a temporary restraining order is issued,
grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be
fixed by the court, which bond shall accrue in favor of the government if the court should finally
decide that the applicant was not entitled to the relief sought. (Emphasis supplied) When the matter
is of "extreme urgency involving a constitutional issue," even Regional Trial Courts may grant
injunctive reliefs as explained in Republic v. Nolasco: 75

Republic Act No. 8975 definitively enjoins all courts, except the Supreme Court, from issuing any
temporary restraining order, preliminary injunction, or preliminary mandatory injunction against the
government, or any of its subdivisions, officials or any person or entity to restrain, prohibit or compel
the bidding or awarding of a contract or project of the national government, precisely the situation
that obtains in this case with respect to the Agno River Project. The only exception would be if the
matter is of extreme urgency involving a constitutional issue, such that unless the temporary
restraining order is issued, grave injustice and irreparable injury will arise.  (Emphasis supplied,
76

citations omitted)

Considering that petitioner alleges that this matter is "of extreme urgency, involving as it does the . . .
constitutional right[s] to due process and equal protection of the law,"  it should have prayed for
77

injunctive relief before the trial court where its Petition for Certiorari via Rule 65 was pending,
together with a bond fixed by the court.

Mere allegation or invocation that constitutionally protected rights were violated will not automatically
result in the issuance of injunctive relief. The plaintiff or the petitioner should discharge the burden to
show a clear and compelling breach of a constitutional provision. Violations of constitutional
provisions are easily alleged, but trial courts should scrutinize diligently and deliberately the
evidence showing the existence of facts that should support the conclusion that a constitutional
provision is clearly and convincingly breached. In case of doubt, no injunctive relief should issue. In
the proper cases, the aggrieved party may then avail itself of special civil actions and elevate the
matter.

This court adheres to the policy behind the prohibition under Republic Act No. 8975 and even issued
Administrative Circular No. 11-2000 entitled Re: Ban on the Issuance of Temporary Restraining
Orders or Writs of Preliminary Prohibitory or Mandatory Injunctions in Cases Involving Government
Infrastructure Projects. This circular enjoins lower court judges to strictly comply with Republic Act
No. 8975.
However, the issue here does not involve the propriety of a lower court’s issuance or non-issuance
of provisional injunctive relief, but petitioner’s insistence that only this court can issue such injunctive
relief in justifying its simultaneous Petitions before the Regional Trial Court and this court.

Petitioner hinges its erroneous simultaneous Petitions on its reading of Republic Act No. 8975 in
relation to Presidential Decree No. 1818.

III

Petitioner submits that only this court has the power to issue injunctions to enjoin government
infrastructures including those of local government. 78

Petitioner explains that the "laws" referred to in Article XVII, Section 58 of Republic Act No. 9184
refer to Republic Act No. 8975 that prohibits courts, except the Supreme Court, from issuing
temporary restraining orders and injunctions against government infrastructure projects. It adds that
Republic Act No. 8975 must be taken in relation to Presidential Decree No. 1818 prohibiting the
issuances by the courts of restraining orders or injunctions involving infrastructure projects.  The full
79

text of Presidential Decree No. 1818 promulgated in 1981 reads: PRESIDENTIAL DECREE NO.
1818

PROHIBITING COURTS FROM ISSUING RESTRAINING ORDERS OR PRELIMINARY

INJUNCTIONS IN CASES INVOLVING INFRASTRUCTURE AND NATURAL RESOURCE
DEVELOPMENT PROJECTS OF, AND PUBLIC UTILITIES OPERATED BY, THE GOVERNMENT.

