RUBY SHELTER BUILDERS AND G.R. No.

175914
REALTY DEVELOPMENT
CORPORATION,
Petitioner, Present:

YNARES-SANTIAGO, J.,
- versus- Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
HON. PABLO C. FORMARAN III, NACHURA, and
Presiding Judge of Regional Trial PERALTA, JJ.
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), Promulgated:
ROMEO Y. TAN, ROBERTO L.
OBIEDO and ATTY. TOMAS A.
REYES,
Respondents. February 10, 2009
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

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 Decision[1]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 loan[3] in the total amount of P95,700,620.00 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 Agreement[9] 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 P74,678,647.00. 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 P 9,340,000.00
29918 P 28,000,000.00
38374 P 12,000,000.00
39232 P 1,600,000.00
39225 P 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 P 25,328,939.00
29918 P 35,660,800.00
38374 P 28,477,600.00
39232 P 6,233,381.00
39225 P 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 owners
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 P10,000,000.00 as liquidated damages
inclusive of costs and attorneys 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 latters
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 3rd 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 P300,000.00 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, petitioners 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 [petitioners] certificates of title to the
mortgaged properties cancelled and changed/registered in [respondents]
Tans and Obiedos 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 P300,000.00; attorneys fees in the
amount of P100,000.00 plus P1,000.00 per court attendance of counsel
as appearance fee; litigation expenses in the amount of at least P10,000.00
and exemplary damages in the amount of P300,000.00, 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 P13,644.25 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 Answer[15] 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. Sias 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 P10,000,000.00 as liquidated damages and the
further sum of not less than P500,000.00 as attorneys 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 P95,700,620.00, plus interests, surcharges and
penalties computed from March 17, 2005 until the entire sum is fully paid,
including the amount of P74,678,647.00 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 Order[17] granting respondent Tans
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 moved[20] 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 petitioners first cause of action in its Complaint in Civil Case No. 2006-
0030.

In its Order[21] 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 P720,392.60 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 RTC[24] 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 petitioners 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.

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
petitioners 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-SC[30] and Supreme Court
Amended Administrative Circular No. 35-2004[31]:

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 ATTORNEYS FEES, LITIGATIO NEXPENSESAND 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 petitioners 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 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 Manalos 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 NTAs 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. (Muoz 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 Courts 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 P200,000.00, as
well as attorneys fee of P200,000.00 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 Delicas complaint for the following
reasons:
A careful examination of respondents 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, respondents complaint is a real action involving not only

the recovery of real properties, but likewise the cancellation of the titles
thereto.

Considering that respondents 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 P1,200.00 per square meter. However, the alleged BIR zonal valuation
is not the kind of valuation required by the Rule. It is the assessed valueof
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,
respondents 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 P100,000.00.[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 P720,392.60 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.

FEDMAN DEVELOPMENT G.R. No. 165025

CORPORATION,
Petitioner, Present:

CORONA, C.J., Chairperson,

LEONARDO-DE CASTRO,
BERSAMIN,
- versus - DEL CASTILLO, and
VILLARAMA, JR., JJ.

Promulgated:

FEDERICO AGCAOILI, August 31, 2011

Respondent.
x-----------------------------------------------------------------------------------------x

DECISION

BERSAMIN, J.:
 The non-payment of the prescribed filing fees at the time of the filing of the
complaint or other initiatory pleading fails to vest jurisdiction over the case in the trial
court. Yet, where the plaintiff has paid the amount of filing fees assessed by the clerk of
court, and the amount paid turns out to be deficient, the trial court still acquires
jurisdiction over the case, subject to the payment by the plaintiff of the deficiency
assessment.

Fedman Development Corporation (FDC) appeals the decision promulgated on

August 20, 2004, [1] whereby the Court of Appeals (CA) affirmed the judgment rendered
on August 28, 1998 by the Regional Trial Court (RTC), Branch 150, Makati City, in favor
of the respondent.[2]

Antecedents

FDC was the owner and developer of a condominium project known as Fedman
Suites Building (FSB) located on Salcedo Street, Legazpi Village, Makati City. On June
18, 1975, Interchem Laboratories Incorporated (Interchem) purchased FSBs Unit 411
under a contract to sell. On March 31, 1977, FDC executed a Master Deed with
Declaration of Restrictions,[3] and formed the Fedman Suite Condominium Corporation
(FSCC) to manage FSB and hold title over its common areas.[4]

On October 10, 1980, Interchem, with FDCs consent, transferred all its rights in
Unit 411 to respondent Federico Agcaoili (Agcaoili), a practicing attorney who was then
also a member of the Provincial Board of Quezon Province.[5] As consideration for the
transfer, Agcaoili agreed: (a) to pay Interchem ₱150,000.00 upon signing of the deed of
transfer; (b) to update the account by paying to FDC the amount of ₱15,473.17 through
a 90 day-postdated check; and (c) to deliver to FDC the balance of ₱137,286.83 in 135
equal monthly installments of ₱1,857.24 effective October 1980, inclusive of 12%
interest per annum on the diminishing balance. The obligations Agcaoili assumed
totaled ₱302,760.00.[6]

In December 1983, the centralized air-conditioning unit of FSBs fourth floor

broke down.[7] On January 3, 1984, Agcaoili, being thereby adversely affected, wrote to
Eduardo X. Genato (Genato), vice-president and board member of FSCC, demanding the
repair of the air-conditioning unit.[8] Not getting any immediate response, Agcaoili sent
follow-up letters to FSCC reiterating the demand, but the letters went unheeded. He
then informed FDC and FSCC that he was suspending the payment of his condominium
dues and monthly amortizations.[9]
 On August 30, 1984, FDC cancelled the contract to sell involving Unit 411 and
cut off the electric supply to the unit. Agcaoili was thus prompted to sue FDC and FSCC
in the RTC, Makati City, Branch 144 for injunction and damages.[10] The parties later
executed a compromise agreement that the RTC approved through its decision of August
26, 1985. As stipulated in the compromise agreement, Agcaoili paid FDC the sum
of ₱39,002.04 as amortizations for the period from November 1983 to July 1985; and
also paid FSCC an amount of ₱17,858.37 for accrued condominium dues, realty taxes,
electric bills, and surcharges as of March 1985. As a result, FDC reinstated the contract
to sell and allowed Agcaoili to temporarily install two window-type air-conditioners in
Unit 411.[11]

On April 22, 1986, FDC again disconnected the electric supply of Unit
411.[12] Agcaoili thus moved for the execution of the RTC decision dated August 26,
1985.[13] On July 17, 1986, the RTC issued an order temporarily allowing Agcaoili to
obtain his electric supply from the other units in the fourth floor of FSB until the main
meter was restored.[14]

On March 6, 1987, Agcaoili lodged a complaint for damages against FDC and
FSCC in the RTC, which was raffled to Branch 150 in Makati City. He alleged that the
disconnection of the electric supply of Unit 411 on April 22, 1986 had unjustly deprived
him of the use and enjoyment of the unit; that the disconnection had seriously affected
his law practice and had caused him sufferings, inconvenience and embarrassment;
that FDC and FSCC violated the compromise agreement; that he was entitled to actual
damages amounting to ₱21,626.60, as well as to moral and exemplary damages, and
attorneys fees as might be proven during the trial; that the payment of interest sought
by FDC and FSCC under the contract to sell was illegal; and that FDC and FSCC were
one and the same corporation. He also prayed that FDC and FSCC be directed to return
the excessive amounts collected for real estate taxes.[15]

In its answer, FDC contended that it had a personality separate from that of
FSCC; that it had no obligation or liability in favor of Agcaoili; that FSCC, being the
manager of FSB and the title-holder over its common areas, was in charge of
maintaining all central and appurtenant equipment and installations for utility services
(like air-conditioning unit, elevator, light and others); that Agcaoili failed to comply with
the terms of the contract to sell; that despite demands, Agcaoili did not pay the
amortizations due from November 1983 to March 1985 and the surcharges, the total
amount of which was ₱376,539.09; that due to the non-payment, FDC cancelled the
contract to sell and forfeited the amount of ₱219,063.97 paid by Agcaoili, applying the
amount to the payment of liquidated damages, agents commission, and interest; that it
demanded that Agcaoili vacate Unit 411, but its demand was not heeded; that Agcaoili
did not pay his monthly amortizations of ₱1,883.84 from October 1985 to May 1986,
resulting in FSCC being unable to pay the electric bills on time to the Manila Electric
Company resulting in the disconnection of the electric supply of FSB; that it allowed
Agcaoili to obtain electric supply from other units because Agcaoili promised to settle
his accounts but he reneged on his promise; that Agcaoilis total obligation
was ₱55,106.40; that Agcaoilis complaint for damages was baseless and was intended
to cover up his delinquencies; that the interest increase from 12% to 24% per
annum was authorized under the contract to sell in view of the adverse economic
conditions then prevailing in the country; and that the complaint for damages was
barred by the principle of res judicata because the issues raised therein were covered
by the RTC decision dated August 26, 1985.
As compulsory counterclaim, FDC prayed for an award of moral and exemplary
damages each amounting to ₱1,000,000.00, attorneys fees amounting to ₱100,000.00
and costs of suit.[16]

On its part, FSCC filed an answer, admitting that the electric supply of Unit 411
was disconnected for the second time on April 22, 1986, but averring that the
disconnection was justified because of Agcaoilis failure to pay the monthly amortizations
and condominium dues despite repeated demands. It averred that it did not repair the
air-conditioning unit because of dwindling collections caused by the failure of some unit
holders to pay their obligations on time; that the unit holders were notified of the
electricity disconnection; and that the electric supply of Unit 411 could not be restored
until Agcaoili paid his condominium dues totaling ₱14,701.16 as of April 1987. [17]

By way of counterclaim, FSCC sought moral damages and attorneys fees

of ₱100,000.00 and ₱50,000.00, respectively, and cost of suit.[18]

On August 28, 1998, the RTC rendered judgment in favor of Agcaoili, holding that
his complaint for damages was not barred by res judicata; that he was justified in
suspending the payment of his monthly amortizations; that FDCs cancellation of the
contract to sell was improper; that FDC and FSCC had no separate personalities; and
that Agcaoili was entitled to damages. The RTC disposed thuswise:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff

and as against both defendants, declaring the increased rates sought by
defendants to be illegal, and ordering defendant FDC/FSCC to reinstate
the contract to sell, as well as to provide/restore the air-conditioning
 services/electric supply to plaintiffs unit. Both defendants are likewise
ordered to pay plaintiff:

a. The amount of ₱21,626.60 as actual damages;

b. ₱500,000.00 as moral damages;

c. ₱50,000.00 as exemplary damages; and

d. ₱50,000.00 as and for attorneys fees.

and to return to plaintiff the excess amount collected from him for real
estate taxes.

SO ORDERED.[19]

FDC appealed, but the CA affirmed the RTC.[20] Hence, FDC comes to us on
further appeal.[21]

Issues

FDC claims that there was a failure to pay the correct amount of docket fee herein
because the complaint did not specify the amounts of moral damages, exemplary
damages, and attorneys fees; that the payment of the prescribed docket fee by Agcaoili
was necessary for the RTC to acquire jurisdiction over the case; and that, consequently,
the RTC did not acquire jurisdiction over this case.

FDC also claims that the proceedings in the RTC were void because the
jurisdiction over the subject matter of the action pertained to the Housing and Land Use
Regulatory Board (HLURB); and that both the RTC and the CA erred in ruling: (a) that
Agcaoili had the right to suspend payment of his monthly amortizations; (b) that FDC
had no right to cancel the contract to sell; and (c) that FDC and FSCC were one and
same corporation, and as such were solidarily liable to Agcaoili for damages.[22]

Ruling

The petition has no merit.

I

The filing of the complaint or other initiatory pleading and the payment of the
prescribed docket fee are the acts that vest a trial court with jurisdiction over the
claim.[23] In an action where the reliefs sought are purely for sums of money and
damages, the docket fees are assessed on the basis of the aggregate amount being
claimed.[24] Ideally, therefore, the complaint or similar pleading must specify the sums
of money to be recovered and the damages being sought in order that the clerk of court
may be put in a position to compute the correct amount of docket fees.

If the amount of docket fees paid is insufficient in relation to the amounts being
sought, the clerk of court or his duly authorized deputy has the responsibility of making
a deficiency assessment, and the plaintiff will be required to pay the deficiency.[25] The
non-specification of the amounts of damages does not immediately divest the trial court
of its jurisdiction over the case, provided there is no bad faith or intent to defraud the
Government on the part of the plaintiff.[26]

The prevailing rule is that if the correct amount of docket fees are not paid at the
time of filing, the trial court still acquires jurisdiction upon full payment of the
fees within a reasonable time as the court may grant, barring prescription.[27] The
prescriptive period that bars the payment of the docket fees refers to the period in which
a specific action must be filed, so that in every case the docket fees must be paid before
the lapse of the prescriptive period, as provided in the applicable laws, particularly
Chapter 3, Title V, Book III, of the Civil Code, the principal law on prescription of
actions.[28]

In Rivera v. Del Rosario,[29] the Court, resolving the issue of the failure to pay the
correct amount of docket fees due to the inadequate assessment by the clerk of
court, ruled that jurisdiction over the complaint was still validly acquired upon the full
payment of the docket fees assessed by the Clerk of Court. Relying on Sun Insurance
Office, Ltd., (SIOL) v. Asuncion,[30] the Court opined that the filing of the complaint or
appropriate initiatory pleading and the payment of the prescribed docket fees vested a
trial court with jurisdiction over the claim, and although the docket fees paid were
insufficient in relation to the amount of the claim, the clerk of court or his duly
authorized deputy retained the responsibility of making a deficiency assessment, and
the party filing the action could be required to pay the deficiency, without jurisdiction
being automatically lost.

Even where the clerk of court fails to make a deficiency assessment, and the
deficiency is not paid as a result, the trial court nonetheless continues to have
jurisdiction over the complaint, unless the party liable is guilty of a fraud in that regard,
considering that the deficiency will be collected as a fee in lien within the contemplation
of Section 2,[31] Rule 141 (as revised by A.M. No. 00-2-01-SC).[32] The reason is that to
penalize the party for the omission of the clerk of court is not fair if the party has acted
in good faith.

Herein, the docket fees paid by Agcaoili were insufficient considering that the
complaint did not specify the amounts of moral damages, exemplary damages and
attorneys fees. Nonetheless, it is not disputed that Agcaoili paid the assessed docket
fees. Such payment negated bad faith or intent to defraud the
Government. Nonetheless, Agcaoili must remit any docket fee deficiency to the RTCs
[33]

clerk of court.

