When dealing with others, it is a part of every business operations to incur obligations in favor of another.

These obligations may be incurred through loan transactions, or through purchases on credit, among others.
It is quite common for some businesses to experience aging receivables, and collecting from debtors can be
quite difficult. Our laws recognize this problem.
For sure, payment extinguishes the obligation, which takes place when the amount consisting the obligation
has been completely delivered [See: Art. 1231 & 1233, Civil Code]. The challenge for creditors, however, is on
how will they get their debtors to pay.

The concept of default

Under the law, those who are obliged to deliver something are considered to be in default only from the time
the creditor demands payment [See: Art. 1169]. Without the debtor incurring default, the creditor would have
no right to enforce his credit through legal action. Since default can be incurred only when there is demand
by the creditor upon the debtor, such demand is therefore necessary before a collection case may be filed
by the creditor in court.
Demand can be made in any form, whether oral or written. However, written demand is more advisable, as
it would provide physical evidence that demand was indeed made upon the debtor.

Civil action for collection of sum of money

As a legal recourse, creditors may enforce their right to collect what is due from their creditor by filing a
collection suit in court, which is done by doing the following steps:
Prepare the complaint – Though a non-lawyer creditor may draft a civil complaint all by himself, it is still
advisable for him to get the services of a lawyer to ensure that the complaint is sufficient in form and
substance. Certainly, the complaint for sum of money must state the following matters in order to prosper.
1. The existence of a transaction creating an obligation in favor of the creditor to be paid a certain sum of
money. This may be a loan transaction, or any dealings that create obligations such as sale (concerning
purchase price) or lease (concerning rentals), among others;
2. The amount of money owed by the debtor to the creditor;
3. The fact that the indebtedness already fell due and is now demandable;
4. The fact a demand was made upon the debtor to pay the amount of the obligation.
5. If claiming for payment of interest, the written agreement entered by and between creditor and the debtor
containing a stipulation as to the payment of interest being claimed, as well as the rate of interest.
Attach all necessary documents to the complaint – One has to make sure that all documents needed to prove
the claim are already annexed to the complaint, because these supporting documents will be the evidence
that the one suing would need to prove the basis of his claim.
Execute a notarized verification and certification against forum shopping – Towards the end of the complaint,
there should be a portion for verification and certification against forum shopping, which the plaintiff needs
to execute. Don’t forget to have it notarized before actually filing it in court.
File the complaint before the court – If the obligation does not exceed Php 300,000.00 (Php 400,000.00 if within
Metro Manila), the complaint must be filed before the Metropolitan/Municipal Trial Court of the place where
the creditor resides, or where the debtor resides. If the amount of obligation is more than the said amount,
then the complaint shall be filed with the Regional Trial Court [See: Sec. 5, R.A. No. 7691].

What must be stated in the complaint

To be considered sufficient, the complaint must state the following matters:
1. The existence of a transaction creating an obligation in favor of the creditor to be paid a certain sum of
money. This may be a loan transaction, or any dealings that create obligations such as sale (concerning
purchase price) or lease (concerning rentals), among others;
2. The amount of money owed by the debtor to the creditor;
3. The fact that the indebtedness already fell due and is now demandable;
4. The fact a demand was made upon the debtor to pay the amount of the obligation.
5. If claiming for payment of interest, the written agreement entered by and between creditor and the debtor
containing a stipulation as to the payment of interest being claimed, as well as the rate of interest.
The matters stated above may be proved by testimonial or documentary evidence. However, it may be more
difficult to establish factual matters if what needs to be proved are not documented. Also, as to the stipulation
on payment of interest, the law requires that it must be in writing, otherwise payment of interest cannot be
enforced [See: Art. 1956].
For being an enforceable right in court, creditors who are having a hard time collecting their credit may resort
to legal action. Of course, it is still better for the parties to simply resolve their issues without having to go
into a legal dispute, but our law cannot close its eyes to the creditor’s rights especially when some debtors
simply make collection of debts more difficult than is necessary.

Pursuant to A.M. No. 08-8-7-SC, or the 2016 Revised Rules of Procedure for Small Claims Cases (amended
by OCA Circular No. 45-2019, effective 01 April 2019) issued by the Supreme Court of the Philippines, money
claims not exceeding P400,000.00 or P300,000.00, depending on the venue of the claim (as amended by OCA
Circular No. 45-2019, effective 01 April 2019). Procedures to be followed are different from that of ordinary
lawsuits for collection of sum of money, provided that the claims purely civil in nature where the claim or
relief prayed for by the plaintiff is solely for payment or reimbursement of sum of money. All money claims
exceeding the above-mentioned amounts are automatically excluded from the rules on small claims, and
would be covered by the regular procedure in ordinary collection cases.
If this is your first time to file (or at least, consider filing) a small claims case, then here are some things that
you need to know.