WHEREAS, Presidential Decree No. 605 prohibits the issuance by the courts of restraining orders or
injunctions in cases involving concessions, licenses, and other permits issued by administrative
officials or bodies for the exploitation, development and utilization of natural resources of the
country;

WHEREAS, it is in the public interest to adopt a similar prohibition against the issuance of such
restraining orders or injunctions in other areas of activity equally critical to the economic
development effort of the nation, in order not to disrupt or hamper the pursuit of essential
government projects;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution, do hereby decree and order as follows:

Section 1. No court in the Philippines shall have jurisdiction to issue any restraining order,
preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy
involving an infrastructure project, or a mining, fishery, forest or other natural resource development
project of the government, or any public utility operated by the government, including among others
public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to
prohibit any person or persons, entity or government official from proceeding with, or continuing the
execution or implementation of any such project, or the operation of such public utility, or pursuing
any lawful activity necessary for such execution, implementation or operation.

Section 2. This decree shall take effect immediately. (Emphasis supplied)

In 2000, Republic Act No. 8975 was passed. Section 3 of the law provides:
Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions. - No court, except the Supreme Court, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory injunction against the government
or any of its subdivisions, officials or any person or entity, whether public or private, acting under the
government’s direction, to restrain, prohibit or compel the following acts: (a) Acquisition, clearance
and development of the right-of-way and/or site or location of any national government project;

(b) Bidding or awarding of contract/project of the national government as defined under

Section 2 hereof;

(c) Commencement, prosecution, execution, implementation, operation of any such contract

or project;

(d) Termination or rescission of any such contract/project; and

(e) The undertaking or authorization of any other lawful activity necessary for such
contract/project.

This prohibition shall apply in all cases, disputes or controversies instituted by a private party,
including but not limited to cases filed by bidders or those claiming to have rights through such
bidders involving such contract/project. This prohibition shall not apply when the matter is of extreme
urgency involving a constitutional issue, such that unless a temporary restraining order is issued,
grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be
fixed by the court, which bond shall accrue in favor of the government if the court should finally
decide that the applicant was not entitled to the relief sought.

If after due hearing the court finds that the award of the contract is null and void, the court may, if
appropriate under the circumstances, award the contract to the qualified and winning bidder or order
a rebidding of the same, without prejudice to any liability that the guilty party may incur under
existing laws. (Emphasis supplied)

Petitioner submits that since the repealing clause of Republic Act No. 8975 has "amended
accordingly" Presidential Decree No. 1818, the prohibition no longer extends to this court.  Section 9
80

reads:

Sec. 9. Repealing Clause. – All laws, decrees, including Presidential Decree Nos. 605, 1818 and
Republic Act No. 7160, as amended, orders, rules and regulations or parts thereof inconsistent

with this Act are hereby repealed or amended accordingly. 81

Petitioner argues that even if Republic Act No. 8975 only mentions national government
infrastructure projects, Section 9 has accordingly amended Presidential Decree No. 1818, such that
the projects covered by this earlier law, like those undertaken by local governments, are similarly
covered by the removal of the prohibition against this court. 82

In other words, petitioner contends that based on these laws, only this court can issue injunctive
relief against local government infrastructure projects.  Thus, it was constrained to simultaneously
1âwphi1

file two separate Petitions before the Regional Trial Court and this court.

We cannot agree.
There is nothing in Republic Act No. 8975 or in Presidential Decree No. 1818 that allows the
simultaneous availment of legal remedies before the Regional Trial Court and this court. Republic
Act No. 8975, even when read with Presidential Decree No. 1818, does not sanction the splitting of a
cause of action in order for a party to avail itself of the ancilliary remedy of a temporary restraining
order from this court.

Petitioner’s reading of Republic Act No. 8975’s repealing clause, such that only this court can issue
injunctive relief, fails to persuade.

This court has set the limit on the prohibition found in Presidential Decree No. 1818 by explaining
that lower courts are not prohibited from enjoining administrative acts when questions of law exist
and the acts do not involve administrative discretion in technical cases:

Although Presidential Decree No. 1818 prohibits any court from issuing injunctions in cases involving
infrastructure projects, the prohibition extends only to the issuance of injunctions or restraining
orders against administrative acts in controversies involving facts or the exercise of discretion in
technical cases. On issues clearly outside this dimension and involving questions of law, this Court
declared that courts could not be prevented from exercising their power to restrain or prohibit
administrative acts. In such cases, let the hammer fall and let it fall hard.
83