II

FDC is now barred from asserting that the HLURB, not the RTC, had jurisdiction
over the case. As already stated, Agcaoili filed a complaint against FDC in the RTC on
February 28, 1985 after FDC disconnected the electric supply of Unit 411. Agcaoili and
FDC executed a compromise agreement on August 16, 1985. The RTC approved the
compromise agreement through its decision of August 26, 1985. In all that time, FDC
never challenged the RTCs jurisdiction nor invoked the HLURBs authority. On the
contrary, FDC apparently recognized the RTCs jurisdiction by its voluntary submission
of the compromise agreement to the RTC for approval. Also, FDC did not assert the
HLURBs jurisdiction in its answer to Agcaoilis second complaint (filed on March 6,
1987). Instead, it even averred in that answer that the decision of August 26, 1985
approving the compromise agreement already barred Agcaoili from filing the second
complaint under the doctrine of res judicata. FDC also thereby sought affirmative relief
from the RTC through its counterclaim.

FDC invoked HLURBs authority only on September 10, 1990,[34] or more than five
years from the time the prior case was commenced on February 28, 1985, and after the
RTC granted Agcaoilis motion to enjoin FDC from cancelling the contract to sell. [35]

The principle of estoppel, which is based on equity and public policy,[36] dictates
that FDCs active participation in both RTC proceedings and its seeking therein
affirmative reliefs now precluded it from denying the RTCs jurisdiction. Its
acknowledgment of the RTCs jurisdiction and its subsequent denial of such jurisdiction
only after an unfavorable judgment were inappropriate and intolerable. The Court
abhors the practice of any litigant of submitting a case for decision in the trial court,
and then accepting the judgment only if favorable, but attacking the judgment for lack
of jurisdiction if it is not.[37]
III

In upholding Agcaoilis right to suspend the payment of his monthly amortizations

due to the increased interest rates imposed by FDC, and because he found FDCs
cancellation of the contract to sell as improper, the CA found and ruled as follows:

It is the contention of the appellee that he has the right to suspend

payments since the increase in interest rate imposed by defendant-
appellant FDC is not valid and therefore cannot be given legal effect.
Although Section II, paragraph d of the Contract to Sell entered into by the
parties states that, should there be an increase in bank interest rate for
loans and/or other financial accommodations, the rate of interest provided
for in this contract shall be automatically amended to equal the said
increased bank interest rate, the date of said amendment to coincide with
the date of said increase in interest rate, the said increase still needs to
[be] accompanied by valid proofs and not one of the parties must
unilaterally alter what was originally agreed upon. However, FDC failed to
substantiate the alleged increase with sufficient proof, thus we quote with
approval the findings of the lower court, to wit:

In the instant case, defendant FDC failed to show by evidence

that it incurred loans and /or other financial accommodations to
pay interest for its loans in developing the property. Thus, the
increased interest rates said defendant is imposing on plaintiff is
not justified, and to allow the same is tantamount to unilaterally
altering the terms of the contract which the law proscribes. Article
1308 of the Civil Code provides:

Art. 1308 The contract must bind both contracting

parties; its validity or compliance cannot be left to the will
of one of them.

For this reason, the court sees no valid reason for defendant
FDC to cancel the contract to sell on ground of default or non-
payment of monthly amortizations. (RTC rollo, pp. 79-80)

It was also grave error on the part of the FDC to cancel the contract
to sell for non-payment of the monthly amortizations without taking into
consideration Republic Act 6552, otherwise known as the Maceda Law.
The policy of law, as embodied in its title, is to provide protection to buyers
of real estate on installment payments. As clearly specified in Section 3,
the declared public policy espoused by Republic Act No. 6552 is to protect
buyers of real estate on installment payments against onerous and
oppressive conditions. Thus, in order for FDC to have validly cancelled the
existing contract to sell, it must have first complied with Section 3 (b) of
RA 6552. FDC should have refund the appellee the cash surrender value
of the payments on the property equivalent to fifty percent of the total
 payments made. At this point, we, find no error on the part of the lower
court when it ruled that:

There is nothing in the record to show that the aforementioned

requisites for a valid cancellation of a contract where complied
with by defendant FDC. Hence, the contract to sell which
defendant FDC cancelled as per its letter dated August 17, 1987
remains valid and subsisting. Defendant FDC cannot by its own
forfeit the payments already made by the plaintiff which as of the
same date amounts to ₱263,637.73.(RTC rollo, p. 81)[38]

We sustain the aforequoted findings and ruling of the CA, which were supported
by the records and relevant laws, and were consistent with the findings and ruling of
the RTC. Factual findings and rulings of the CA are binding and conclusive upon this
Court if they are supported by the records and coincided with those made by the trial
court.[39]

FDCs claim that it was distinct in personality from FSCC is unworthy of

consideration due to its being a question of fact that cannot be reviewed under Rule
45.[40]

Among the obligations of FDC and FSCC to the unit owners or purchasers of
FSBs units was the duty to provide a centralized air-conditioning unit, lighting,
electricity, and water; and to maintain adequate fire exit, elevators, and cleanliness in
each floor of the common areas of FSB.[41] But FDC and FSCC failed to repair the
centralized air-conditioning unit of the fourth floor of FSB despite repeated demands
from Agcaoili.[42] To alleviate the physical discomfort and adverse effects on his work as
a practicing attorney brought about by the breakdown of the air-conditioning unit, he
installed two window-type air-conditioners at his own expense.[43]Also, FDC and FSCC
failed to provide water supply to the comfort room and to clean the corridors.[44] The fire
exit and elevator were also defective.[45] These defects, among other circumstances,
rightly compelled Agcaoili to suspend the payment of his monthly amortizations and
condominium dues. Instead of addressing his valid complaints, FDC disconnected the
electric supply of his Unit 411 and unilaterally increased the interest rate without
justification.[46]

Clearly, FDC was liable for damages. Article 1171 of the Civil Code provides that
those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof are liable for damages.
 WHEREFORE, we DENY the petition for review; AFFIRM the decision of the
Court of Appeals; and DIRECT the Clerk of Court of the Regional Trial Court, Makati
City, Branch 150, or his duly authorized deputy to assess and collect the additional
docket fees from the respondent as fees in lien in accordance with Section 2, Rule 141
of the Rules of Court.

RE: REQUEST OF A.M. No. 08-11-7-SC

NATIONAL COMMITTEE
ON LEGAL AID[1] TO EXEMPT Present:
LEGAL AID CLIENTS FROM
PAYING FILING, DOCKET PUNO, C.J.,
AND OTHER FEES. QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
CORONA,
CARPIO MORALES,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO and
ABAD, JJ.

Promulgated:

August 28, 2009

x---------------------------------------------------x

RESOLUTION
CORONA, J.:

On September 23, 2008 the Misamis Oriental Chapter of the Integrated Bar of

the Philippines (IBP) promulgated Resolution No. 24, series of 2008. [2] The resolution

requested the IBPs National Committee on Legal Aid[3] (NCLA) to ask for the exemption

from the payment of filing, docket and other fees of clients of the legal aid offices in the

various IBP chapters. Resolution No. 24, series of 2008 provided:

RESOLUTION NO. 24, SERIES OF 2008

RESOLUTION OF THE IBPMISAMIS ORIENTAL CHAPTER FOR THE IBP

NATIONAL LEGAL AID OFFICE TO REQUEST THE COURTS AND OTHER
QUASI-JUDICIAL BODIES, THE PHILIPPINE MEDIATION CENTER AND
PROSECUTORS OFFICES TO EXEMPT LEGAL AID CLIENTS FROM
PAYING FILING, DOCKET AND OTHER FEES INCIDENTAL TO THE
FILING AND LITIGATION OF ACTIONS, AS ORIGINAL PROCEEDINGS OR
ON APPEAL.

WHEREAS, Section 1, Article I of the Guidelines Governing the

Establishment and Operation of Legal Aid Offices in All Chapters of the
Integrated Bar of the Philippines (otherwise known as []Guideline[s] on
Legal Aid[]) provides: Legal aid is not a matter of charity. It is a means for
the correction of social imbalances that may often lead to injustice, for
which reason, it is a public responsibility of the Bar. The spirit of public
service should therefore unde[r]ly all legal aid offices. The same should be
so administered as to give maximum possible assistance to indigent and
deserving members of the community in all cases, matters and situations
in which legal aid may be necessary to forestall injustice.

WHEREAS, Section 2 of the same provides: In order to attain the

objectives of legal aid, legal aid office should be as close as possible to
those who are in need thereof the masses. Hence, every chapter of the IBP
must establish and operate an adequate legal aid office.

WHEREAS, the Legal Aid Office of the IBPMisamis Oriental

Chapter has long been operational, providing free legal services to
numerous indigent clients, through the chapters members who render
volunteer services in the spirit of public service;

WHEREAS, the courts, quasi-judicial bodies, the various

mediation centers and prosecutors offices are collecting fees, be they
filing, docket, motion, mediation or other fees in cases, be they original
proceedings or on appeal;

WHEREAS, IBP Legal Aid clients are qualified under the same
indigency and merit tests used by the Public Attorneys Office (PAO), and
would have qualified for PAO assistance, but for reasons other than
indigency, are disqualified from availing of the services of the PAO, like
the existence of a conflict of interests or conflicting defenses, and other
similar causes;

WHEREAS, PAO clients are automatically exempt from the

payment of docket and other fees for cases, be they original proceedings
or on appeal, by virtue of the provisions of Section 16D of R.A. 9406 (PAO
Law), without the need for the filing of any petition or motion to declare
them as pauper litigants;
 WHEREAS, there is no similar provision in any substantive law or
procedural law giving IBP Legal Aid clients the same benefits or privileges
enjoyed by PAO clients with respect to the payment of docket and other
fees before the courts, quasi-judicial bodies and prosecutors offices;

WHEREAS, the collection of docket and other fees from the IBP
Legal Aid clients poses an additional strain to their next to non-existent
finances;

WHEREAS, the quarterly allowance given by the National Legal Aid

Office to the IBP Misamis Oriental Chapter is insufficient to even cover
the incidental expenses of volunteer legal aid lawyers, much less answer
for the payment of docket and other fees collected by the courts, quasi-
judicial bodies and prosecutors offices and mediation fees collected by the
Philippine Mediation Center;

NOW THEREFORE, on motion of the Board of Officers of the

IBPMisamis Oriental Chapter, be it resolved as it is hereby resolved, to
move the IBP National Legal Aid Office to make the necessary requests or
representations with the Supreme Court, the Philippine Mediation
Center, the Department of Justice and the National Prosecution Service
and other quasi-judicial agencies to effect the grant of a like exemption
from the payment of filing, docket and other fees to the IBP Legal Aid
clients as that enjoyed by PAO clients, towards the end that IBP Legal Aid
clients be automatically exempted from the filing of the abovementioned
fees;

RESOLVED FURTHER, that copies of this Resolution be furnished

to Supreme Court Chief Justice Honorable Reynato S. Puno, IBP National
President Feliciano M. Bautista, the IBP Board of Governors, Secretary of
Justice Hon. Raul M. Gonzalez, the National Supervisor of the Philippine
Mediation Center, the National Labor Relations Commission, the Civil
Service Commission and other quasi-judicial bodies and their local
offices;

RESOLVED FINALLY to move the IBP Board of Governors and

National Officers to make the necessary representations with the National
Legislature and its members to effect the filing of a bill before the House
of Representatives and the Senate granting exemption to IBP Legal Aid
clients from the payment of docket, filing and or other fees in cases before
the courts, quasi-judicial agencies and prosecutors offices and the
mediation centers.

Done this 23rd day of September 2008, Cagayan De Oro City.

Unanimously approved upon motion severally seconded.[4]

The Court noted Resolution No. 24, series of 2008 and required the IBP, through the

NCLA, to comment thereon.[5]

In a comment dated December 18, 2008,[6] the IBP, through the NCLA, made the

following comments:

(a) Under Section 16-D of RA[7] 9406, clients of the Public Attorneys Office (PAO)
are exempt from the payment of docket and other fees incidental to the
institution of action in court and other quasi-judicial bodies. On the other
hand, clients of legal aid offices in the various IBP chapters do not enjoy
the same exemption. IBPs indigent clients are advised to litigate as pauper
litigants under Section 21, Rule 3 of the Rules of Court;
(b) They are further advised to submit documentary evidence to prove compliance
with the requirements under Section 21, Rule 3 of the Rules of Court, i.e.,
certifications from the barangay and the Department of Social Welfare and
Development. However, not only does the process involve some expense
which indigent clients could ill-afford, clients also lack knowledge on how
to go about the tedious process of obtaining these documents;

(c) Although the IBP is given an annual legal aid subsidy, the amount it receives
from the government is barely enough to cover various operating
expenses;[8]

(d) While each IBP local chapter is given a quarterly allocation (from the legal aid
subsidy),[9] said allocation covers neither the incidental expenses defrayed
by legal aid lawyers in handling legal aid cases nor the payment of docket
and other fees collected by the courts, quasi-judicial bodies and the
prosecutors office, as well as mediation fees and

(e) Considering the aforementioned factors, a directive may be issued by the

Supreme Court granting IBPs indigent clients an exemption from the
payment of docket and other fees similar to that given to PAO clients under
Section 16-D of RA 9406. In this connection, the Supreme Court
previously issued a circular exempting IBP clients from the payment of
transcript of stenographic notes.[10]

At the outset, we laud the Misamis Oriental Chapter of the IBP for its effort to

help improve the administration of justice, particularly, the access to justice by the poor.

Its Resolution No. 24, series of 2008 in fact echoes one of the noteworthy

recommendations during the Forum on Increasing Access to Justice spearheaded by the

Court last year. In promulgating Resolution No. 24, the Misamis Oriental Chapter of the
IBP has effectively performed its duty to participate in the development of the legal

system by initiating or supporting efforts in law reform and in the administration of

justice.[11]

We now move on to determine the merits of the request.

ACCESS TO JUSTICE:
MAKING AN IDEAL A REALITY

Access to justice by all, especially by the poor, is not simply an ideal in our

society. Its existence is essential in a democracy and in the rule of law. As such, it is

guaranteed by no less than the fundamental law:

Sec. 11. Free access to the courts and quasi-judicial bodies and
adequate legal assistance shall not be denied to any person by reason
of poverty.[12] (emphasis supplied)

The Court recognizes the right of access to justice as the most important pillar of

legal empowerment of the marginalized sectors of our society.[13] Among others, it has

exercised its power to promulgate rules concerning the protection and enforcement of

constitutional rights[14] to open the doors of justice to the underprivileged and to allow

them to step inside the courts to be heard of their plaints. In particular, indigent litigants

are permitted under Section 21, Rule 3[15] and Section 19, Rule 141[16] of the Rules of

Court to bring suits in forma pauperis.

