Home Guaranty Corp. v. R-II Builders, G.R. No.

192649, March 9, 2011

FACTS: HGC and R-II Builders were guarantors in a Joint Venture Agreement (JVA) for the implementation
of the Smokey Mountain Development and Reclamation Project (SMDRP). When the SMPPCs (Smokey
Mountain Project Participation Certificates) were not redeemed by HGC when it matured, R-II Builders
filed the complaint against HGC and NHA before Branch 24 of the Manila Regional Trial Court, a Special
Commercial Court (SCC). R-II Builders alleged, among other matters, that the DAC (Deed of Assignment
and Conveyance) to HGC should be rescinded and it should be appointed as new trustee in the event of
the resolution of the DAC. The complaint also sought the grant of the following reliefs: (a)
TRO/preliminary and permanent injunction, (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; (d) HGC’s
rendition of an accounting of the assets and the conveyance thereof in favor of R-II Builders; and, (e)
P500,000.00 in attorney’s fees.

On 26 October 2005, Branch 24 of the Manila RTC issued the writ of preliminary injunction. HGC moved
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 before this Court of G.R. No. 164537, 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.

On 2 August 2007, R-II Builders, in turn, 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. In lieu
thereof, said pleading introduced causes of action for conveyance of title to and/or possession of the
entire Asset Pool, for NHA to pay the Asset Pool the sum of P1,803,729,757.88 representing the cost of
the changes and additional works on the project and for an increased indemnity for attorney’s fees in the
sum of P2,000,000.00.

Consistent with its joint order dated 2 January 2008 which held that R-II Builders’ complaint was an
ordinary civil action and not an intra-corporate controversy, Branch 24 of the Manila RTC issued a
clarificatory order dated 1 February 2008 to the effect, among other matters, that it did not have the
authority to hear the case. As a consequence, the case was re-raffled to respondent Branch 22 of the
Manila RTC (respondent RTC) which subsequently 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.

On 15 August 2008, however, R-II Builders filed a motion to admit it 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 attorney’s fees
to P500,000.00, 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.

On 2 September 2008, 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 court’s 19 May 2008 order by refusing to pay the correct docket fees,
HGC additionally moved for the dismissal of the case pursuant to Section 3, Rule 17 of the 1997 Rules of
Civil Procedure.

RTC Ruling
The RTC denied HGCs motions and granted R-II Builders’ application for appointment of receiver. HGC
went on certiorari with the CA which held that the RTC had jurisdiction; that from the allegations of R-II
Builders’ original complaint and amended complaint the character of the relief primarily sought, i.e., the
declaration of nullity of the DAC, the action before respondent RTC is one where the subject matter is
incapable of pecuniary estimation; and R-II Builders need not pay any deficiency in the docket fees
considering its withdrawal of its Amended and Supplemental Complaint.

Hence, the instant case contending that the original court (the Special Commercial Court) was without
authority to hear the case and despite an unequivocal order from the trial court a quo, Private
Respondent (R-II Builders) failed and refused to pay the correct and proper docket fees, whether it be for
a real or personal action, based on the values of the properties or claims subject of the complaints.

ISSUES: WON the RTC had jurisdiction over the complaint

HELD: No. Reversed and set aside. R-II Builders’ case dismissed.

Jurisdiction is defined as the authority to hear and determine a cause or the right to act in a case.[37] In
addition to being conferred by the Constitution and the law,[38] the rule is settled that a court’s
jurisdiction over the subject matter is determined by the relevant allegations in the complaint,[39] the
law in effect when the action is filed,[40] and the character of the relief sought irrespective of whether
the plaintiff is entitled to all or some of the claims asserted.[41] Consistent with Section 1, Rule 141 of
the Revised Rules of Court which provides that the prescribed fees shall be paid in full “upon the filing of
the pleading or other application which initiates an action or proceeding”, the well-entrenched rule is to
the effect that a court acquires jurisdiction over a case only upon the payment of the prescribed filing
and docket fees.

HGC correctly faults the CA for not finding that Branch 24 of the Manila RTC had no authority to order the
transfer of the case to respondent RTC.[49] Being outside the jurisdiction of Special Commercial Courts,
the rule is settled that cases which are civil in nature, like the one commenced by R-II Builders, should be
threshed out in a regular court.[50] With its acknowledged lack of jurisdiction over the case, Branch 24
of the Manila RTC should have ordered the dismissal of the complaint, since a court without subject
matter jurisdiction cannot transfer the case to another court.[51] Instead, it should have simply ordered
the dismissal of the complaint, considering that the affirmative defenses for which HGC sought hearing
included its lack of jurisdiction over the case.