Demands that may be enforced under small claims

The following are just some of the examples of claims or demands that may be enforced before the Small
Claims Court (as long as the amount does not exceed P400,000.00):
• Money owed under the any contract of lease, contract of loan, contract of services, contract of sale;
or contract of mortgage;
• Liquidated damages arising from contracts;
• The enforcement of a barangay amicable settlement or an arbitration award involving a money
claim [See: Sec. 5].

How to file a small claims case

Here is a quick guide on the steps to take when filing a small claims case:
Fill up the Statement of Claim – There is no more need for one to draft a complaint for small claims, as the
complaining party would need only to fill up a ready-made form called “Statement of Claim” (download the
blank forms here). This Statement of Claim would already serve as the complaint in a Small Claims Case.
Attach all necessary documents to the Statement of Claim – Make sure that all documents that you need to prove
your claim are already attached to the Statement of Claim, because the court will not allow any evidence that
was not attached or submitted together with the Statement of Claim unless good cause is shown for the
admission of additional evidence. Also, if you have witnesses, make sure that their affidavits are already
attached to the Statement of Claim before you submit it to the court [See: Sec. 6].
Have the Statement of Claim notarized – Towards the end of the Statement of Claim, there is a portion on
Verification and Certification Against Forum Shopping. Don’t forget to have it notarized first before filing it
with the court.
File the Statement of Claim before the court – The Statement of Claim must be filed before the
Metropolitan/Municipal Trial Court of the place where the plaintiff (the one suing), resides, or where the
defendant (the one being sued) resides [See: Sec. 7]. For being the one suing, since it is you who has the choice
on where to file the Statement of Claim, it would be more practical and convenient for you to simply file it in
the court of the place where you reside.

Simplified procedure
The procedure on small claims cases was promulgated for faster resolution of claims. Since the amount of
claim is relatively small, it is the court’s policy not to keep these cases from dragging for long periods before
finally being decided. Since the proceedings must be speedy, inexpensive, and informal, the procedure was
simplified.
 Among the most noticeable features of the procedure on small claims cases is that when a Statement of
Claim is filed before the court, the court may do either of the following:
1. Dismiss the claim outright – If upon examination of the allegations contained in the Statement of Claim and
the attached evidence, it becomes apparent that there exist grounds for the dismissal of a civil action [See:
Sec. 11].
2. Issue summons and notice of hearing – If no ground for dismissal is found, summons shall be issued on the
very day the Statement of Claim was filed before the court, directing the defendant to submit a verified
Response. The court shall also issue a notice to both parties, directing them to appear before it on a specific
date and time for hearing, with a warning that no unjustified postponement will be allowed [See: Sec. 12].

During the hearings, however, appearance of lawyers is prohibited. It is expressly provided by the rules that
no attorney shall appear in behalf of or represent a party at the hearing. If the court determines that a party
cannot properly present his/her claim or defense and needs assistance, the court may, in its discretion, allow
another individual who is not a lawyer to assist that party. The only exception to this rule is when the plaintiff
or the defendant himself is a lawyer [See: Sec. 19].

Postponements are also discouraged in small claims proceedings. A request for postponement of a hearing
may be granted only upon proof of the physical inability of the concerned party to appear before the court
on the scheduled date and time. Also, such request for postponement may be availed of by either party only
once [See: Sec. 21].

With the promulgation of the rules on small claims cases, collection of relatively small amounts had become
much more simple and less expensive. After all, recovery of the money owed to you is not supposed to be
difficult, so this innovation in our rules is a welcome development in the field of debt collection.