The IBP, pursuant to its general objectives to improve the administration of

justice and enable the Bar to discharge its public responsibility more

effectively,[17] assists the Court in providing the poor access to justice. In particular, it

renders free legal aid under the supervision of the NCLA.

A NEW RULE, A NEW TOOL
FOR ACCESS TO JUSTICE

Under the IBPs Guidelines Governing the Establishment and Operation of Legal

Aid Offices in All Chapters of the IBP (Guidelines on Legal Aid), the combined means

and merit tests shall be used to determine the eligibility of an applicant for legal aid:

ARTICLE VIII
TESTS

SEC. 19. Combined tests. The Chapter Legal Aid Committee or the [NCLA],
as the case may be, shall pass upon the request for legal aid by the
combined application of the means test and merit test, and the
consideration of other factors adverted to in the following sections.

SEC. 20. Means test. The means test aims at determining whether the
applicant has no visible means of support or his income is otherwise
insufficient to provide the financial resources necessary to engage
competent private counsel owing to the demands for subsistence of his
family, considering the number of his dependents and the conditions
prevailing in the locality.

The means test shall not be applicable to applicants who fall under the
Developmental Legal Aid Program such as Overseas Filipino Workers,
fishermen, farmers, women and children and other disadvantaged
groups.

SEC. 21. Merit test. The merit test seeks to ascertain whether or not the
applicants cause of action or his defense is valid and chances of
establishing the same appear reasonable.

SEC. 22. Other factors. The effect of the Legal Aid Service or of the failure
to render the same upon the Rule of Law, the proper administration of
justice, the public interest involved in given cases and the practice of law
in the locality shall likewise be considered.

SEC. 23. Private practice. Care shall be taken that the Legal aid is not
availed of to the detriment of the private practice of law, or taken
advantage of by anyone for personal ends.

SEC. 24. Denial. Legal aid may be denied to an applicant already

receiving adequate assistance from any source other than the Integrated
Bar.
 The means and merit tests appear to be reasonable determinants of eligibility for

coverage under the legal aid program of the IBP. Nonetheless, they may be improved to

ensure that any exemption from the payment of legal fees that may be granted to clients

of the NCLA and the legal aid offices of the various IBP chapters will really further the

right of access to justice by the poor. This will guarantee that the exemption will neither

be abused nor trivialized. Towards this end, the following shall be observed by the NCLA

and the legal aid offices in IBP chapters nationwide in accepting clients and handling

cases for the said clients:

A.M. No. 08-11-7-SC (IRR): Re: Rule on the Exemption From the
Payment of Legal Fees of the Clients of the National Committee on
Legal Aid and of the Legal Aid Offices in the Local Chapters of the
Integrated Bar of the Philippines

Rule on the Exemption From the Payment of Legal Fees of the

Clients of the National Committee on Legal Aid (NCLA) and of the
Legal Aid Offices in the Local Chapters of the Integrated Bar of the
Philippines (IBP)

ARTICLE I
Purpose

Section 1. Purpose. This Rule is issued for the purpose of enforcing the
right of free access to courts by the poor guaranteed under Section 11,
Article III of the Constitution. It is intended to increase the access to
justice by the poor by exempting from the payment of legal fees incidental
to instituting an action in court, as an original proceeding or on
appeal, qualified indigent clients of the NCLA and of the legal aid offices
in local IBP chapters nationwide.

ARTICLE II
Definition of Terms

Section 1. Definition of important terms. For purposes of this Rule and as

used herein, the following terms shall be understood to be how they are
defined under this Section:

(a) Developmental legal aid means the rendition of legal services in

public interest causes involving overseas workers,
fisherfolk, farmers, laborers, indigenous cultural
communities, women, children and other disadvantaged
groups and marginalized sectors;
 (b) Disinterested person refers to the punong barangay having
jurisdiction over the place where an applicant for legal aid or
client of the NCLA or chapter legal aid office resides;

(c) Falsity refers to any material misrepresentation of fact or any

fraudulent, deceitful, false, wrong or misleading statement
in the application or affidavits submitted to support it or the
affidavit of a disinterested person required to be submitted
annually under this Rule which may substantially affect the
determination of the qualifications of the applicant or the
client under the means and merit tests;
(d) Legal fees refers to the legal fees imposed under Rule 141 of the
Rules of Court as a necessary incident of instituting an
action in court either as an original proceeding or on appeal.
In particular, it includes filing or docket fees, appeal fees,
fees for issuance of provisional remedies, mediation fees,
sheriffs fees, stenographers fees (that is fees for transcript of
stenographic notes) and commissioners fees;

(e) Means test refers to the set of criteria used to determine whether
the applicant is one who has no money or property sufficient
and available for food, shelter and basic necessities for
himself and his family;

(f) Merit test refers to the ascertainment of whether the applicants

cause of action or his defense is valid and whether the
chances of establishing the same appear reasonable and

(g) Representative refers to the person authorized to file an

application for legal aid in behalf of the applicant when the
said applicant is prevented by a compelling reason from
personally filing his application. As a rule, it refers to the
immediate family members of the applicant. However, it may
include any of the applicants relatives or any person or
concerned citizen of sufficient discretion who has first-hand
knowledge of the personal circumstances of the applicant as
well as of the facts of the applicants case.

ARTICLE III
Coverage

Section 1. Persons qualified for exemption from payment of legal fees.

Persons who shall enjoy the benefit of exemption from the payment of
legal fees incidental to instituting an action in court, as an original
proceeding or on appeal, granted under this Rule shall be limited only to
clients of the NCLA and the chapter legal aid offices.

The said clients shall refer to those indigents qualified to receive

free legal aid service from the NCLA and the chapter legal aid offices. Their
qualifications shall be determined based on the tests provided in this
Rule.

Section 2. Persons not covered by the Rule. The following shall be

disqualified from the coverage of this Rule. Nor may they be accepted as
clients by the NCLA and the chapter legal aid offices.

(a) Juridical persons; except in cases covered by developmental

legal aid or public interest causes involving juridical entities
which are non-stock, non-profit organizations, non-
governmental organizations and peoples organizations
whose individual members will pass the means test provided
in this Rule;

(b) Persons who do not pass the means and merit tests;

(c) Parties already represented by a counsel de parte;

(d) Owners or lessors of residential lands or buildings with respect

to the filing of collection or unlawful detainer suits against
their tenants and

(e) Persons who have been clients of the NCLA or chapter legal aid
office previously in a case where the NCLA or chapter legal
aid office withdrew its representation because of a falsity in
the application or in any of the affidavits supporting the said
application.

Section 3. Cases not covered by the Rule. The NCLA and the chapter legal
aid offices shall not handle the following:

(a) Cases where conflicting interests will be represented by the

NCLA and the chapter legal aid offices and

(b) Prosecution of criminal cases in court.

ARTICLE IV
Tests of Indigency

Section 1. Tests for determining who may be clients of the NCLA

and the legal aid offices in local IBP chapters. The NCLA or the chapter
legal aid committee, as the case may be, shall pass upon requests for legal
aid by the combined application of the means and merit tests and the
consideration of other relevant factors provided for in the following
sections.

Section 2. Means test; exception. (a) This test shall be based on the
following criteria: (i) the applicant and that of his immediate family must
have a gross monthly income that does not exceed an amount double the
monthly minimum wage of an employee in the place where the applicant
resides and (ii) he does not own real property with a fair market value as
stated in the current tax declaration of more than Three Hundred
Thousand (P300,000.00) Pesos.

In this connection, the applicant shall execute an affidavit of indigency

(printed at the back of the application form) stating that he and his
immediate family do not earn a gross income abovementioned, nor own
any real property with the fair value aforementioned, supported by an
affidavit of a disinterested person attesting to the truth of the applicants
affidavit. The latest income tax return and/or current tax declaration, if
any, shall be attached to the applicants affidavit.

(b) The means test shall not be applicable to applicants who fall under
the developmental legal aid program such as overseas workers, fisherfolk,
farmers, laborers, indigenous cultural communities, women, children
and other disadvantaged groups.

Section 3. Merit test. A case shall be considered meritorious if an

assessment of the law and evidence at hand discloses that the legal
service will be in aid of justice or in the furtherance thereof, taking into
consideration the interests of the party and those of society. A case fails
this test if, after consideration of the law and evidence presented by the
applicant, it appears that it is intended merely to harass or injure the
opposite party or to work oppression or wrong.

Section 4. Other relevant factors that may be considered. The effect of legal
aid or of the failure to render the same upon the rule of law, the proper
administration of justice, the public interest involved in a given case and
the practice of law in the locality shall likewise be considered.

ARTICLE V
Acceptance and Handling of Cases

Section 1. Procedure in accepting cases. The following procedure shall be

observed in the acceptance of cases for purposes of this Rule:

(a) Filing of application An application shall be made personally by

the applicant, unless there is a compelling reason which
prevents him from doing so, in which case his representative
may apply for him. It shall adhere substantially to the form
made for that purpose. It shall be prepared and signed by
the applicant or, in proper cases, his duly authorized
representative in at least three copies.

Applications for legal aid shall be filed with the NCLA or with the
chapter legal aid committee.

The NCLA shall, as much as possible, concentrate on cases of

paramount importance or national impact.
Requests received by the IBP National Office shall be referred by
the NCLA to the proper chapter legal aid committee of the
locality where the cases have to be filed or are pending. The
chapter president and the chairman of the chapters legal aid
committee shall be advised of such referral.

(b) Interview The applicant shall be interviewed by a member of the

chapter legal aid committee or any chapter member
authorized by the chapter legal aid committee to determine
the applicants qualifications based on the means and merit
tests and other relevant factors. He shall also be required to
submit copies of his latest income tax returns and/or
current tax declaration, if available, and execute an affidavit
of indigency printed at the back of the application form with
the supporting affidavit of a disinterested person attesting
to the truth of the applicants affidavit.

After the interview, the applicant shall be informed that he can

follow up the action on his application after five (5) working
days.

(c) Action on the application The chapter legal aid committee shall
pass upon every request for legal aid and submit its
recommendation to the chapter board of officers within three
(3) working days after the interview of the applicant. The
basis of the recommendation shall be stated.

The chapter board of officers shall review and act on

the recommendation of the chapter legal aid committee
within two (2) working days from receipt thereof; Provided,
however, that in urgent matters requiring prompt or
immediate action, the chapters executive director of legal aid
or whoever performs his functions may provisionally act on
the application, subject to review by the chapter legal aid
committee and, thereafter, by the chapter board of officers.

The action of the chapter board of officers on the application shall

be final.

(d) Cases which may be provisionally accepted. In the following

cases, the NCLA or the chapter legal aid office, through the
chapters executive director of legal aid or whoever performs
his functions may accept cases provisionally pending
verification of the applicants indigency and an evaluation of
the merit of his case.

(i) Where a warrant for the arrest of the applicant has been
issued;
 (ii) Where a pleading has to be filed immediately to avoid
adverse effects to the applicant;

(iii) Where an appeal has to be urgently perfected or a

petition for certiorari, prohibition or mandamus filed
has to be filed immediately; and

(iv) Other similar urgent cases.

(e) Assignment of control number Upon approval of the chapter

board of officers of a persons application and the applicant
is found to be qualified for legal assistance, the case shall be
assigned a control number. The numbering shall be
consecutive starting from January to December of every
year. The control number shall also indicate the region and
the chapter handling the case.

Example:
Region[18] Chapter Year Month Number
GM - Manila - 2009 - 03 - 099

(f) Issuance of a certification After an application is approved and a

control number duly assigned, the chapter board of officers
shall issue a certification that the person (that is, the
successful applicant) is a client of the NCLA or of the chapter
legal aid office. The certification shall bear the control
number of the case and shall state the name of the client
and the nature of the judicial action subject of the legal aid
of the NCLA or the legal aid office of a local IBP chapter.
The certification shall be issued to the successful applicant free of
charge.

Section 2. Assignment of cases. After a case is given a control number,

the chapter board of officers shall refer it back to the chapter legal aid
committee. The chapter legal aid committee shall assign the case to any
chapter member who is willing to handle the case.

In case no chapter member has signified an intention to handle the

case voluntarily, the chapter legal aid committee shall refer the matter to
the chapter board of officers together with the names of at least three
members who, in the chapter legal aid committees discretion, may
competently render legal aid on the matter. The chapter board of officers
shall appoint one chapter member from among the list of names
submitted by the chapter legal aid committee. The chapter member
chosen may not refuse the appointment except on the ground of conflict
of interest or other equally compelling grounds as provided in the Code of
Professional Responsibility,[19] in which case the chapter board of officers
shall appoint his replacement from among the remaining names in the
list previously submitted by the chapter legal aid committee.
 The chapter legal aid committee and the chapter board of officers
shall take the necessary measures to ensure that cases are well-
distributed to chapter members.

Section 3. Policies and guidelines in the acceptance and handling of cases.

The following policies and guidelines shall be observed in the acceptance
and handling of cases:

(a) First come, first served Where both the

complainant/plaintiff/petitioner and defendant/
respondent apply for legal aid and both are qualified, the
first to seek assistance shall be given preference.

(b) Avoidance of conflict of interest Where acceptance of a case will

give rise to a conflict of interest on the part of the chapter
legal aid office, the applicant shall be duly informed and
advised to seek the services of a private counsel or another
legal aid organization.

Where handling of the case will give rise to a conflict of interest on

the part of the chapter member assigned to the case, the
client shall be duly informed and advised about it. The
handling lawyer shall also inform the chapter legal aid
committee so that another chapter member may be assigned
to handle the case. For purposes of choosing the substitute
handling lawyer, the rule in the immediately preceding
section shall be observed.

(c) Legal aid is purely gratuitous and honorary No member of the

chapter or member of the staff of the NCLA or chapter legal
aid office shall directly or indirectly demand or request from
an applicant or client any compensation, gift or present for
legal aid services being applied for or rendered.

(d) Same standard of conduct and equal treatment A chapter

member who is tasked to handle a case accepted by the
NCLA or by the chapter legal aid office shall observe the
same standard of conduct governing his relations with
paying clients. He shall treat the client of the NCLA or of the
chapter legal aid office and the said clients case in a manner
that is equal and similar to his treatment of a paying client
and his case.

(e) Falsity in the application or in the affidavits Any falsity in the

application or in the affidavit of indigency or in the affidavit
of a disinterested person shall be sufficient cause for the
NCLA or chapter legal aid office to withdraw or terminate the
legal aid. For this purpose, the chapter board of officers shall
authorize the handling lawyer to file the proper
manifestation of withdrawal of appearance of the chapter
 legal aid office in the case with a motion for the dismissal of
the complaint or action of the erring client. The court, after
hearing, shall approve the withdrawal of appearance and
grant the motion, without prejudice to whatever criminal
liability may have been incurred.