Calleja v. Panday,[52] while on facts the other way around, i.e., a branch of the RTC exercising jurisdiction
over a subject matter within the Special Commercial Court’s authority, dealt squarely with the issue:

Whether a branch of the Regional Trial Court which has no jurisdiction to try and decide a case has
authority to remand the same to another co-equal Court in order to cure the defects on venue and
jurisdiction.
Certainly, the pronouncement of Br. 24, the Special Commercial Court, in its Joint Order of 2 January 2008
that the case is not an intracorporate controversy, amplified in its Order of 1 February 2008 that it “does
not have the authority to hear the complaint it being an ordinary civil action” is incompatible with the
directive for the re-raffle of the case and to “leave the resolution of the same to Branch 22 of this Court.”
Such a directive is an exercise of authority over the case, which authority it had in the same breath
declared it did not have. What compounds the jurisdictional error is the fact that at the time of its
surrender of jurisdiction, Br. 24 had already acted on the case and had in fact, on 26 October 2005, 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. So faulty was the order of re-raffle that it left the impression that its previously issued
preliminary injunction remained effective since the case from which it issued was not dismissed but
merely transferred to another court. A re-raffle 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 re-raffle of a case cannot cure a jurisdictional defect.

Payment of docket fees jurisdictional

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. In its order
dated 19 May 2008 which admitted R-II Builders’ Amended and Supplemental Complaint, respondent RTC
distinctly ruled that the case was a real action and ordered the re-computation and payment of the
correct docket fees.[53] In patent circumvention of said order, however, R-II Builders filed its 14 August
2008 motion to admit its Second Amended Complaint which effectively deleted its causes of action for
accounting and conveyance of title to and/or possession of the entire Asset Pool and, in addition to
reducing the claim for attorney’s fees and seeking its appointment as a receiver, reinstated its cause of
action for resolution of the DAC.

While it is true, however, that R-II Builder's continuing stake in the Asset Pool is "with respect only to its
residual value after payment of all the regular SMPPCs holders and the Asset Pool creditors",[59] the CA
failed to take into account the fact that R-II Builders’ original complaint and Amended and Supplemental
Complaint both interposed causes of action for conveyance and/or recovery of possession of the entire
Asset Pool. Indeed, in connection with its second cause of action for appointment as trustee in its original
complaint,[60] R-II Builders distinctly sought the conveyance of the entire Asset Pool[61] which it
consistently estimated to be valued at P5,919,716,618.62 as of 30 June 2005.[62] In its opposition to
HGC’s motion to dismiss, R-II Builders even admitted that the case is a real action as it affects title to or
possession of real property or an interest therein.[63] With R-II Builders' incorporation of a cause of
action for conveyance of title to and/or possession of the entire Asset Pool in its Amended and
Supplemental Complaint,[64] on the other hand, no less than respondent RTC, in its 19 May 2008 order,
directed the assessment and payment of docket fees corresponding to a real action.

Admittedly, this Court has repeatedly laid down the test in ascertaining whether the subject matter of an
action is incapable of pecuniary estimation by determining the nature of the principal action or remedy
sought. While a claim is, on the one hand, considered capable of pecuniary estimation if the action is
primarily for recovery of a sum of money, the action is considered incapable of pecuniary estimation
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.[65] To our mind, the application
of foregoing test does not, however, preclude the further classification of actions into personal actions
and real action, for which appropriate docket fees are prescribed. In contrast to personal actions where
the plaintiff seeks the recovery of personal property, the enforcement of a contract, or the recovery of
damages, real actions are those which affect title to or possession of real property, or interest therein.[66]
While personal actions should be commenced and tried where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a
non-resident defendant where he may be found, at the election of the plaintiff,[67] the venue for real
actions is the court of the place where the real property is located.

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.[72]

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. Applying the rule that "a case is deemed
filed only upon payment of the docket fee regardless of the actual date of filing in court" in the landmark
case of Manchester Development Corporation v. Court of Appeals,[76] this Court ruled that jurisdiction
over any case is acquired only upon the payment of the prescribed docket fee which is both mandatory
and jurisdictional. To temper said ruling, the Court subsequently issued the following guidelines in Sun
Insurance Office, Ltd. v. Hon. Maximiano Asuncion,[77] viz.:

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.
The importance of filing fees cannot be over-emphasized for they are intended to take care of court
expenses in the handling of cases in terms of costs of supplies, use of equipment, salaries and fringe
benefits of personnel, and others, computed as to man-hours used in the handling of each case. The
payment of said fees, therefore, cannot be made dependent on the result of the action taken without
entailing tremendous losses to the government and to the judiciary in particular.[80] For non-payment
of the correct docket fees which, for real actions, should be computed on the basis of the assessed value
of the property, or if there is none, the estimated value thereof as alleged by the claimant,[81] respondent
RTC should have denied admission of R-II Builders’ Second Amended Complaint and ordered the dismissal
of the case. Although a catena of decisions rendered by this Court eschewed the application of the
doctrine laid down in the Manchester case,[82] said decisions had been consistently premised on the
willingness of the party to pay the correct docket fees and/or absence of intention to evade payment of
the correct docket fees. This cannot be said of R-II Builders which not only failed to pay the correct docket
fees for its original complaint and Amended and Supplemental Complaint but also clearly evaded
payment of the same by filing its Second Amended Complaint.

By itself, the propriety of admitting R-II Builders’ Second Amended Complaint is also cast in dubious light
when viewed through the prism of the general prohibition against amendments intended to confer
jurisdiction where none has been acquired yet. 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.[83] Hence, with jurisdiction over the case yet to
properly attach, HGC correctly fault the CA for upholding respondent RTC’s 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.