(Emphasis supplied, citations omitted)

We also consider the second paragraph of Republic Act No. 8975, Section 3 on the exception to the
prohibition:

This prohibition shall apply in all cases, disputes or controversies instituted by a private party,
including but not limited to cases filed by bidders or those claiming to have rights through such
bidders involving such contract/project. This prohibition shall not apply when the matter is of extreme
urgency involving a constitutional issue, such that unless a temporary restraining order is issued,
grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be
fixed by the court, which bond shall accrue in favor of the government if the court should finally
decide that the applicant was not entitled to the relief sought. (Emphasis supplied) In other words,
the Regional Trial Court can issue injunctive relief against government infrastructure projects, even
those undertaken by local governments, considering that the prohibition in Section 3 of Republic Act
No. 8957 only mentions national government projects. These courts can issue injunctive relief when
there are compelling constitutional violations — only when the right is clear, there is a need to
prevent grave and irreparable injuries, and the public interest at stake in restraining or enjoining the
project while the action is pending far outweighs the inconvenience or costs to the party to whom the
project is awarded.

Republic Act No. 8975 mentions the constitutional provision in that "[t]he use of property bears a
social function, and all economic agents shall contribute to the common good." 84

Statute cannot be interpreted as to violate protected rights. Thus, the above conditions safeguard
against lower court issuances of provisional injunctive relief in cases not falling within the exception.

These safeguards are also consistent with the law’s policy for the expeditious implementation of
government projects that ultimately benefit the public:

Section 1. Declaration of Policy. - Article XII, Section 6 of the Constitution states that the use of
property bears a social function, and all economic agents shall contribute to the common good.
Towards this end, the State shall ensure the expeditious and efficient implementation and
completion of government infrastructure projects to avoid unnecessary increase in construction,
maintenance and/or repair costs and to immediately enjoy the social and economic benefits
therefrom.  (Emphasis supplied)
85

There is no need for this court to labor on petitioner’s arguments regarding violations of due process
and equal protection of the law and the alleged grave injustice and irreparable injury petitioner
suffered. The Petition’s incorporation of its discussion on these arguments, as made in its Petition
before the Regional Trial Court docketed as Civil Case No. 1459, only emphasizes the splitting of a
cause of action committed.

In any event, the general rule of prohibition under Republic Act No. 8975 does not preclude lower
courts from assuming jurisdiction when the ultimate relief prayed for is to nullify a national
government infrastructure project and its implementation:

However, it must be clarified that Republic Act No. 8975 does not ordinarily warrant the outright
dismissal of any complaint or petition before the lower courts seeking permanent injunctive relief
from the implementation of national government infrastructure projects. What is expressly prohibited
by the statute is the issuance of the provisional reliefs of temporary restraining orders, preliminary
injunctions, and preliminary mandatory injunctions. It does not preclude the lower courts from
assuming jurisdiction over complaints or petitions that seek as ultimate relief the nullification or
implementation of a national government infrastructure project. A statute such as Republic Act No.
8975 cannot diminish the constitutionally mandated judicial power 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 government. Section 3 of the law in fact mandates, thus:

If after due hearing the court finds that the award of the contract is null and void, the court may, if
appropriate under the circumstances, award the contract to the qualified and winning bidder or order
a rebidding of the same, without prejudice to any liability that the guilty party may incur under
existing laws.

Thus, when a court is called upon to rule on an initiatory pleading assailing any material aspect
pertinent to a national government infrastructure project, the court ordinarily may not dismiss the
action based solely on Republic Act No. 8975 but is merely enjoined from granting provisional
reliefs. If no other ground obtains to dismiss the action, the court should decide the case on the
merits.  (Emphasis supplied, citation omitted)
86

IV

We decide on petitioner’s verified Petition to Cite Respondent for Contempt alleging violation of this
court’s September 18, 2006 status quo Order.