Violation of this policy shall disqualify the erring client from

availing of the benefits of this Rule in the future.

(f) Statement in the initiatory pleading To avail of the benefits of the

Rule, the initiatory pleading shall state as an essential
preliminary allegation that (i) the party initiating the action
is a client of the NCLA or of the chapter legal aid office and
therefore entitled to exemption from the payment of legal
fees under this Rule and (ii) a certified true copy of
the certification issued pursuant to Section 1(e), of this
Article is attached or annexed to the pleading.

Failure to make the statement shall be a ground for the dismissal

of the action without prejudice to its refiling.
The same rule shall apply in case the client, through the NCLA
or chapter legal aid office, files an appeal.

(g) Attachment of certification in initiatory pleading A certified true

copy of the certification issued pursuant to Section 1(e), of
this Article shall be attached as an annex to the initiatory
pleading.

Failure to attach a certified true copy of the said

certification shall be a ground for the dismissal of the action
without prejudice to its refiling.
The same rule shall apply in case the client, through the NCLA
or chapter legal aid office, files an appeal.

(h) Signing of pleadings All complaints, petitions, answers, replies,

memoranda and other important pleadings or motions to be
filed in courts shall be signed by the handling lawyer and
co-signed by the chairperson or a member of the chapter
legal aid committee, or in urgent cases, by the executive
director of legal aid or whoever performs his functions.

Ordinary motions such as motions for extension of time to file a

pleading or for postponement of hearing and manifestations
may be signed by the handling lawyer alone.

(i) Motions for extension of time or for postponement The filing of

motions for extension of time to file a pleading or for
postponement of hearing shall be avoided as much as
possible as they cause delay to the case and prolong the
proceedings.
 (j) Transfer of cases Transfer of cases from one handling lawyer to
another shall be affected only upon approval of the chapter
legal aid committee.

Section 4. Decision to appeal. (a) All appeals must be made on the request
of the client himself. For this purpose, the client shall be made to fill up
a request to appeal.

(b) Only meritorious cases shall be appealed. If the handling

lawyer, in consultation with the chapter legal aid committee, finds that
there is no merit to the appeal, the client should be immediately informed
thereof in writing and the record of the case turned over to him, under
proper receipt. If the client insists on appealing the case, the lawyer
handling the case should perfect the appeal before turning over the
records of the case to him.

Section 5. Protection of private practice. Utmost care shall be taken to

ensure that legal aid is neither availed of to the detriment of the private
practice of law nor taken advantage of by anyone for purely personal ends.

ARTICLE VI
Withdrawal of Legal Aid and Termination of Exemption

Section 1. Withdrawal of legal aid. The NCLA or the chapter legal aid
committee may, in justifiable instances as provided in the next Section,
direct the handling lawyer to withdraw representation of a clients cause
upon approval of the IBP Board of Governors (in the case of the NCLA) or
of the chapter board of officers (in the case of the chapter legal aid
committee) and through a proper motion filed in Court.

Section 2. Grounds for withdrawal of legal aid. Withdrawal may be

warranted in the following situations:

(a) In a case that has been provisionally accepted, where it is

subsequently ascertained that the client is not qualified for
legal aid;

(b) Where the clients income or resources improve and he no longer

qualifies for continued assistance based on the means test.
For this purpose, on or before January 15 every year, the
client shall submit an affidavit of a disinterested person
stating that the client and his immediate family do not earn
a gross income mentioned in Section 2, Article V, nor own
any real property with the fair market value mentioned in
the same Section;
 (c) When it is shown or found that the client committed a falsity in
the application or in the affidavits submitted to support the
application;

(d) When the client subsequently engages a de parte counsel or is

provided with a de oficio counsel;

(e) When, despite proper advice from the handling lawyer, the client
cannot be refrained from doing things which the lawyer
himself ought not do under the ethics of the legal profession,
particularly with reference to their conduct towards courts,
judicial officers, witnesses and litigants, or the client insists
on having control of the trial, theory of the case, or strategy
in procedure which would tend to result in incalculable
harm to the interests of the client;

(f) When, despite notice from the handling lawyer, the client does
not cooperate or coordinate with the handling lawyer to the
prejudice of the proper and effective rendition of legal aid
such as when the client fails to provide documents
necessary to support his case or unreasonably fails to attend
hearings when his presence thereat is required; and

(g) When it becomes apparent that the representation of the clients

cause will result in a representation of conflicting interests,
as where the adverse party had previously engaged the
services of the NCLA or of the chapter legal aid office and the
subject matter of the litigation is directly related to the
services previously rendered to the adverse party.

Section 3. Effect of withdrawal. The court, after hearing, shall allow the
NCLA or the chapter legal aid office to withdraw if it is satisfied that the
ground for such withdrawal exists.

Except when the withdrawal is based on paragraphs (b), (d) and (g) of the
immediately preceding Section, the court shall also order the dismissal of
the case. Such dismissal is without prejudice to whatever criminal
liability may have been incurred if the withdrawal is based on paragraph
(c) of the immediately preceding Section.

ARTICLE VII
Miscellaneous Provisions

Section 1. Lien on favorable judgment. The amount of the docket and

other lawful fees which the client was exempted from paying shall be a
lien on any judgment rendered in the case favorable to the indigent,
unless the court otherwise provides.

In case, attorneys fees have been awarded to the client, the same shall
belong to the NCLA or to the chapter legal aid office that rendered the
legal aid, as the case may be. It shall form part of a special fund which
shall be exclusively used to support the legal aid program of the NCLA or
the chapter legal aid office. In this connection, the chapter board of
officers shall report the receipt of attorneys fees pursuant to this Section
to the NCLA within ten (10) days from receipt thereof. The NCLA shall, in
turn, include the data on attorneys fees received by IBP chapters
pursuant to this Section in its liquidation report for the annual subsidy
for legal aid.

Section 2. Duty of NCLA to prepare forms. The NCLA shall prepare the
standard forms to be used in connection with this Rule. In particular, the
NCLA shall prepare the following standard forms: the application form,
the affidavit of indigency, the supporting affidavit of a disinterested
person, the affidavit of a disinterested person required to be submitted
annually under Section 2(b), Article VI, the certification issued by the
NCLA or the chapter board of officers under Section 1(f), Article V and the
request to appeal.

The said forms, except the certification, shall be in Filipino. Within sixty
(60) days from receipt of the forms from the NCLA, the chapter legal aid
offices shall make translations of the said forms in the dominant dialect
used in their respective localities.

Section 3. Effect of Rule on right to bring suits in forma pauperis. Nothing

in this Rule shall be considered to preclude those persons not covered
either by this Rule or by the exemption from the payment of legal fees
granted to clients of the Public Attorneys Office under Section 16-D of RA
9406 to litigate in forma pauperis under Section 21, Rule 3 and Section
19 Rule 141 of the Rules of Court.

Section 4. Compliance with Rule on Mandatory Legal Aid Service. Legal aid
service rendered by a lawyer under this Rule either as a handling lawyer
or as an interviewer of applicants under Section 1(b), Article IV hereof
shall be credited for purposes of compliance with the Rule on Mandatory
Legal Aid Service.

The chairperson of the chapter legal aid office shall issue the certificate
similar to that issued by the Clerk of Court in Section 5(b) of the Rule on
Mandatory Legal Aid Service.

ARTICLE VIII
Effectivity

Section 1. Effectivity. This Rule shall become effective after fifteen days
following its publication in a newspaper of general circulation.
 The above rule, in conjunction with Section 21, Rule 3 and Section 19, Rule 141

of the Rules of Court, the Rule on Mandatory Legal Aid Service and the Rule of Procedure

for Small Claims Cases, shall form a solid base of rules upon which the right of access

to courts by the poor shall be implemented. With these rules, we equip the poor with

the tools to effectively, efficiently and easily enforce their rights in the judicial system.

A FINAL WORD

Equity will not suffer a wrong to be without a remedy. Ubi jus ibi remedium. Where

there is a right, there must be a remedy. The remedy must not only be effective and

efficient, but also readily accessible. For a remedy that is inaccessible is no remedy at

all.

The Constitution guarantees the rights of the poor to free access to the courts

and to adequate legal assistance. The legal aid service rendered by the NCLA and legal

aid offices of IBP chapters nationwide addresses only the right to adequate legal

assistance. Recipients of the service of the NCLA and legal aid offices of IBP chapters

may enjoy free access to courts by exempting them from the payment of fees assessed

in connection with the filing of a complaint or action in court. With these twin initiatives,

the guarantee of Section 11, Article III of Constitution is advanced and access to justice

is increased by bridging a significant gap and removing a major roadblock.

WHEREFORE, the Misamis Oriental Chapter of the Integrated Bar of the

Philippines is hereby COMMENDED for helping increase the access to justice by the

poor. The request of the Misamis Oriental Chapter for the exemption from the payment

of filing, docket and other fees of the clients of the legal aid offices of the various IBP

chapters is GRANTED. The Rule on the Exemption From the Payment of Legal Fees of
the Clients of the National Committee on Legal Aid (NCLA) and of the Legal Aid Offices

in the Local Chapters of the Integrated Bar of the Philippines (IBP) (which shall be

assigned the docket number A.M. No. 08-11-7-SC [IRR] provided in this resolution is

hereby APPROVED. In this connection, the Clerk of Court is DIRECTED to cause the

publication of the said rule in a newspaper of general circulation within five days from

the promulgation of this resolution.

The Office of the Court Administrator is hereby directed to promptly issue a

circular to inform all courts in the Philippines of the import of this resolution.

3. G.R. No. 174908

DEL CASTILLO, J.:

"It is incumbent upon x x x appellants to utilize the correct mode of appeal of the decisions
of trial courts to the appellate courts. In the mistaken choice of their remedy, they can
blame no one but themselves."[1]

This is a Petition for Review on Certiorari[2] of the May 31, 2006 Resolution[3] of the Court
of Appeals (CA) in CA-G.R. CV No. 83365, which dismissed petitioner Darma Maslag's
(petitioner) ordinary appeal to it for being an improper remedy. The Resolution disposed
of the case as follows:

WHEREFORE, the Motion to Dismiss is GRANTED, and the Appeal is

hereby DISMISSED.

SO ORDERED.[4]

The Petition also assails the CA's September 22, 2006 Resolution[5] denying petitioner's
Motion for Reconsideration.[6]

Factual Antecedents

In 1998, petitioner filed a Complaint[7] for reconveyance of real property with declaration
of nullity of original certificate of title (OCT) against respondents Elizabeth Monzon
(Monzon), William Geston and the Registry of Deeds of La Trinidad, Benguet. The
Complaint was filed before the Municipal Trial Court (MTC) of La Trinidad, Benguet.
After trial, the MTC found respondent Monzon guilty of fraud in obtaining an OCT over
petitioner's property.[8] It ordered her to reconvey the said property to petitioner, and to
pay damages and costs of suit.[9]

Respondents appealed to the Regional Trial Court (RTC) of La Trinidad, Benguet.

After going over the MTC records and the parties' respective memoranda, the RTC of La
Trinidad, Benguet, Branch 10, through Acting Presiding Judge Fernando P. Cabato
(Judge Cabato), issued its October 22, 2003 Order,[10] declaring the MTC without
jurisdiction over petitioner's cause of action. It further held that it will take cognizance
of the case pursuant to Section 8, Rule 40 of the Rules of Court, which reads:

SECTION 8. Appeal from orders dismissing case without trial; lack of jurisdiction. x x x

If the case was tried on the merits by the lower court without jurisdiction over the
subject matter, the Regional Trial Court on appeal shall not dismiss the case if it has
original jurisdiction thereof, but shall decide the case in accordance with the preceding
section, without prejudice to the admission of amended pleadings and additional
evidence in the interest of justice.

Both parties acknowledged receipt of the October 22, 2003 Order,[11] but neither
presented additional evidence before the new judge, Edgardo B. Diaz De Rivera, Jr.
(Judge Diaz De Rivera).[12]

On May 4, 2004, Judge Diaz De Rivera issued a Resolution [13] reversing the MTC
Decision. The fallo reads as follows:

WHEREFORE, the Judgment appealed from the Municipal Trial Court of La Trinidad,
Benguet is set aside. [Petitioner] is ordered to turn over the possession of the 4,415
square meter land she presently occupies to [Monzon]. This case is remanded to the
court a quo for further proceedings to determine whether [Maslag] is entitled to the
remedies afforded by law to a builder in good faith for the improvements she constructed
thereon.

No pronouncement as to damages and costs.

SO ORDERED.[14]

Petitioner filed a Notice of Appeal[15] from the RTC's May 4, 2004 Resolution.

Petitioner assailed the RTC's May 4, 2004 Resolution for reversing the MTC's factual
findings[16] and prayed that the MTC Decision be adopted. Her prayer before the CA
reads:

WHEREFORE, premises considered, it is most respectfully prayed that the decision of

the Regional Trial Court, Branch 10 of La Trinidad, Benguet, appealed from be
reversed in toto and that the Honorable Court adopt the decision of the Municipal Trial
Court. Further reliefs just and equitable under the premises are prayed for.[17]

Respondents moved to dismiss petitioner's ordinary appeal for being the improper
remedy. They asserted that the proper mode of appeal is a Petition for Review under
Rule 42 because the RTC rendered its May 4, 2004 Resolution in its appellate
jurisdiction.[18]

Ruling of the Court of Appeals

The CA dismissed petitioner's appeal. It observed that the RTC's May 4, 2004
Resolution (the subject matter of the appeal before the CA) set aside an MTC Judgment;
hence, the proper remedy is a Petition for Review under Rule 42, and not an ordinary
appeal.[19]

Petitioner sought reconsideration.[20] She argued, for the first time, that the RTC
rendered its May 4, 2004 Resolution in its original jurisdiction. She cited the earlier
October 22, 2003 Order of the RTC declaring the MTC without jurisdiction over the case.

The CA denied petitioner's Motion for Reconsideration in its September 22, 2006
Resolution:[21]

A perusal of the May 4, 2004 Resolution of the RTC, which is the subject matter of the
appeal, clearly reveals that it took cognizance of the MTC case in the exercise of its
appellate jurisdiction. Consequently, as We have previously enunciated, the proper
remedy, is a petition for review under Rule 42 and not an ordinary appeal under Rule
41.

WHEREFORE, premises considered, the instant Motion for Reconsideration

is DENIED. The May 31, 2006 Resolution of this Court is hereby AFFIRMED in toto.

