165 - Home Guaranty Builders vs.

R-II Builders & NHA (2011)

Home Guaranty (guarantor) v. R-II Builders (developer) & NHA (landowner/implementing agency)
Amendment is not allowed where the court has no jurisdiction over the original complaint and the purpose
of the amendment is to confer jurisdiction upon the court. Hence, with jurisdiction over the case yet to
properly attach, CA erred in upholding respondent RTCs admission of respondents R-II Builders Second
Amended Complaint despite non-payment of the docket fees for its original complaint and Amended and
Supplemental Complaint as well as the clear intent to evade payment thereof.
Petition for review under R45
19 March 1993, a Joint Venture Agreement (JVA) was entered into between respondents NHA and RII Builders for the implementation of the Smokey Mountain Development and Reclamation Project
(SMDRP) which was amended and restated after 11 months.
11 August 1994, JVA was aimed at implementing a 2-phase conversion of the Smokey Mountain
Dumpsite into a habitable housing project inclusive of the reclamation of the area across Radial
Road 10 (R-10).
o R-II Builders, as developer, was entitled to own 79 hectares of reclaimed land and the 2.3
hectare commercial area at the Smokey Mountain.
o NHA, as landowner/implementing agency, was entitled to own the 2,992 temporary housing
units agreed to be built in the premises, the cleared and fenced incinerator site consisting of
5 hectares, 3,520 units of permanent housing to be awarded to qualified on site residents,
the industrial area consisting of 3.2 hectares and the open spaces, roads and facilities within
the Smokey Mountain Area.
26 September 1994, NHA and R-II Builders, alongside petitioner Housing Guaranty Corporation
(HGC) as guarantor and the PNB as trustee, entered into an Asset Pool Formation Trust
Agreement which provided the mechanics for the implementation of the project. To back the project,
an Asset Pool was created.
The parties also executed a Contract of Guaranty whereby HGC, upon the call made by PNB and
conditions therein specified, undertook to redeem the regular Smokey Mountain Project
Participation Certificates (SMPPC) upon maturity and to pay the simple interest thereon to the
extent of 8.5% per annum. The foregoing agreements led to the securitization of the project
through the issuance of 5,216 SMPPCs upon the Asset Pool, with a par value of 1M each, classified
and to be redeemed by the trustee or, in case of call on its guaranty, by HGC.
29 January 2001, subsequent to R-II Builders' infusion of P300M into the project, the issuance of the
SMPPCs and the termination of PNBs services, NHA, R-II Builders and HGC agreed on the institution
of Planters Development Bank (PDB) as trustee.
24 October 2002, all the Regular SMPPCs issued had reached maturity and, unredeemed, already
amounted to an aggregate face value of P2.513 Billion. The lack of liquid assets with which to
effect redemption of the regular SMPPCs prompted PDB to make a call on HGCs guaranty and to
execute in the latters favor a Deed of Assignment and Conveyance (DAC) of the entire Asset Pool.
Procedure:
RTC Manila Branch 24, acting as Special Commercial Court (SCC)
1. R-II Builders filed the complaint against HGC and NHA contending that HGCs failure to redeem the
outstanding regular SMPPCs despite obtaining possession of the Asset Pool ballooned the stipulated
interests and materially prejudiced its stake on the residual values of the Asset Pool. Deed of
Assignment and Conveyance (DAC) should be rescinded since PDB exceeded its authority in
executing the same prior to HGCs redemption and payment of the guaranteed SMPPC Assessed
docket fees corresponding to an action incapable of pecuniary estimation, the complaint sought the
grant of the following reliefs:
(a) TRO/preliminary and permanent injunction, enjoining disposition/s of the properties in
the Asset Pool;
(b) the resolution or, in the alternative, the nullification of the DAC;
(c) R-II Builders' appointment as trustee pursuant to Rule 98 of the Rules of Court;

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(d) HGCs rendition of an accounting of the assets and the conveyance thereof in favor of R-II
Builders; (e) P500k in attorneys fees.
RTC issued the writ of preliminary injunction sought by R-II Builders.
In the meantime, HGC, having filed its answer to the complaint, went on before the SC to move for
the conduct of a preliminary hearing on its affirmative defenses which included such grounds as
lack of jurisdiction, improper venue and the then pendency entitled Francisco Chavez vs. National
Housing Authority, et al., a case which challenged, among other matters, the validity of the JVA and
its subsequent amendments.
R-II Builders filed a motion to admit its Amended and Supplemental Complaint which deleted the
prayer for resolution of the DAC initially prayed for in its original complaint.
Manila RTC Branch 24 issued a clarificatory order holding that R-II Builders complaint was an
ordinary civil action and not an intra-corporate controversy and that it did not have the authority to
hear the case.
Case was re-raffled to respondent Manila RTC Branch 22.