In its Comment, private respondent HLJ Construction and Enterprise explains that it has no intention
to disobey the Resolution. Its decision to continue the Construction Shoreline Protection Project was
based on the definition of "status quo," meaning the "present, current, existing state of affairs." 87

"The present[,] existing condition on September 18, 2006, was the ongoing construction."  Moreover,
88

petitioner’s rights were not violated as its bid was declared as "not substantially responsive."  In the
89

absence of a clear legal right, no injunction can be granted.  Similarly, public respondent contends in
90

its Comment that the Construction Shoreline Protection Project commenced as early as May 8,
2006.  At the time the Petition was filed in September 2006, the Construction Shoreline Protection
91
Project had been ongoing for four (4) months.  Thus, the status quo as of the September 18, 2006
92

Resolution was that the project was ongoing. 93

This court has explained that status quo should be the one existing at the time of the filing of the
case:

The status quo should be that existing at the time of the filing of the case. The status quo usually
preserved by a preliminary injunction is the last actual, peaceable and uncontested status which
preceded the actual controversy. The status quo ante litem is, ineluctably, the state of affairs which
is existing at the time of the filing of the case. Indubitably, the trial court must not make use of its
injunctive power to alter such status.  (Emphasis supplied, citations omitted)
94

The ordinary meaning of status quo is "the existing state of affairs[,]"  while status quo ante refers to
95

"the state of affairs that existed previously. "96

Relying in good faith on the ordinary meaning of status quo as differentiated from status quo ante,
respondents pushed through with the construction, which had been the existing state of affairs at the
time the September 18, 2006 Resolution was issued.

This is consistent with Republic Act No. 8975's policy that "the State shall ensure the expeditious
and efficient implementation and completion of government infrastructure projects to avoid
unnecessary increase in construction, maintenance and/or repair costs and to immediately enjoy the
social and economic benefits therefrom."  This policy declaration does not distinguish between
97

national and local government infrastructure projects. Delay in the project will only mean additional
costs for the government and prejudice to the people of the Municipality of Valladolid who will
directly benefit from the Construction Shoreline Protection Project. WHEREFORE, considering the
foregoing, the Petition is DISMISSED for lack of merit. The verified Petition to Cite Respondents for
Contempt dated December 11, 2006 is likewise DISMISSED for lack of merit.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice Associate Justice

DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO (on official leave)

Associate Justice MARTIN S. VILLARAMA, JR.*
 Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice

(on leave)
BIENVENIDO L. REYES
ESTELA M. PERLAS-BERNABE**
Associate Justice
Associate Justice

FRANCIS H. JARDELEZA
Associate Justice

FIRST DIVISION

G.R. No. 138497            January 16, 2002

IMELDA RELUCIO, petitioner,
vs.
ANGELINA MEJIA LOPEZ, respondent.

PARDO, J.:

The Case

The case is a petition for review on certiorari seeking to set aside the decision of the Court of
1  2 

Appeals that denied a petition for certiorari assailing the trial court's order denying petitioner's motion
to dismiss the case against her inclusion as party defendant therein.

The Facts

The facts, as found by the Court of Appeals, are as follows:

"On September 15, 1993, herein private respondent Angelina Mejia Lopez (plaintiff below)
filed a petition for "APPOINTMENT AS SOLE ADMINISTRATIX OF CONJUGAL
PARTNERSHIP OF PROPERTIES, FORFEITURE, ETC.," against defendant Alberto Lopez
and petition Imelda Relucio, docketed as Spec. Proc. M-3630, in the Regional Trial Court of
Makati, Branch 141. In the petition, private-respondent alleged that sometime in 1968,
defendant Lopez, who is legally married to the private respondent, abandoned the latter and
their four legitimate children; that he arrogated unto himself full and exclusive control and
 administration of the conjugal properties, spending and using the same for his sole gain and
benefit to the total exclusion of the private respondent and their four children; that defendant
Lopez, after abandoning his family, maintained an illicit relationship and cohabited with
herein petitioner since 1976.