SO ORDERED.[22]

Hence this Petition wherein petitioner prays that the CA be ordered to take cognizance
of her appeal.[23]

Issues

Petitioner set forth the following issues in her Petition:

WHETHER X X X THE COURT OF APPEALS WAS CORRECT IN DISMISSING THE

APPEAL FILED BY THE PETITIONER, CONSIDERING THAT THE REGIONAL TRIAL
COURT, BRANCH 10 OF LA TRINIDAD, BENGUET HELD THAT THE ORIGINAL
COMPLAINT AS FILED BEFORE THE MUNICIPAL TRIAL COURT OF LA TRINIDAD,
BENGUET WAS DECIDED BY THE LATTER WITHOUT ANY JURISDICTION AND, IN
ORDERING THAT THE CASE SHALL BE DECIDED PURSUANT TO THE PROVISION OF
SECTION 8 OF RULE 40 OF THE RULES OF COURT, IT DECIDED THE CASE NOT ON
ITS APPELLATE JURISDICTION BUT ON ITS ORIGINAL JURISDICTION

WHAT WILL BE THE EFFECT OF THE DECISION OF THE REGIONAL TRIAL COURT,
BRANCH 10 OF LA TRINIDAD, BENGUET, WHEN IT DECIDED A CASE APPEALED
BEFORE IT UNDER THE PROVISION OF SECTION 8, RULE 40 OF THE RULES OF
COURT OF THE PHILIPPINES, AS TO THE COURSE OF REMEDY THAT MAY BE
AVAILED OF BY THE PETITIONER A PETITION FOR REVIEW UNDER RULE 42 OR AN
ORDINARY APPEAL UNDER RULE 41.[24]

Our Ruling

In its October 22, 2003 Order, the RTC declared that the MTC has no jurisdiction over
the subject matter of the case based on the supposition that the same is incapable of
pecuniary estimation. Thus, following Section 8, Rule 40 of the Rules of Court, it took
cognizance of the case and directed the parties to adduce further evidence if they so
desire. The parties bowed to this ruling of the RTC and, eventually, submitted the case
for its decision after they had submitted their respective memoranda.

We cannot, however, gloss over this jurisdictional faux pas of the RTC. Since it involves
a question of jurisdiction, we may motu proprio review and pass upon the same even at
this late stage of the proceedings.[25]

In her Complaint[26] for reconveyance of real property with declaration of nullity of OCT,
petitioner claimed that she and her father had been in open, continuous, notorious and
exclusive possession of the disputed property since the 1940's. She averred:

7. Sometime in the year 1987, Elizabeth Monzon, the owner of the adjacent parcel of
land being occupied by plaintiff [Maslag], informed the plaintiff that the respective
parcels of land being claimed by them can now be titled. A suggestion was, thereafter
made, that those who were interested to have their lands titled, will contribute to a
common fund for the surveying and subsequent titling of the land;

8. Since plaintiff had, for so long, yearned for a title to the land she occupies, she
contributed to the amount being requested by Elizabeth Monzon;

9. A subdivision survey was made and in the survey, the respective areas of the plaintiff
and the defendants were defined and delimited all for purposes of titling. x x x

10. But alas, despite the assurance of subdivided titles, when the title was finally issued
by the Registry of Deeds, the same was only in the name of Elizabeth Monzon and
WILLIAM GESTON. The name of Darma Maslag was fraudulently, deliberately and in
bad faith omitted. Thus, the title to the property, to the extent of 18,295 square meters,
was titled solely in the name of ELIZABETH MONZON.

As a relief, petitioner prayed that Monzon be ordered to reconvey the portion of the
property which she claimed was fraudulently included in Monzon's title. Her primary
relief was to recover ownership of real property. Indubitably, petitioner's complaint
involves title to real property. An action "involving title to real property," on the other
hand, was defined as an action where "the plaintiff's cause of action is based on a claim
that [she] owns such property or that [she] has the legal rights to have exclusive control,
possession, enjoyment, or disposition of the same."[27] Under the present state of the
law, in cases involving title to real property, original and exclusive jurisdiction belongs
to either the RTC or the MTC, depending on the assessed value of the subject
property.[28] Pertinent provisions of Batas Pambansa Blg. (BP) 129,[29] as amended by
Republic Act (RA) No. 7691,[30] provides:

Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original
jurisdiction:

(1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;

(2) In all civil actions which involve the title to, or possession of, real property, or any
interest therein, where the assessed value of the property involved exceeds Twenty
thousand pesos (P20,000.00) or for civil actions in Metro Manila, where x x x the
[assessed] value [of the property] exceeds Fifty thousand pesos ([P]50,000.00) except
actions for forcible entry into and unlawful detainer of lands or buildings, original
jurisdiction over which is conferred upon Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts;

x x x x

SEC. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts shall exercise: x x x x

(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession
of, real property, or any interest therein where the assessed value of the property or
interest therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions
in Metro Manila, where such assessed value does not exceed Fifty thousand pesos
(P50,000.00) x x x.

In the case at bench, annexed to the Complaint is a Declaration of Real Property [31] dated
November 12, 1991, which was later marked as petitioner's Exhibit "A",[32] showing that
the disputed property has an assessed value of P12,400[33] only. Such assessed value
of the property is well within the jurisdiction of the MTC. In fine, the RTC, thru Judge
Cabato, erred in applying Section 19(1) of BP 129 in determining which court has
jurisdiction over the case and in pronouncing that the MTC is divested of original and
exclusive jurisdiction.

This brings to fore the next issue of whether the CA was correct in dismissing petitioner's
appeal.

Section 2, Rule 50 of the Rules of Court provides for the dismissal of an improper appeal:

SECTION 2. Dismissal of improper appeal to the Court of Appeals. An appeal under Rule
41 taken from the Regional Trial Court to the Court of Appeals raising only questions of
law shall be dismissed, issues purely of law not being reviewable by said
court. Similarly, an appeal by notice of appeal instead of by petition for review
from the appellate judgment of a Regional Trial Court shall be dismissed.

An appeal erroneously taken to the Court of Appeals shall not be transferred to the
appropriate court but shall be dismissed outright. (Emphasis supplied)

There are two modes of appealing an RTC decision or resolution on issues of fact and
law.[34] The first mode is an ordinary appeal under Rule 41 in cases where the RTC
exercised its original jurisdiction. It is done by filing a Notice of Appeal with the
RTC. The second mode is a petition for review under Rule 42 in cases where the RTC
exercised its appellate jurisdiction over MTC decisions. It is done by filing a Petition for
Review with the CA. Simply put, the distinction between these two modes of appeal lies
in the type of jurisdiction exercised by the RTC in the Order or Decision being appealed.

As discussed above, the MTC has original and exclusive jurisdiction over the subject
matter of the case; hence, there is no other way the RTC could have taken cognizance
of the case and review the court a quo's Judgment except in the exercise of its appellate
jurisdiction. Besides, the new RTC Judge who penned the May 4, 2004 Resolution,
Judge Diaz de Rivera, actually treated the case as an appeal despite the October 22,
2003 Order. He started his Resolution by stating, "This is an appeal from the Judgment
rendered by the Municipal Trial Court (MTC) of La Trinidad Benguet" [35] and then
proceeded to discuss the merits of the "appeal." In the dispositive portion of said
Resolution, he reversed the MTC's findings and conclusions and remanded residual
issues for trial with the MTC.[36] Thus, in fact and in law, the RTC Resolution was a
continuation of the proceedings that originated from the MTC. It was a judgment issued
by the RTC in the exercise of its appellate jurisdiction. With regard to the RTC's earlier
October 22, 2003 Order, the same should be disregarded for it produces no effect (other
than to confuse the parties whether the RTC was invested with original or appellate
jurisdiction). It cannot be overemphasized that jurisdiction over the subject matter is
conferred only by law and it is "not within the courts, let alone the parties, to themselves
determine or coveniently set aside."[37] Neither would the active participation of the
parties nor estoppel operate to confer original and exclusive jurisdiction where the court
or tribunal only wields appellate jurisdiction over the case.[38] Thus, the CA is correct
in holding that the proper mode of appeal should have been a Petition for Review under
Rule 42 of the Rules of Court, and not an ordinary appeal under Rule 41.

Seeing the futility of arguing against what the RTC actually did, petitioner resorts to
arguing for what the RTC should have done. She maintains that the RTC should have
issued its May 4, 2004 Resolution in its original jurisdiction because it had earlier ruled
that the MTC had no jurisdiction over the cause of action.

Petitioner's argument lacks merit. To reiterate, only statutes can confer jurisdiction.
Court issuances cannot seize or appropriate jurisdiction. It has been repeatedly held
that "any judgment, order or resolution issued without [jurisdiction] is void and cannot
be given any effect."[39] By parity of reasoning, an order issued by a court declaring that
it has original and exclusive jurisdiction over the subject matter of the case when under
the law it has none cannot likewise be given effect. It amounts to usurpation of
jurisdiction which cannot be countenanced. Since BP 129 already apportioned the
jurisdiction of the MTC and the RTC in cases involving title to property, neither the
courts nor the petitioner could alter or disregard the same. Besides, in determining the
proper mode of appeal from an RTC Decision or Resolution, the determinative factor is
the type of jurisdiction actually exercised by the RTC in rendering its Decision or
Resolution. Was it rendered by the RTC in the exercise of its original jurisdiction, or in
the exercise of its appellate jurisdiction? In short, we look at what type of jurisdiction
was actually exercised by the RTC. We do not look into what type of jurisdiction the
RTC should have exercised. This is but logical. Inquiring into what the RTC should
have done in disposing of the case is a question which already involves the merits of the
appeal, but we obviously cannot go into that where the mode of appeal was improper to
begin with.

WHEREFORE, premises considered, the Petition for Review is DENIED for lack of
merit. The assailed May 31, 2006 and September 22, 2006 Resolutions of the Court of
Appeals in CA-G.R. CV No. 83365 are AFFIRMED.

SO ORDERED.

7. FIRST DIVISION

G.R. No. 173616, June 25, 2014

AIR TRANSPORTATION OFFICE (ATO), Petitioner, v. HON. COURT OF APPEALS

(NINETEENTH DIVISION) AND BERNIE G. MIAQUE, Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

This petition for certiorari and prohibition of the Air Transportation Office (ATO) seeks
the nullification of the Court of Appeals’ Resolution 1 dated March 29, 2006 and
Resolution2 dated May 30, 2006 in CA-G.R. CEB-SP No. 01603. The Resolution dated
March 29, 2006 granted the application for temporary restraining order (TRO) of Bernie
G. Miaque, while the Resolution dated May 30, 2006 issued a writ of preliminary
injunction enjoining the implementation of the writ of execution issued by the Regional
Trial Court (RTC) of Iloilo despite Miaque’s alleged continued failure and refusal to make
current the supersedeas bond and to pay to the ATO the rental and concession privilege
fees.

The proceedings on the main case of ejectment

MTCC of Iloilo City: Civil Case No. 01 (38)

In May 2001, the ATO filed a complaint for unlawful detainer against Miaque in the
Municipal Trial Court in Cities (MTCC) of Iloilo City, Branch 3. It was docketed as Civil
Case No. 01 (38). The ATO sought the following, among others:
(1) That Miaque be ordered to permanently vacate and peacefully return to the ATO
possession of:

(a) the 800-square meter Refreshment Parlor fronting the New Terminal Building-Iloilo
Airport;

(b) the 310-square meter Restaurant/Gift Shop inside the Iloilo Airport Terminal; and

(c) all areas occupied or otherwise utilized by Miaque incident to his operation of the
Porterage Service within the Iloilo Airport; and

(2) That Miaque be ordered to immediately pay the ATO the amount of not less than
P1,296,103.10, representing unpaid space rental and concessionaire privilege fees as of
October 15, 2000 plus interest and additional rental and fees which may be proven
during the trial.3cralawred

The MTCC subsequently rendered a Decision4 dated May 27, 2002 the dispositive part
of which reads:ChanRoblesVirtualawlibrary
WHEREFORE, judgment is rendered finding [Miaque] to be unlawfully detaining the
following premises and orders [him], his men and privies to:

a. vacate the 800[-]square meter Refreshment Parlor fronting the New Terminal
Building-Iloilo Airport. [Miaque] is further ordered to pay [the ATO] the rental and
concessionaire privilege fee[s] accruing from November 1986 to October 2000, totaling
P460,060.70, plus differential billings from January 1990 to July 1993 for P4,652.60
and interest charges from January 2000 to October 2000 for P2,678.38 or a total
amount of P467,397.68 as of October 2000, less the payments made by [Miaque] under
Official Receipt No. 4317842 dated December 1998, and the monthly current
lease/concession privilege fee from November 2000 until [Miaque] shall have vacated
the premises;

(b) vacate the 310[-]square meter Restaurant/Gift Shop inside the Iloilo Terminal
Building which was reduced to a total of 183 square meters in 1998 (51.56 square
meters inside the pre-departure area and 126.72 square meters outside the pre-
departure area). [Miaque] is also ordered to pay [the ATO] rentals/concessionaire’s
privilege fee[s] from January 16, 1992 to October 15, 2000 in the total amount of
P719,708.43 and from October 16, 2000, to pay the current monthly
lease/concessionaire privilege fees until [Miaque] shall have vacated the premises; and

(c) vacate the area occupied or used by [Miaque] incident to his operation of the
Porterage Service within the Iloilo Airport. [Miaque] is further ordered to pay Tender
Offer Fee due from March 1992 to October 2000 in the total amount of P108,997.07.
[Miaque] is further ordered to pay the current monthly concession privilege fee from
October 2000 until such time that [Miaque] shall have vacated the premises.

Costs against [Miaque].5

RTC of Iloilo City: Civil Case No. 02-27292

Miaque appealed the MTCC Decision to the RTC of Iloilo City, Branch 24. It was docketed
as Civil Case No. 02-27292. The RTC, in its Decision6 dated June 7, 2003, affirmed the
MTCC Decision in its entirety. Miaque’s motion for reconsideration was
denied.7cralawred

Court of Appeals: CA-G.R. SP No. 79439

Miaque questioned the RTC Decision in the Court of Appeals by filing a petition for
review, docketed as CA-G.R. SP No. 79439, on September 25, 2003. In a Decision8 dated
April 29, 2005, the Court of Appeals dismissed the petition and affirmed the RTC
Decision. Miaque moved for reconsideration but it was denied in a Resolution dated
January 5, 2006.9cralawred

Supreme Court: G.R. No. 171099

Miaque brought the case to this Court in a petition for review, docketed as G.R. No.
171099. In a Resolution10 dated February 22, 2006, the petition was denied as no
reversible error in the Court of Appeals Decision was sufficiently shown. The motion for
reconsideration of Miaque was denied with finality.11cralawred

The proceedings on execution

As an incident of CA-G.R. SP No. 79439, the Court of Appeals issued on February 27,
2004 a temporary restraining order (TRO) effective for a period of 60 days and required
Miaque to post a bond in the amount of P100,000.00.12 After the lapse of the TRO, the
ATO filed an urgent motion for the execution of the RTC Decision pursuant to Section
21, Rule 70 of the Rules of Court. This was opposed by Miaque.13cralawred

In an Order14 dated August 2, 2004, the RTC granted the ATO’s

motion:ChanRoblesVirtualawlibrary
Wherefore, in view of the above consideration, the court finds merit [i]n the reasons
given in the motion of [the ATO] and hereby Grants the issuance of a Writ of Execution.