SMALL CLAIMS NOW UP TO 400K IN METROPOLITAN TRIAL COURTS

February 27, 2019

The Supreme Court increased the limit of small claims cases filed before the Metropolitan Trial Courts from
P300,000.00 to P400,000.00, beginning 1 April 2019. Upon the recommendation of the Office of the Court
Administrator to Associate Justice Diosdado M. Peralta, Chairperson of the Special Committee on Small
Claims Cases, who took it up with the Court en banc, the initiative was to streamline and harmonize the rules
of procedure for money claims filed before all first level courts.
Before the concept of small claims was introduced in our court system, the Revised Rule on Summary
Procedure applied to money claims not exceeding P100,000.00 in first level courts outside Metro Manila,
while P200,000.00 in first level courts within Metro Manila, otherwise known as the Metropolitan Trial
Courts. These amounts were later increased to P300,000.00 and P400,000.00, respectively, under Republic
Act No. 7691. In 2010, the Court authorized the implementation of the Rule of Procedure for Small Claims
Cases to all first level courts nationwide for money claims of not more than P100,000.00. In 2015, the
Supreme Court increased this to P200,000.00 and in 2018, to P300,000.00.
As a consequence, money claims filed before the first level courts outside Metro Manila were all covered by
the Revised Rules of Procedure for Small Claims Cases, whereas those filed before the Metropolitan Trial
Courts were considered either as small claims cases for claims of up to P300,000.00, or proceeded under the
Revised Rule on Summary Procedure, for claims above P300,000.00 to P400,000.00.
According to Justice Peralta, this move by the Court “will result in the speedier and more efficient resolution
of money claims cases, as well as help increase the country’s score in the World Bank’s Ease of Doing Business
Report.” In the World Bank’s 2019 Report, the Philippines ranked 124th out of 190 countries, dropping from
its 2018 ranking of 113. This score is based on a number of indicators, one of which involves measuring the
time and cost of resolving commercial disputes before the Metropolitan Trial Court in Quezon City for claims
amounting to 200% of the Philippine’s income per capita, or P337,331.00. Under the Revised Rules of
Procedure for Small Claims Cases, courts are mandated to resolve a case within thirty (30) days from the day
the statement of claim was filed. Justice Peralta “believes that applying the Revised Rules of Procedure for
Small Claims Cases in all money claims filed before the Metropolitan Trial Courts will increase the country’s
score in next year’s report.” He added that “the increase is in accord with the four-point agenda of Chief
 Justice Lucas P. Bersamin for the Judiciary, to make our rules more efficient, effective and responsive to the
needs of the court users.”

In a message relayed to the Court, Department of Trade and Industry (DTI) Secretary Ramon M. Lopez also
expressed optimism that “the move initiated by the Supreme Court will benefit small entrepreneurs using
the court system and result in an increase in the country’s ranking in the World Bank Doing Business
Survey.” He “thanked the Supreme Court for it strong support to Ease of Doing Business reforms. The SC’s
swift action to increase the threshold for small claims in the Metropolitan Trial Courts in Metro Manila will
significantly reduce the number of days for trial and judgment under the DB Enforcing Contracts indicator.”
The reform also decreases cost on the part of the claimant by approximately 20%, since attorney’s fees are
no longer necessary given that lawyers are not allowed to represent a party in small claims cases.
“This reform,” Secretary Lopez explains, “is one of the initiatives of the government to promote Ease of Doing
Business. The DTI is optimistic that the strong partnership between the Executive and the Judicial branches
of government will bring positive results. We look forward to working with the Supreme Court to improve the
quality of judicial processes index, particularly in the area of court automation and case management.”

SC Recalibrates Rules to Expedite Procedures in First Level Courts

On 01 March 2022, the Supreme Court promulgated A.M. No. 08-8-7-SC or the Expedited Procedures in First
Level Courts, in order to reconcile and harmonize the coverage of the 1991 Revised Rule on Summary
Procedure and the 2016 Revised Rules on Small Claims Cases.
In promulgating A.M. No. 08-8-7-SC, the Supreme Court also took into consideration the following laws:
a. Republic Act No. 11576, which expanded the jurisdictional amount cognizable by First Level Courts in civil
cases to Two Million Pesos (PHP2,000,000.00) and the jurisdictional amount for recovery of real property with
the assessed value to Four Hundred Thousand Pesos (PHP400,000.00); and
b. Republic Act No. 10951, which adjusted the value of property and damage on which a penalty is based, and
the fines imposed under the Revised Penal Code, as amended.