RTC Manila Br. 22

1. Issued the 19 May 2008 order which, having determined that the case is a real action, admitted the
aforesaid Amended and Supplemental Complaint, subject to R-II Builders payment of the correct
and appropriate docket fees.
2. But instead of paying docket fees, R-II Builders filed a motion to admit its Second Amended
Complaint, on the ground that its previous Amended and Supplemental Complaint had not yet been
admitted in view of the non-payment of the correct docket fees therefor. Said Second Amended
Complaint notably resurrected R-II Builders cause of action for resolution of the DAC, deleted its
causes of action for accounting and conveyance of title to and/or possession of the entire Asset
Pool, reduced the claim for attorneys fees to P500k, sought its appointment as Receiver pursuant
to Rule 59 of the Rules of Court and, after an inventory in said capacity, prayed for approval of the
liquidation and distribution of the Asset Pool in accordance with the parties agreements.
3. HGC filed its opposition to the admission of R-II Builders Second Amended Complaint on the ground
that respondent RTC had no jurisdiction to act on the case until payment of the correct docket fees
and that said pleading was intended for delay and introduced a new theory inconsistent with the
original complaint and the Amended and Supplemental Complaint. Claiming that R-II Builders had
defied respondent courts 19 May 2008 order by refusing to pay the correct docket fees, HGC
moved for the dismissal of the case.
4. R-II Builders also filed an Urgent Ex-Parte Motion for Annotation of Lis Pendens on the titles of the
properties in the Asset Pool, on the ground that HGC had sold and/or was intending to dispose of
portions thereof, in violation of the writ of preliminary injunction issued in the premises.
5. Respondent RTC issued its first assailed order dated 3 March 2009 which: (a) denied HGCs MTD; (b)
granted R-II Builders motion to admit its Second Amended Complaint; and, (c) noted R-II
Builders Urgent Ex-Parte Motion for Annotation of Lis Pendens, to which the attention of the Manila
Register of Deeds was additionally called.
6. Undaunted, HGC filed its MFR of the foregoing order, arguing that: (a) the case is real action and
the docket fees paid by R-II Builders were grossly insufficient because the estimated value of
properties in the Asset Pool exceeds P5B; (b) a complaint cannot be amended to confer jurisdiction
when the court had none; (c) the RTC should have simply denied the Urgent Ex-Parte Motion for
Annotation of Lis Pendens instead of rendering an advisory opinion thereon.
7. R-II Builders opposed the foregoing motion and on the theory that the Asset Pool was still in danger
of dissipation, filed an urgent motion to resolve its application for the appointment of a receiver and
submitted its nominees for said position.
8. Respondent RTC issued its second assailed order which (a) denied HGCs motion for
reconsideration; (b) granted R-II Builders application for appointment of receiver and, for said
purpose: [i] appointed Atty. Danilo Concepcion as Receiver and, [ii] directed R-II Builders to post a
bond in the sum of P10M.
CA Former Special Fifteenth Division

1. HGC filed Rule 65 petition for certiorari and prohibition imputing grave abuse of discretion against
the RTC for not dismissing the case and for granting R-II Builders application for receivership.
2. Petition denied and HGCs MFR was denied for lack of merit. Hence, this petition.
Issues
1. WON RTC a quo had jurisdiction to proceed with the case. (NO jurisdiction)
A court acquires jurisdiction over a case only upon the payment of the prescribed filing and docket fees. RII Builders original complaint was initially docketed before RTC Manila Br. 24, a designated Special
Commercial Court. With HGCs filing of a motion for a preliminary hearing on the affirmative defenses
asserted in its answer and R-II Builders filing of its Amended and Supplemental Complaint, said court
issued an order ordering the re-raffle of the case upon the finding that the same is not an intra-corporate
dispute. With its acknowledged lack of jurisdiction over the case, RTC Manila Br. 24 should have ordered
the dismissal of the complaint, since a court without subject matter jurisdiction cannot transfer the case to
another court.
At the time of its surrender of jurisdiction, Br. 24 had already acted on the case and had in fact issued the
writ of preliminary injunction sought by herein respondent R-II Builders. At that point, there was absolutely
no reason which could justify a re-raffle of the case considering that the order that was supposed to have
caused the re-raffle was not an inhibition of the judge but a declaration of absence of jurisdiction. A reraffle which causes a transfer of the case involves courts with the same subject matter jurisdiction; it
cannot involve courts which have different jurisdictions exclusive of the other. More apt in this case, a reraffle of a case cannot cure a jurisdictional defect.
The jurisdictionally flawed transfer of the case from Branch 24, the SCC to Branch 22, the regular court, is
topped by another jurisdictional defect which is the non-payment of the correct docket fees. 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.
For failure of R-II Builders to pay the correct docket fees for its original complaint or, for that matter,
its Amended and Supplemental Complaint as directed in respondent RTC's 19 May 2008 order, it stands to
reason that jurisdiction over the case had yet to properly attach.
2. (TOPICAL) WON the admitting of R-II Builders Second Amended Complaint is proper.
(NO)
Although the policy in this jurisdiction is to the effect that amendments to pleadings are favored and
liberally allowed in the interest of justice, amendment is not allowed where the court has no jurisdiction
over the original complaint and the purpose of the amendment is to confer jurisdiction upon the court.
Hence, with jurisdiction over the case yet to properly attach, CA erred in upholding respondent RTCs
admission of R-II Builders Second Amended Complaint despite non-payment of the docket fees for its
original complaint and Amended and Supplemental Complaint as well as the clear intent to evade payment
thereof.
In view of respondent RTCs non-acquisition of jurisdiction over the case, it clearly had no authority to grant
the receivership sought by R-II Builders. It needs pointing out though that the prayer for receivership
clearly indicates that the R-II Builders sought the transfer of possession of property consisting of the assets
of the JVA from HGC to the formers named Receiver. As already noted, said transfer of possession was
sought by respondent R-II Builders since the very start, overtly at the first two attempts, covertly in the
last, the successive amendments betraying the deft maneuverings to evade payment of the correct docket
fees.
CA decision REVERSED and SET ASIDE. RTC Branch 22s & 24s Orders are NULLIFIED. The
complaint of R-II Builders first before Br. 24 and thereafter before Br. 22 both of the RTC Manila is
DISMISSED.