Pursuant to Section 21, Rule 70 of the 1997 Rules of Civil Procedure, which mandates
that the judgment of this Court being immediately executory in cases of this nature, let
a writ of execution shall issue, ordering the sheriff of this Court to effect its Decision
dated June 7, 2003, affirming the Decision of the MTCC, Branch 3, Iloilo City.

Furnish copies of this order to the Asst. Solicitor Almira Tomampos of the Office of the
Solicitor General and Atty. Rex Rico, counsel for [Miaque].15
Miaque sought reconsideration of the above Order but the RTC denied the motion in an
Order16 dated August 13, 2004. Thereafter, the RTC issued a Writ of Execution dated
August 16, 2004.17cralawred

However, the Court of Appeals issued a Resolution18 dated August 18, 2004 ordering
the issuance of a writ of preliminary injunction and enjoining the ATO and all persons
acting in its behalf from enforcing the respective Decisions of the MTCC and the RTC
while CA-G.R. SP No. 79439 is pending. Thus, after the dismissal of Miaque’s petition
for review in CA-G.R. SP No. 79439, the ATO filed another urgent motion for execution
of the RTC Decision. In its motion, the ATO pointed out that the supersedeas bond filed
by Miaque had lapsed and was not renewed and that the rental and concessionaire
privilege fees have not been paid at all in violation of Section 8, Rule 70 of the Rules of
Court.19 Miaque again opposed the ATO’s urgent motion for execution,20 while the ATO
filed a supplemental urgent motion for execution stating that Miaque’s appeal in the
Court of Appeals had been dismissed.21cralawred

In an Order22 dated June 1, 2005, the RTC granted the ATO’s urgent motion for
execution and issued a Writ of Execution23 dated June 2, 2005. On the basis of the said
writ, a notice to vacate was given to Miaque.24 On June 3, 2005, Miaque filed a motion
for reconsideration of the Order dated June 1, 2005, with prayer to set aside the writ of
execution and notice to vacate.25 At the same time, he filed a motion in CA-G.R. SP No.
79439 praying that the Court of Appeals order the RTC judge and the concerned sheriffs
to desist from implementing the writ of execution.26 Thereafter, the Court of Appeals
issued a Resolution27 dated June 14, 2005 ordering the sheriffs to desist from executing
the Decisions of the MTCC and the RTC while CA-G.R. SP No. 79439 is still pending.
However, on June 15, 2005, before the concerned sheriffs received a copy of the
Resolution dated June 14, 2005, the said sheriffs implemented the writ of execution and
delivered the possession of the following premises to the ATO:

(a) the Restaurant/Gift Shop inside the Iloilo Terminal Building in the reduced area of
183 square meters; and

(b) the area which Miaque occupied or used incident to his operation of the Porterage
Service within the Iloilo Airport.

The sheriffs who implemented the writ then filed a return of service 28 and issued reports
of partial delivery of possession.29 However, Miaque subsequently regained possession
of the said premises on the strength of the Court of Appeals’ Resolution dated June 14,
2005.30cralawred

On February 9, 2006, after the Court of Appeals issued its Resolution dated January 5,
2006 denying Miaque’s motion for reconsideration of the Decision dated April 29, 2005
in CA-G.R. SP No. 79439, the ATO filed with the RTC a motion for the revival of the writs
of execution dated August 16, 2004 and June 2, 2005.31 This was opposed by
Miaque.32 After the RTC heard the parties, it issued an Order33 dated March 20, 2006
granting the ATO’s motion and revived the writs of execution dated August 16, 2004
and June 2, 2005. Miaque filed a motion for reconsideration but the RTC denied
it.34cralawred

A new case in the Court of Appeals: CA-G.R. CEB-SP No. 01603

On March 28, 2006, Miaque filed a petition35 for certiorari (with prayer for issuance of
TRO and/or writ of preliminary injunction) in the Court of Appeals, docketed as CA-
G.R. CEB-SP No. 01603, where he assailed the RTC’s Order dated March 20, 2006. He
prayed, among others, that the implementation of the writs of execution be enjoined. It
is here where the Court of Appeals issued the Resolutions being challenged in this case,
namely, the Resolution dated March 29, 2006 issuing a TRO effective for 60 days, and
Resolution dated May 30, 2006 issuing a writ of preliminary injunction enjoining the
implementation of the writs of execution dated August 16, 2004 and June 2, 2005. In
particular, the Resolution dated May 30, 2006 reads:ChanRoblesVirtualawlibrary
Before us for resolution is [Miaque]’s application for the issuance of a writ of preliminary
injunction that would restrain the respondent judge, Sheriffs Marcial B. Lambuso,
Winston T. Eguia, Camilo I. Divinagracia, Jr. and Eric George S. Luntao and all other
persons acting for and in their behalves, from enforcing the orders issued by the
respondent judge on March 20, 2006 and March 24, 2006, including the writ[s] of
execution issued pursuant thereto, while the petition in the case at bench is still pending
with us.

After examining judiciously the record in this case, together with the submissions and
contentions of the parties, we have come up with a finding and so hold that there is a
sufficient showing by [Miaque] that the grounds for the issuance of a writ of preliminary
injunction enumerated in Section 3 of Rule 58 of the 1997 Revised Rules of Court exist.
We find that [Miaque] has a right in esse to be protected and the acts against which the
injunction is sought to be directed are violative of said right. To our mind, [Miaque]
appears to have a clear legal right to hold on to the premises leased by him from ATO at
least until such time when he shall have been duly ejected therefrom by a writ of
execution of judgment caused to be issued by the MTCC in Iloilo City, which is the court
of origin of the decision promulgated by this Court in CA-G.R. SP No. 79439 on April
29, 2005. Under the attendant circumstances, it appears that the respondent judge or
the RTC in Iloilo City has no jurisdiction to order the issuance of such writ of execution
because we gave due course to the petition for review filed with us in CA-G.R. SP No.
79439 and, in fact, rendered a decision on the merit in said case, thereby divesting the
RTC in Iloilo City of jurisdiction over the case as provided for in the third paragraph of
Section 8(a) of Rule 42 of the 1997 Revised Rules of Court. In City of Manila vs. Court of
Appeals, 204 SCRA 362, as cited in Mocles vs. Maravilla, 239 SCRA 188, the Supreme
Court held as follows:ChanRoblesVirtualawlibrary
“The rule is that, if the judgment of the metropolitan trial court is appealed to the RTC
and the decision of the latter itself is elevated to the CA whose decision thereafter
became final, the case should be remanded through the RTC to the metropolitan trial
court for execution.”
WHEREFORE, in view of the foregoing premises, a WRIT OF PRELIMINARY
INJUNCTION is hereby ordered or caused to be issued by us enjoining the respondent
judge, Sheriffs Marcial B. Lambuso, Winston T. Eguia, Camilo I. Divinagracia, Jr. and
Eric George S. Luntao and all other persons acting for and in their behalves, from
enforcing the orders issued by the respondent judge on March 20, 2006 and March 24,
2006, including the writ[s] of execution issued pursuant thereto, while the petition in
the case at bench is still pending with us.

This is subject to the petitioner’s putting up of a bond in the sum of ONE HUNDRED
THOUSAND PESOS (P100,000.00) to the effect that he will pay to the respondent ATO
all damages which said office may sustain by reason of the injunctive writ if we should
finally decide that [Miaque] is not entitled thereto.36
The present petition

The ATO claims that the Court of Appeals acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing the TRO and the subsequent writ
of preliminary injunction through the Order dated March 29, 2006 and the Resolution
dated May 30, 2006, respectively. According to the ATO, the Court of Appeals ignored
the government’s right under the law, Rules of Court, jurisprudence and equity to the
possession as well as to the payment of rental and concession privilege fees which, at
the time of the filing of this petition, already amounted to P2 Million. Such right had
already been decided with finality by this Court, which affirmed the Decision dated April
29, 2005 of the Court of Appeals in CA-G.R. SP No. 79439, but the Court of Appeals has
repeatedly thwarted it. The RTC acted properly and pursuant to Section 21, Rule 70 of
the Rules of Court when it issued the writs of execution.37 Moreover, the ATO asserts
that a TRO cannot restrain an accomplished fact, as the RTC’s writ of execution dated
June 1, 2005 had already been partially implemented.38cralawred

The ATO also argues that, by his admission that the issues in CA-G.R. SP No. 79439
and CA-G.R. CEB-SP No. 01603 are exactly the same, Miaque has committed forum
shopping. In this connection, the ATO points out that, in his opposition to the ATO’s
motion for additional period of time to file its comment on Miaque’s petition in CA-G.R.
CEB-SP No. 01603, Miaque pointed out the similarity of the core issues in CA-G.R. SP
No. 79439 and CA-G.R. CEB-SP No. 01603, to wit:ChanRoblesVirtualawlibrary
b) The legal issues raised by the petition [in CA-G.R. CEB-SP No. 01603] are very simple
and not complicated. In fact, the threshold issue, i.e., whether or not respondent court
(RTC) has jurisdiction to issue the writ of execution after the appeal over its decision
had been perfected and the petition for review [in CA-G.R. SP No. 79439] given due
course, is exactly the same one earlier raised by [the ATO itself in its] “Motion for
Reconsideration” of the Resolution dated June 14, 2005, in CA G.R. No. 79439, entitled
“Bernie G. Miaque vs. Hon. Danilo P. Galvez and Air Transportation Office (ATO)”, (same
parties in this proceeding), then pending before the 20th Division, Court of Appeals,
Cebu City.

Hence, all that [the ATO has] to do is simply to reiterate [its] said arguments, the law
and jurisprudence [it has] earlier invoked and, if [it wishes], add some more arguments,
laws or jurisprudence thereto. Such an exercise would definitely not require a sixty (60)
day period. A ten (10) day period is more than sufficient.39
The ATO further contends that the subject premises form part of a public utility
infrastructure and, pursuant to Presidential Decree No. 1818, the issuance of a TRO
against a public utility infrastructure is prohibited.40cralawred

The ATO adds that Miaque’s petition for certiorari in CA-G.R. CEB-SP No. 01603
introduces a new matter which is the alleged novation of the MTCC Decision when he
deposited the amount of P319,900.00 to the Land Bank of the Philippines account of
the ATO in February 2006. At any rate, the ATO asserts that its tenacity in pursuing
the execution of the judgment against Miaque belies its consent to the alleged
novation.41cralawred

For his part, Miaque argues that this Court has no jurisdiction to dismiss a petition still
pending with the Court of Appeals. Thus, the ATO cannot properly pray that this Court
dismiss CA-G.R. CEB-SP No. 01603. According to Miaque, the jurisdiction of this Court
is limited only to the determination of whether or not the Court of Appeals gravely
abused its discretion in issuing a TRO and, subsequently, a preliminary injunction in
CA-G.R. CEB-SP No. 01603. In this connection, Miaque insists that the Court of Appeals
acted well within its jurisdiction in the issuance of both the Order dated March 29, 2006
granting a TRO and the Resolution dated May 30, 2006 issuing a writ of preliminary
injunction in CA-G.R. CEB-SP No. 01603. As this Court has effectively affirmed the
MTCC Decision, then it is the MTCC and not the RTC which should have directed the
execution of the MTCC Decision. Moreover, the RTC had no jurisdiction to issue the
writs of execution dated August 16, 2004 and June 1, 2005 because the said court
already lost its jurisdiction when Miaque filed an appeal to the Court of Appeals on
September 25, 2003, which appeal was given due course.42cralawred

Miaque also asserts that the ATO’s claim that the RTC’s writ of execution had been
partially implemented is not true and that he is in possession of the entire subject
premises when the Court of Appeals issued the TRO and writ of preliminary injunction
being challenged in this case. Finally, Miaque alleges that no writ may be issued to
enforce the MTCC Decision as the said decision had already been novated by his deposit
of P319,000.00 to the ATO’s account with the Land Bank of the Philippines in February
2006.43cralawred

This Court, in a Resolution44 dated August 14, 2006, issued a TRO enjoining the Court
of Appeals, Miaque, and his agents and representatives from implementing the
Resolution dated March 29, 2006 and the Resolution dated May 30, 2006 in CA-G.R.
CEB-SP No. 01603.

The Court’s ruling

The petition is meritorious.

Preliminarily, the Court notes that the challenge to the Order dated March 29, 2006
granting a TRO, effective for 60 days, is moot as its effectivity had already lapsed.

Cutting through the tangled web of issues presented by the contending parties, the basic
question in this petition is whether or not the Court of Appeals committed grave abuse
of discretion amounting to lack or excess of jurisdiction in issuing the Resolution dated
May 30, 2006 which granted petitioner’s application for the issuance of a writ of
preliminary injunction in CA-G.R. CEB-SP No. 01603.

Section 21, Rule 70 of the Rules of Court provides the key to that
question:ChanRoblesVirtualawlibrary
Sec. 21. Immediate execution on appeal to Court of Appeals or Supreme Court. – The
judgment of the Regional Trial Court against the defendant shall be immediately
executory, without prejudice to a further appeal that may be taken therefrom.
(Emphasis supplied.)
This reflects Section 21 of the Revised Rule on Summary
Procedure:ChanRoblesVirtualawlibrary
Sec. 21. Appeal. - The judgment or final order shall be appealable to the appropriate
Regional Trial Court which shall decide the same in accordance with Section 22 of Batas
Pambansa Blg. 129. The decision of the Regional Trial Court in civil cases governed
by this Rule, including forcible entry and unlawful detainer, shall be immediately
executory, without prejudice to a further appeal that may be taken therefrom. Section
10 of Rule 70 shall be deemed repealed. (Emphasis and underscoring supplied.)
The above provisions are supplemented and reinforced by Section 4, Rule 39 and Section
8(b), Rule 42 of the Rules of Court which respectively
provide:ChanRoblesVirtualawlibrary
Sec. 4. Judgments not stayed by appeal. – Judgments in actions for injunction,
receivership, accounting and support, and such other judgments as are now or may
hereafter be declared to be immediately executory, shall be enforceable after their
rendition and shall not be stayed by an appeal taken therefrom, unless otherwise
ordered by the trial court. On appeal therefrom, the appellate court in its discretion may
make an order suspending, modifying, restoring or granting the injunction, receivership,
accounting, or award of support.

