FACTS: Spouses Arturo and Maxima emigrated to the U.S.

and leased their house and lot to their

nephew, Maceda, for P200 per month. With the spouses’ permission, petitioner repaired and
renovated the house subject to reimbursement for expenses. The remodeling job cost P40,000.
The spouses made plans to reimburse him. Maceda introduced more improvements.

When Arturo passed away in the US, his attorney-in-fact promised to sell to Maceda the property
for P125,000 after the transfer of title to his widowed aunt. However, it was later sold by the aunt
to Mr. Gomez, and the latter to Pablo Zubiri. Ejectment cases were filed against Maceda, but all
were dismissed. Maxima died in the US.

Zubiri sold the property to Cement Center, Inc., who asked petitioner to vacate because of a
housing project it had for its employees. Maceda insisted on being reimbursed for his
improvements as the original owners had promised to do. Formal demands to vacate and for
payment of P4,000 monthly rental from April 15, 1982 were sent to him by the company.
Another ejectment suit was filed against him in the MTC.

In his answer to the complaint, Maceda set up a P240,000 counterclaim, the alleged value of his
improvements. The MTC ordered him to vacate the premises and pay Cement Center rent. The
latter was ordered to reimburse him for the improvements.

The RTC set aside the decision and ordered Cement Center to pay Maceda P182,000 as
necessary and useful improvements.

The CA reversed the decision because of MTC’s lack of jurisdiction, and, in consequence the
RTC decision’s lack of legal basis.

ISSUE: Whether the MTC had jurisdiction over an ejectment case where the lessee's
counterclaim exceeds the court's jurisdictional limit

NO. The MTC did not have original jurisdiction over his counterclaim as it exceeds P20,000.
Correspondingly, the RTC did not have appellate jurisdiction over the claim. The decision of the
MTC awarding Maceda P158,000 on his counterclaim, and that of the RTC raising the award to
P182,200, were invalid for lack of jurisdiction. The jurisdiction of the MTC in a civil action for
sum of money is limited to a demand that "does not exceed P20,000 exclusive of interest and
costs but inclusive of damages of whatever kind." (Sec. 33, subpar. 1, B.P. Blg. 129.) A
counterclaim in the municipal or city court beyond that jurisdictional limit may be pleaded only
by way of defense to weaken the plaintiffs claim, but not to obtain affirmative relief.