Amendments to the Revised Rule on Summary Procedure

Pursuant to the amendments, the civil cases covered by the Rule on Summary Procedure now consists of the
following:
1. Forcible entry and unlawful detainer cases, regardless of the amount to be recovered. Attorney’s fees, if
awarded, shall not exceed One Hundred Thousand Pesos (PHP100,000.00);
2. All civil actions, except probate proceedings, admiralty and maritime actions and small claims where the claim
does not exceed Two Million Pesos (PHP2,000,000.00).
3. Complaints for damages where the claims do not exceed Two Million Pesos (PHP2,000,000.00);
4. Cases for enforcement of barangay amicable settlement agreements and arbitration award where the money
claim exceeds One Million Pesos (PHP1,000,000.00), provided that no execution has been enforced within six
(6) months from the settlement date or receipt of award or the date when the obligation becomes due and
demandable;
5. Cases solely for the revival of judgment of any first level court;
6. The civil aspect of violations of Batas Pambansa Blg. 22 (BP 22), if no criminal action has been instituted.
7. With respect to criminal cases, violation of BP 22 is explicitly included, and the penalty threshold of all other
criminal cases is increased to imprisonment not exceeding one year, or a fine not exceeding Fifty Thousand
Pesos (PHP50,000.00), or both, and a fine not exceeding One Hundred Fifty Thousand Pesos (PHP150,000.00)
for offenses involving damage to property through criminal negligence. If the prescribed penalty consists of
imprisonment and/or a fine, the prescribed imprisonment shall be the basis for determining the applicable
procedure. Arraignment and pre-trial shall be scheduled and conducted in accordance with the Revised
Guidelines for Continuous Trial of Criminal Cases.

In cases of appeal, any judgment, final order, or final resolution of the first level courts on summary
procedure may be appealed to the appropriate Regional Trial Court (RTC) exercising jurisdiction over the
 territory under Rule 40 for civil cases and Rule 122 for criminal cases. The judgment of the RTC on the appeal
shall be final, executory, and unappealable.

Amendments to the Rules on Small Claims

The following are the significant amendments made on the Rules on Small Claims:
1. The threshold amount in small claims cases is now One Million Pesos (PHP1,000,000.00), regardless of
whether the case is filed within or outside Metro Manila. This covers claims or demands for money owed
under contracts of lease, loan and other credit accommodations, services, and sale of personal property.
2. Recovery of personal property, unless it is made subject of a compromise agreement between the parties,
are excluded from the operation of the new Rules. Nevertheless, the enforcement of barangay amicable
settlement agreements and arbitration awards where the money claim does not exceed One Million Pesos
(PHP1,000,000.00) are included, provided that no execution has been enforced within six (6) months from
the settlement date or receipt of award or the date when the obligation becomes due and demandable.
3. Joinder of two or more separate small claims against a defendant is allowed, provided that the total amount
claimed does not exceed One Million Pesos (PHP1,000,000.00).
4. If more than five (5) claims are filed by one party within the calendar year, additional filing fee of Five Hundred
Pesos (PHP500.00) shall be paid for every claim filed after the fifth (5th) claim and an additional One Hundred
Pesos (PHP100.00) or a total of Six Hundred Pesos (PHP600.00) for every claim filed after the tenth (10th)
claim and another One Hundred Pesos (PHP100.00) or a total of Seven Hundred Pesos (PHP700.00) for every
claim filed after the fifteenth (15th) claim, progressively and cumulatively
5. Service of summons through the plaintiff is allowed if it is returned unserved by the sheriff or proper court
officer, or if it shall be served outside the judicial region of the court where the case is pending. If the plaintiff
misrepresents that the defendant was served, the case shall be dismissed with prejudice and the plaintiff
shall be declared in indirect contempt and/ or be meted a fine of Five Thousand Pesos (PHP5,000.00).
6. If a case is dismissed without prejudice for failure to serve summons, it may now be re-filed with a fixed filing
fee of Two Thousand Pesos (PHP2,000.00) within one year from notice of dismissal.
7. Any amount pleaded in counterclaim in excess of One Million Pesos (PHP1,000,000.00) shall be deemed
waived.
8. The period to set the hearing was increased to sixty (60) calendar days in small claims cases where one of the
defendants reside or hold business outside the judicial region of the court. Otherwise, the hearing shall be
set within thirty (30) calendar days.
9. The hearing will still be held in one (1) day, with the judgment to be rendered strictly within twenty-four (24)
hours from its termination.
10. The Small Claims Forms have also been updated and improved for ease of use, with translations in Filipino.

The conduct of videoconferencing hearings using Microsoft Teams for both summary proceedings and small
claims cases is allowed at any stage of the proceedings. If warranted, the first level courts may also make use
of alternative platforms or instant messaging applications with video call features for their videoconferencing
hearings.

The new Rules shall take effect on 11 April 2022 and shall apply prospectively. Cases currently pending before
the first and second level courts will remain with and be decided by those same courts, in accordance with
the applicable rules at the time of their filing.