The stay of execution shall be upon such terms as to bond or otherwise as may be
considered proper for the security or protection of the rights of the adverse party.

x x x x

Sec. 8. Perfection of appeal; effect thereof. –

(a) Upon the timely filing of a petition for review and the payment of the corresponding
docket and other lawful fees, the appeal is deemed perfected as to the petitioner.

The Regional Trial Court loses jurisdiction over the case upon the perfection of the
appeals filed in due time and the expiration of the time to appeal of the other parties.

However, before the Court of Appeals gives due course to the petition, the Regional Trial
Court may issue orders for the protection and preservation of the rights of the parties
which do not involve any matter litigated by the appeal, approve compromises, permit
appeals of indigent litigants, order execution pending appeal in accordance with Section
2 of Rule 39, and allow withdrawal of the appeal.

(b) Except in civil cases decided under the Rules on Summary Procedure, the appeal
shall stay the judgment or final order unless the Court of Appeals, the law, or these
Rules shall provide otherwise. (Emphases supplied.)
The totality of all the provisions above shows the following significant characteristics of
the RTC judgment in an ejectment case appealed to it:

(1) The judgment of the RTC against the defendant-appellant is immediately executory,
without prejudice to a further appeal that may be taken therefrom; and

(2) Such judgment of the RTC is not stayed by an appeal taken therefrom, unless
otherwise ordered by the RTC or, in the appellate court’s discretion, suspended or
modified.

The first characteristic -- the judgment of the RTC is immediately executory -- is

emphasized by the fact that no resolutory condition has been imposed that will prevent
or stay the execution of the RTC’s judgment.45 The significance of this may be better
appreciated by comparing Section 21 of Rule 70 with its precursor, Section 10, Rule 70
of the 1964 Rules of Court which provided:ChanRoblesVirtualawlibrary
Sec. 10. Stay of execution on appeal to Court of Appeals or Supreme Court. – Where
defendant appeals from a judgment of the Court of First Instance, execution of said
judgment, with respect to the restoration of possession, shall not be stayed unless the
appellant deposits the same amounts and within the periods referred to in section 8 of
this rule to be disposed of in the same manner as therein provided.
Under the old provision, the procedure on appeal from the RTC’s judgment to the Court
of Appeals was, with the exception of the need for a supersedeas bond which was not
applicable, virtually the same as the procedure on appeal of the MTC’s judgment to the
RTC. Thus, in the contemplated recourse to the Court of Appeals, the defendant, after
perfecting his appeal, could also prevent the immediate execution of the judgment by
making the periodic deposit of rentals during the pendency of the appeal and thereby
correspondingly prevent restitution of the premises to the plaintiff who had already twice
vindicated his claim to the property in the two lower courts. On the other hand, under
the amendatory procedure introduced by the present Section 21 of Rule 70, the
judgment of the RTC shall be immediately executory and can accordingly be
enforced forthwith. It shall not be stayed by the mere continuing deposit of monthly
rentals by the dispossessor during the pendency of the case in the Court of Appeals or
this Court, although such execution of the judgment shall be without prejudice to that
appeal taking its due course. This reiterates Section 21 of the Revised Rule on Summary
Procedure which replaced the appellate procedure in, and repealed, the former Section
10, Rule 70 of the 1964 Rules of Court.46Teresa T. Gonzales La’O & Co., Inc. v. Sheriff
Hatab47 states:ChanRoblesVirtualawlibrary
Unlike Rule 70 of the 1964 Revised Rules of Court where the defendant, after perfecting
his appeal, could prevent the immediate execution of the judgment by taking an appeal
and making a periodic deposit of monthly rentals during the pendency of the appeal
thereby preventing the plaintiff from taking possession of the premises in the
meantime, the present wording of Section 21, Rule 70 explicitly provides that the
judgment of the regional trial court in ejectment cases appealed to it shall be
immediately executory and can be enforced despite the perfection of an appeal to
a higher court.48 (Emphasis supplied.)
The RTC’s duty to issue a writ of execution under Section 21 of Rule 70 is
ministerial and may be compelled by mandamus.49 Section 21 of Rule 70 presupposes
that the defendant in a forcible entry or unlawful detainer case is unsatisfied with the
RTC’s judgment and appeals to a higher court. It authorizes the RTC to immediately
issue a writ of execution without prejudice to the appeal taking its due course. 50 The
rationale of immediate execution of judgment in an ejectment case is to avoid injustice
to a lawful possessor.51 Nevertheless, it should be stressed that the appellate court may
stay the writ of execution should circumstances so require.52cralawred

The second characteristic -- the judgment of the RTC is not stayed by an appeal taken
therefrom -- reinforces the first. The judgment of the RTC in an ejectment case is
enforceable upon its rendition and, upon motion, immediately executory
notwithstanding an appeal taken therefrom.

The execution of the RTC’s judgment is not discretionary execution under Section 2,
Rule 39 of the Rules of Court which provides:ChanRoblesVirtualawlibrary
Section 2. Discretionary execution. –

(a) Execution of a judgment or a final order pending appeal. – On motion of the prevailing
party with notice to the adverse party filed in the trial court while it has jurisdiction over
the case and is in possession of either the original record or the record on appeal, as the
case may be, at the time of the filing of such motion, said court may, in its discretion,
order execution of a judgment or final order even before the expiration of the period to
appeal.

After the trial court has lost jurisdiction, the motion for execution pending appeal may
be filed in the appellate court.

Discretionary execution may only issue upon good reasons to be stated in a special order
after due hearing.
(b) Execution of several, separate or partial judgments. – A several, separate or partial
judgment may be executed under the same terms and conditions as execution of a
judgment or final order pending appeal.
Discretionary execution is authorized while the trial court, which rendered the judgment
sought to be executed, still has jurisdiction over the case as the period to appeal has
not yet lapsed and is in possession of either the original record or the record on appeal,
as the case may be, at the time of the filing of the motion for execution. It is part of the
trial court’s residual powers, or those powers which it retains after losing jurisdiction
over the case as a result of the perfection of the appeal.53 As a rule, the judgment of the
RTC, rendered in the exercise of its appellate jurisdiction, being sought to be executed
in a discretionary execution is stayed by the appeal to the Court of Appeals pursuant to
Section 8(b), Rule 42 of the Rules of Court. On the other hand, execution of the RTC’s
judgment under Section 21, Rule 70 is not discretionary execution but a ministerial
duty of the RTC.54 It is not governed by Section 2, Rule 39 of the Rules of Court but by
Section 4, Rule 39 of the Rules of Court on judgments not stayed by appeal. In this
connection, it is not covered by the general rule, that the judgment of the RTC is stayed
by appeal to the Court of Appeals under Section 8(b), Rule 42 of the Rules of Court, but
constitutes an exception to the said rule. In connection with the second characteristic
of the RTC judgment in an ejectment case appealed to it, the consequence of the above
distinctions between discretionary execution and the execution of the RTC’s judgment
in an ejectment case on appeal to the Court of Appeals is that the former may be
availed of in the RTC only before the Court of Appeals gives due course to the
appeal while the latter may be availed of in the RTC at any stage of the appeal to
the Court of Appeals. But then again, in the latter case, the Court of Appeals may stay
the writ of execution issued by the RTC should circumstances so require.55City of Naga
v. Hon. Asuncion56 explains:ChanRoblesVirtualawlibrary
This is not to say that the losing defendant in an ejectment case is without recourse to
avoid immediate execution of the RTC decision. The defendant may x x x appeal said
judgment to the Court of Appeals and therein apply for a writ of preliminary injunction.
Thus, as held in Benedicto v. Court of Appeals, even if RTC judgments in unlawful
detainer cases are immediately executory, preliminary injunction may still be granted.
(Citation omitted.)
To reiterate, despite the immediately executory nature of the judgment of the RTC in
ejectment cases, which judgment is not stayed by an appeal taken therefrom, the Court
of Appeals may issue a writ of preliminary injunction that will restrain or enjoin the
execution of the RTC’s judgment. In the exercise of such authority, the Court of Appeals
should constantly be aware that the grant of a preliminary injunction in a case rests on
the sound discretion of the court with the caveat that it should be made with great
caution.57cralawred

A writ of preliminary injunction is an extraordinary event which must be granted only

in the face of actual and existing substantial rights. The duty of the court taking
cognizance of a prayer for a writ of preliminary injunction is to determine whether the
requisites necessary for the grant of an injunction are present in the case before it. In
the absence of the same, and where facts are shown to be wanting in bringing the matter
within the conditions for its issuance, the ancillary writ must be struck down for having
been rendered in grave abuse of discretion.58cralawred

In this case, the decisions of the MTCC in Civil Case No. 01 (38), of the RTC in Civil Case
No. 02-27292, and of the Court of Appeals in CA-G.R. SP No. 79439 unanimously
recognized the right of the ATO to possession of the property and the
corresponding obligation of Miaque to immediately vacate the subject premises.
This means that the MTCC, the RTC, and the Court of Appeals all ruled that Miaque
does not have any right to continue in possession of the said premises. It is
therefore puzzling how the Court of Appeals justified its issuance of the writ of
preliminary injunction with the sweeping statement that Miaque “appears to have a
clear legal right to hold on to the premises leased by him from ATO at least until such
time when he shall have been duly ejected therefrom by a writ of execution of judgment
caused to be issued by the MTCC in Iloilo City, which is the court of origin of the decision
promulgated by this Court in CA-G.R. SP No. 79439.” Unfortunately, in its Resolution
dated May 30, 2006 granting a writ of preliminary injunction in Miaque’s favor, the
Court of Appeals did not state the source or basis of Miaque’s “clear legal right to hold
on to the [said] premises.” This is fatal.

In Nisce v. Equitable PCI Bank, Inc.,59 this Court stated that, in granting or dismissing
an application for a writ of preliminary injunction, the court must state in its order
the findings and conclusions based on the evidence and the law. This is to enable
the appellate court to determine whether the trial court committed grave abuse of its
discretion amounting to excess or lack of jurisdiction in resolving, one way or the other,
the plea for injunctive relief. In the absence of proof of a legal right and the injury
sustained by one who seeks an injunctive writ, an order for the issuance of a writ of
preliminary injunction will be nullified. Thus, where the right of one who seeks an in
junctive writ is doubtful or disputed, a preliminary injunction is not proper. The
possibility of irreparable damage without proof of an actual existing right is not a ground
for a preliminary injunction.

The sole basis of the Court of Appeals in issuing its Resolution dated May 30, 2006 is
its view that the RTC “has no jurisdiction to order the issuance of [the] writ of execution”
because, when it gave due course to the petition for review in CA-G.R. SP No. 79439,
the RTC was already divested of jurisdiction over the case pursuant to the third
paragraph of Section 8(a), Rule 42 of the Rules of Court. The Court of Appeals is
mistaken. It disregards both (1) the immediately executory nature of the judgment of
the RTC in ejectment cases, and (2) the rule that such judgment of the RTC is not stayed
by an appeal taken therefrom. It ignores the nature of the RTC’s function to issue a writ
of execution of its judgment in an ejectment case as ministerial and not discretionary.

The RTC was validly exercising its jurisdiction pursuant to Section 21, Rule 70 of the
Rules of Court when it issued the writs of execution dated August 16, 2004 and June
2, 2005. While the Court of Appeals in CA-G.R. SP No. 79439 enjoined the execution of
the RTC’s judgment during the pendency of CA-G.R. SP No. 79439, the RTC revived the
writs of execution dated August 16, 2004 and June 1, 2005 in its Order dated March
20, 2006, after the Court of Appeals denied Miaque’s motion for reconsideration of the
dismissal of the petition in CA-G.R. SP No. 79439. Indeed, the said writs of execution
need not even be revived because they continue in effect during the period within which
the judgment may be enforced by motion, that is within five years from entry of
judgment, pursuant to Section 14,60 Rule 39 of the Rules of Court in relation to Section
661 of the same Rule.

There is grave abuse of discretion when an act is (1) done contrary to the Constitution,
the law or jurisprudence, or (2) executed whimsically, capriciously or arbitrarily out of
malice, ill will or personal bias.62 In this case, the Court of Appeals issued the Resolution
dated May 30, 2006 granting Miaque’s prayer for a writ of preliminary injunction
contrary to Section 21, Rule 70 and other relevant provisions of the Rules of Court, as
well as this Court’s pronouncements in Teresa T. Gonzales La’O & Co.,
Inc.63 and Nisce.64 Thus, the Court of Appeals committed grave abuse of discretion when
it issued the Resolution dated May 30, 2006 in CA-G.R. CEB-SP No. 01603.

This Court notes that the controversy between the parties in this case has been unduly
protracted, considering that the decisions of the MTCC, the RTC, the Court of Appeals,
and this Court in favor of the ATO and against Miaque on the ejectment case are already
final and executory. The Court of Appeals should therefore proceed expeditiously in
resolving CA-G.R. CEB-SP No. 01603.

WHEREFORE, the petition is hereby GRANTED. The Resolution dated May 30, 2006 of
the Court of Appeals in CA-G.R. CEB-SP No. 01603 is ANNULLED for having been
rendered with grave abuse of discretion. The Court of Appeals is directed to conduct its
proceedings in CA-G.R. CEB-SP No. 01603 expeditiously and without delay.

SO ORDERED

G.R. No. 196200 September 11, 2013

ERNESTO DY, Petitioner,

vs.
HON. GINA M. BIBAT- PALAMOS, in her capacity as Presiding Judge of the Regional
Trial Court, Branch 64, Makati City, and ORIX METRO LEASING AND FINANCE
CORPORATION, Respondents.

DECISION

MENDOZA, J.:

This petition for certiorari under Rule 65 of the 1997 Revised Rules of Civil Procedure
questions the December 13, 2010 and March 7, 2011Orders1 of the Regional Trial Court
of Makati, Branch 64 (RTC), in Civil Case No. 92-2311, granting the motion for execution
of petitioner, but denying his prayer for the return of his cargo vessel in the condition
when the possession thereof was seized from him.