"It was further alleged that defendant Lopez and petitioner Relucio, during their period of
cohabitation since 1976, have amassed a fortune consisting mainly of stockholdings in
Lopez-owned or controlled corporations, residential, agricultural, commercial lots, houses,
apartments and buildings, cars and other motor vehicles, bank accounts and jewelry. These
properties, which are in the names of defendant Lopez and petitioner Relucio singly or jointly
or their dummies and proxies, have been acquired principally if not solely through the actual
contribution of money, property and industry of defendant Lopez with minimal, if not nil,
actual contribution from petitioner Relucio.

"In order to avoid defendant Lopez obligations as a father and husband, he excluded the
private respondent and their four children from sharing or benefiting from the conjugal
properties and the income or fruits there from. As such, defendant Lopez either did not place
them in his name or otherwise removed, transferred, stashed away or concealed them from
the private-respondent. He placed substantial portions of these conjugal properties in the
name of petitioner Relucio. 1âwphi1.nêt

"It was also averred that in the past twenty five years since defendant Lopez abandoned the
private-respondent, he has sold, disposed of, alienated, transferred, assigned, canceled,
removed or stashed away properties, assets and income belonging to the conjugal
partnership with the private-respondent and either spent the proceeds thereof for his sole
benefit and that of petitioner Relucio and their two illegitimate children or permanently and
fraudulently placed them beyond the reach of the private-respondent and their four children.

"On December 8, 1993, a Motion to Dismiss the Petition was filed by herein petitioner on the
ground that private respondent has no cause of action against her.

"An Order dated February 10, 1994 was issued by herein respondent Judge denying
petitioner Relucio's Motion to Dismiss on the ground that she is impleaded as a necessary or
indispensable party because some of the subject properties are registered in her name and
defendant Lopez, or solely in her name.

"Subsequently thereafter, petitioner Relucio filed a Motion for Reconsideration to the Order
of the respondent Judge dated February 10, 1994 but the same was likewise denied in the
Order dated May 31, 1994." 3

On June 21, 1994, petitioner filed with the Court of Appeals a petition for certiorari assailing the trial
court's denial of her motion to dismiss. 4

On May 31, 1996, the Court of Appeals promulgated a decision denying the petition. On June 26,
5 

1996, petitioner filed a motion for reconsideration. However, on April 6, 1996, the Court of Appeals
6 

denied petitioner's motion for reconsideration. 7

Hence, this appeal. 8

The Issues
 1. Whether respondent's petition for appointment as sole administratrix of the conjugal
property, accounting, etc. against her husband Alberto J. Lopez established a cause of
action against petitioner.

2. Whether petitioner's inclusion as party defendant is essential in the proceedings for a

complete adjudication of the controversy. 9

The Court's Ruling

We grant the petition. We resolve the issues in seriatim.

First issue: whether a cause of action exists against petitioner in the proceedings below. "A cause of
action is an act or omission of one party the defendant in violation of the legal right of the
other." The elements of a cause of action are:
10 

(1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is
created;

(2) an obligation on the part of the named defendant to respect or not to violate such right;
and

(3) an act or omission on the part of such defendant in violation of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff for which the latter may
maintain an action for recovery of damages. 11

A cause of action is sufficient if a valid judgment may be rendered thereon if the alleged facts were
admitted or proved. 12

In order to sustain a motion to dismiss for lack of cause of action, the complaint must show that the
claim for relief does not exist, rather than that a claim has been merely defectively stated or is
ambiguous, indefinite or uncertain. 13

Hence, to determine the sufficiency of the cause of action alleged in Special Proceedings M-3630,
we assays its allegations.

In Part Two on the "Nature of [the] Complaint," respondent Angelina Mejia Lopez summarized the
causes of action alleged in the complaint below.

The complaint is by an aggrieved wife against her husband.

Nowhere in the allegations does it appear that relief is sought against petitioner. Respondent's
causes of action were all against her husband.