The Facts

The present controversy finds its roots in the Court’s decision in Orix Metro Leasing and
Finance Corporation v. M/V "Pilar-I" and Spouses Ernesto Dy and Lourdes Dy2 involving
the same parties. The facts, as culled from the Court’s decision in the said case and the
records, are not disputed by the parties.
Petitioner Ernesto Dy (petitioner) and his wife, Lourdes Dy (Lourdes), were the
proprietors of Limchia Enterprises which was engaged in the shipping business. In
1990, Limchia Enterprises, with Lourdes as co-maker, obtained a loan from Orix Metro
Leasing and Finance Corporation (respondent) to fund its acquisition of M/V Pilar-I, a
cargo vessel. As additional security for the loan, Limchia Enterprises executed the Deed
of Chattel Mortgage over M/V Pilar-I.3

Due to financial losses suffered when M/V Pilar-I was attacked by pirates, Spouses Dy
failed to make the scheduled payments as required in their promissory note. After
receiving several demand letters from respondent, Spouses Dy applied for the
restructuring of their loan. Meanwhile, Lourdes issued several checks to cover the
remainder of their loan but the same were dishonored by the bank, prompting
respondent to institute a criminal complaint for violation of the Bouncing Checks Law.
Lourdes appealed to respondent with a new proposal to update their outstanding loan
obligations.4

On August 18, 1992, respondent filed the Complaint and Petition for Extrajudicial
Foreclosure of Preferred Ship Mortgage under Presidential Decree No. 1521 with Urgent
Prayer for Attachment with the RTC. Following the filing of an affidavit of merit and the
posting of bond by respondent, the RTC ordered the seizure of M/V Pilar-I and turned
over its possession to respondent. On September 28, 1994, respondent transferred all
of its rights, title to and interests, as mortgagee, in M/V Pilar-I to Colorado Shipyard
Corporation (Colorado).5

On July 31, 1997, the RTC rendered a decision in favor of Spouses Dy, ruling that they
had not yet defaulted on their loan because respondent agreed to a restructured
schedule of payment. There being no default, the foreclosure of the chattel mortgage on
M/V Pilar-I was premature. The RTC ordered that the vessel be returned to Spouses
Dy.6 This was affirmed by the Court of Appeals (CA), with the modification that Spouses
Dy be ordered to reimburse the respondent for repair and dry docking expenses while
the vessel was in the latter’s possession.7 On appeal, the Court promulgated its
Decision, dated September 11, 2009, upholding the findings of the CA but deleting the
order requiring Spouses Dy to reimburse respondent.8

Consequently, on August 17, 2010, petitioner filed a motion for execution of judgment
with the RTC. In the intervening period, Colorado filed its Manifestation/Motion, dated
July 29, 2010, informing the RTC that M/V Pilar-I, which was in its possession, had
sustained severe damage and deterioration and had sunk in its shipyard because of its
exposure to the elements. For this reason, it sought permission from the court to cut
the sunken vessel into pieces, sell its parts and deposit the proceeds in escrow. 9 In his
Comment/Objection, petitioner insisted that he had the right to require that the vessel
be returned to him in the same condition that it had been at the time it was wrongfully
seized by respondent or, should it no longer be possible, that another vessel of the same
tonnage, length and beam similar to that of M/V Pilar-I be delivered.10 Colorado,
however, responded that the vessel had suffered severe damage and deterioration that
refloating or restoring it to its former condition would be futile, impossible and very
costly; and should petitioner persist in his demand that the ship be refloated, it should
be done at the expense of the party adjudged by the court to pay the same.11
The RTC issued its questioned December 13, 2010 Order granting the motion for
execution but denying petitioner’s prayer for the return of M/V Pilar-I in the same state
in which it was taken by respondent. In so resolving, the RTC ratiocinated:

First, the judgment of the Supreme Court does not require the delivery of M/V Pilar in
the state the defendants wanted it to be. Secondly, said judgment has now become final
and it is axiomatic that after judgment has become executory, the court cannot amend
the same, except: x x x None of the three circumstances where a final and executory
judgment may be amended is present in this case. And third, the present deplorable
state of M/V Pilar certainly did not happen overnight, thus, defendants should have
brought it to the attention of this Court, the Court of Appeals or the Supreme Court
after it became apparent. Their inaction until after the judgment has become final,
executory and immutable rendered whatever right they may have to remedy the
situation to be nugatory. [Underlining supplied]

Petitioner moved for reconsideration but the motion was denied by the RTC in its March
7, 2011 Order.12

Hence, this petition.

The Issues

Petitioner raises the following issues in its Memorandum:

1. Whether or not the rule on hierarchy of courts is applicable to the instant

petition?

2. Whether or not the honorable trial court gravely abused its discretion,
amounting to lack or excess of jurisdiction, in finding that petitioner is not
entitled to the return of M/VPilar-1 in the condition that it had when it was
wrongfully seized by Orix Metro, or in the alternative, to a vessel of similar
tonnage, length, beam, and other particulars as M/VPilar-1;

3. Whether or not petitioner is estopped from asking for the return of the vessel
in the condition it had at the time it was seized?

4. Whether or not it was petitioner’s duty to look out for the vessel’s condition?13

To be succinct, only two central issues need to be resolved: (1) whether petitioner was
justified in resorting directly to this Court via a petition for certiorari under Rule 65;
and (2) whether petitioner is entitled to the return of M/V Pilar-I in the same condition
when it was seized by respondent.

The Court’s Ruling

The Court finds the petition to be partly meritorious.

Hierarchy of Courts; Direct Resort

To The Supreme Court Justified
Petitioner argues that his situation calls for the direct invocation of this Court’s
jurisdiction in the interest of justice. Moreover, as pointed out by the RTC, what is
involved is a judgment of the Court which the lower courts cannot modify. Hence,
petitioner deemed it proper to bring this case immediately to the attention of this Court.
Lastly, petitioner claims that the present case involves a novel issue of law – that is,
whether in an action to recover, a defendant in wrongful possession of the subject matter
in litigation may be allowed to return the same in a deteriorated condition without any
liability.14

Respondent, on the other hand, contends that the petition should have been filed with
the CA, following the doctrine of hierarchy of courts. It pointed out that petitioner failed
to state any special or important reason or any exceptional and compelling circumstance
which would warrant a direct recourse to this Court.15

Under the principle of hierarchy of courts, direct recourse to this Court is improper
because the Supreme Court is a court of last resort and must remain to be so in order
for it to satisfactorily perform its constitutional functions, thereby allowing it to devote
its time and attention to matters within its exclusive jurisdiction and preventing the
overcrowding of its docket. 16 Nonetheless, the invocation of this Court’s original
jurisdiction to issue writs of certiorari has been allowed in certain instances on the
ground of special and important reasons clearly stated in the petition, such as,(1) when
dictated by the public welfare and the advancement of public policy; (2) when demanded
by the broader interest of justice; (3) when the challenged orders were patent nullities;
or (4) when analogous exceptional and compelling circumstances called for and justified
the immediate and direct handling of the case.17

This case falls under one of the exceptions to the principle of hierarchy of courts. Justice
demands that this Court take cognizance of this case to put an end to the controversy
and resolve the matter which has been dragging on for more than twenty (20) years.
Moreover, in light of the fact that what is involved is a final judgment promulgated by
this Court, it is but proper for petitioner to call upon its original jurisdiction and seek
final clarification.

Wrong Mode of Appeal;

Exception

Petitioner asserts that the RTC committed grave abuse of discretion when it failed to
rule in his favor despite the fact that he had been deprived by respondent of his property
rights over M/V Pilar-I for the past eighteen(18) years. Moreover, the change in the
situation of the parties calls for a relaxation of the rules which would make the execution
of the earlier decision of this Court inequitable or unjust. According to petitioner, for the
RTC to allow respondent to return the ship to him in its severely damaged and
deteriorated condition without any liability would be to reward bad faith.18

Conversely, respondent submits that there was no grave abuse of discretion on the part
of the RTC as the latter merely observed due process and followed the principle that an
execution order may not vary or go beyond the terms of the judgment it seeks to
enforce.19 Respondent adds that the proper remedy should have been an ordinary
appeal, where a factual review of the records can be made to determine the condition of
the ship at the time it was taken from petitioner, and not a special civil action for
certiorari.20

There are considerable differences between an ordinary appeal and a petition for
certiorari which have been exhaustively discussed by this Court in countless cases. The
remedy for errors of judgment, whether based on the law or the facts of the case or on
the wisdom or legal soundness of a decision, is an ordinary appeal. 21 In contrast, a
petition for certiorari under Rule 65 is an original action designed to correct errors of
jurisdiction, defined to be those "in which the act complained of was issued by the court,
officer, or quasi-judicial body without or in excess of jurisdiction, or with grave abuse of
discretion which is tantamount to lack of in excess of jurisdiction."22 A court or tribunal
can only be considered to have acted with grave abuse of discretion if its exercise of
judgment was so whimsical and capricious as to be equivalent to a lack of jurisdiction.
The abuse must be extremely patent and gross that it would amount to an "evasion of
a positive duty or to virtual refusal to perform a duty enjoined by law, or to act at all in
contemplation of law, as where the power is exercised in an arbitrary and despotic
manner by reason of passion and hostility."23

Therefore, a misappreciation of evidence on the part of the lower court, as asserted by

petitioner, may only be reviewed by appeal and not by certiorari because the issue raised
by the petitioner does not involve any jurisdictional ground. 24 It is a general rule of
procedural law that when a party adopts an inappropriate mode of appeal, his petition
may be dismissed outright to prevent the erring party from benefiting from his neglect
and mistakes.25 There are exceptions to this otherwise ironclad rule, however. One is
when the strict application of procedural technicalities would hinder the expeditious
disposition of this case on the merits,26 such as in this case.

Petitioner Not Barred from Demanding

Return of the Vessel in its Former Condition

Petitioner insists that it is respondent who should bear the responsibility for the
deterioration of the vessel because the latter, despite having in its possession the vessel
M/V Pilar-I during the pendency of the foreclosure proceedings, failed to inform the
court and petitioner himself about the actual condition of the ship. For estoppel to take
effect, there must be knowledge of the real facts by the party sought to be estopped and
reliance by the party claiming estoppel on the representation made by the former. In
this case, petitioner cannot be estopped from asking for the return of the vessel in the
condition that it had been at the time it was seized by respondent because he had not
known of the deteriorated condition of the ship.27

On the contrary, respondent argues that petitioner is barred from asking for a
modification of the judgment since he never prayed for the return of M/V Pilar-I in the
same condition that it had been at the time it was seized.28Petitioner could have prayed
for such relief in his prior pleadings and presented evidence thereon before the judgment
became final and executory. During the course of the trial, and even at the appellate
phase of the case, petitioner failed to ask the courts to look into the naturally foreseeable
depreciation of M/V Pilar-I and to determine who should pay for the wear and tear of
the vessel. Consequently, petitioner can no longer pursue such relief for the first time
at this very late stage.29 Moreover, respondent posits that it can only be held liable for
the restoration and replacement of the vessel if it can be proven that M/V Pilar-I
deteriorated through the fault of respondent. Nowhere in the prior decision of this Court,
however, does it appear that respondent was found to have been negligent in its care of
the vessel. In fact, respondent points out that, for a certain period, it even paid for the
repair and maintenance of the vessel and engaged the services of security guards to
watch over the vessel. It reasons that the vessel’s deterioration was necessarily due to
its exposure to sea water and the natural elements for the almost twenty years that it
was docked in the Colorado shipyard.30

On this matter, the Court finds for petitioner.

This Court is not unaware of the doctrine of immutability of judgments. When a

judgment becomes final and executory, it is made immutable and unalterable, meaning
it can no longer be modified in any respect either by the court which rendered it or even
by this Court. Its purpose is to avoid delay in the orderly administration of justice and
to put an end to judicial controversies. Even at the risk of occasional errors, public
policy and sound practice dictate that judgments must become final at some point.31

As with every rule, however, this admits of certain exceptions. When a supervening event
renders the execution of a judgment impossible or unjust, the interested party can
petition the court to modify the judgment to harmonize it with justice and the facts. 32 A
supervening event is a fact which transpires or a new circumstance which develops after
a judgment has become final and executory. This includes matters which the parties
were unaware of prior to or during trial because they were not yet in existence at that
time.33

In this case, the sinking of M/V Pilar-I can be considered a supervening

event.1âwphi1 Petitioner, who did not have possession of the ship, was only informed
of its destruction when Colorado filed its Manifestation, dated July 29, 2010, long after
the September 11, 2009 Decision of this Court in Orix Metro Leasing and Finance
Corporation v. M/V "Pilar-I" and Spouses Ernesto Dy and Lourdes Dy attained finality
on January 19, 2010. During the course of the proceedings in the RTC, the CA and this
Court, petitioner could not have known of the worsened condition of the vessel because
it was in the possession of Colorado.

It could be argued that petitioner and his lawyer should have had the foresight to ask
for the return of the vessel in its former condition at the time respondent took possession
of the same during the proceedings in the earlier case. Nonetheless, the modification of
the Court’s decision is warranted by the superseding circumstances, that is, the severe
damage to the vessel subject of the case and the belated delivery of this information to
the courts by the party in possession of the same.

Having declared that a modification of our earlier judgment is permissible in light of the
exceptional incident present in this case, the Court further rules that petitioner is
entitled to the return of M/V Pilar-I in the same condition in which respondent took
possession of it. Considering, however, that this is no longer possible, then respondent
should pay petitioner the value of the ship at such time.
This disposition is not without precedent. In the case of Metro Manila Transit
Corporation v. D.M. Consortium, Inc.,34D.M. Consortium, Inc. (DMCI) acquired 228
buses under a lease purchase agreement with Metro Manila Transit Corporation
(MMTC). MMTC later alleged that DMCI was in default of its amortization, as a result of
which, MMTC took possession of all the buses. This Court upheld the right of DMCI,
after having been unjustly denied of its right of possession to several buses, to have
them returned by MMTC. Considering, however, that the buses could no longer be
returned in their original state, the Court sustained the resolution of the CA ordering
MMTC to pay DMCI the value of the buses at the time of repossession.

The aforecited case finds application to the present situation of petitioner. After having
been deprived of his vessel for almost two decades, through no fault of his own, it would
be the height of injustice to permit there turn of M/V Pilar-I to petitioner in pieces,
especially after a judgment by this very same Court ordering respondent to restore
possession of the vessel to petitioner. To do so would leave petitioner with nothing but
a hollow and illusory victory for although the Court ruled in his favor and declared that
respondent wrongfully took possession of his vessel, he could no longer enjoy the
beneficial use of his extremely deteriorated vessel that it is no longer seaworthy and has
no other commercial value but for the sale of its parts as scrap.

Moreover, the incongruity only becomes more palpable when consideration is taken of
the fact that petitioner's obligation to respondent, for which the now practically
worthless vessel serves as security, is still outstanding.35 The Court cannot countenance
such an absurd outcome. It could not have been the intention of this Court to perpetrate
an injustice in the guise of a favorable decision. As the court of last resort, this Court is
the final bastion of justice where litigants can hope to correct any error made in the
lower courts.

WHEREFORE, the petition is PARTIALLYGRANTED. Respondent is ordered to pay

petitioner the value of M/V Pilar- I at the time it was wrongfully seized by it. The case is
hereby REMANDED to the Regional Trial Court, Branch 64, Makati City, for the proper
determination of the value of the vessel at said time.

SO ORDERED.