The first cause of action is for judicial appointment of respondent as administratrix of the conjugal
partnership or absolute community property arising from her marriage to Alberto J. Lopez. Petitioner
is a complete stranger to this cause of action. Article 128 of the Family Code refers only to spouses,
to wit:

"If a spouse without just cause abandons the other or fails to comply with his or her
obligations to the family, the aggrieved spouse may petition the court for receivership, for
 judicial separation of property, or for authority to be the sole administrator of the conjugal
partnership property xxx"

The administration of the property of the marriage is entirely between them, to the exclusion of all
other persons. Respondent alleges that Alberto J. Lopez is her husband. Therefore, her first cause
of action is against Alberto J. Lopez. There is no right-duty relation between petitioner and
respondent that can possibly support a cause of action. In fact, none of the three elements of a
cause of action exists.

The second cause of action is for an accounting "by respondent husband." The accounting of
14 

conjugal partnership arises from or is an incident of marriage.

Petitioner has nothing to do with the marriage between respondent Alberto J. Lopez. Hence, no
cause of action can exist against petitioner on this ground.

Respondent's alternative cause of action is for forfeiture of Alberto J. Lopez' share in the co-owned
property "acquired during his illicit relationship and cohabitation with [petitioner]" and for the
15 

"dissolution of the conjugal partnership of gains between him [Alberto J. Lopez] and the
[respondent]."

The third cause of action is essentially for forfeiture of Alberto J. Lopez' share in property co-owned
by him and petitioner. It does not involve the issue of validity of the co-ownership between Alberto J.
Lopez and petitioner. The issue is whether there is basis in law to forfeit Alberto J. Lopez' share, if
any there be, in property co-owned by him with petitioner.

Respondent's asserted right to forfeit extends to Alberto J. Lopez' share alone. Failure of Alberto J.
Lopez to surrender such share, assuming the trial court finds in respondent's favor, results in a
breach of an obligation to respondent and gives rise to a cause of action. Such cause of action,
16 

however, pertains to Alberto J. Lopez, not petitioner.

The respondent also sought support. Support cannot be compelled from a stranger.

The action in Special Proceedings M-3630 is, to use respondent Angelina M. Lopez' own words, one
by "an aggrieved wife against her husband." References to petitioner in the common and specific
17 

allegations of fact in the complaint are merely incidental, to set forth facts and circumstances that
prove the causes of action alleged against Alberto J. Lopez.

Finally, as to the moral damages, respondent's claim for moral damages is against Alberto J. Lopez,
not petitioner.

To sustain a cause of action for moral damages, the complaint must have the character of an action
for interference with marital or family relations under the Civil Code.

A real party in interest is one who stands "to be benefited or injured by the judgment of the suit." In
18 

this case, petitioner would not be affected by any judgment in Special Proceedings M-3630.

If petitioner is not a real party in interest, she cannot be an indispensable party. An indispensable
party is one without whom there can be no final determination of an action. Petitioner's participation
19 

in Special Proceedings M-36-30 is not indispensable. Certainly, the trial court can issue a judgment
ordering Alberto J. Lopez to make an accounting of his conjugal partnership with respondent, and
give support to respondent and their children, and dissolve Alberto J. Lopez' conjugal partnership
with respondent, and forfeit Alberto J. Lopez' share in property co-owned by him and petitioner. Such
judgment would be perfectly valid and enforceable against Alberto J. Lopez.

Nor can petitioner be a necessary party in Special Proceedings M-3630. A necessary party as one
who is not indispensable but who ought to be joined as party if complete relief is to be accorded
those already parties, or for a complete determination or settlement of the claim subject of the
action. In the context of her petition in the lower court, respondent would be accorded complete
20 

relief if Alberto J. Lopez were ordered to account for his alleged conjugal partnership property with
respondent, give support to respondent and her children, turn over his share in the co-ownership
with petitioner and dissolve his conjugal partnership or absolute community property with
respondent.

The Judgment

WHEREFORE, the Court GRANTS the petition and REVERSES the decision of the Court of

Appeals. The Court DISMISSES Special Proceedings M-3630 of the Regional Trial Court, Makati,
21 

Branch 141 as against petitioner. 1âwphi1.nêt

No costs.

SO ORDERED.

Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ., concur.