UPDATES ON REMEDIAL LAW (CIVIL PROCEDURE)

NOTES AND COMMENTS ON ACTION INCAPABLE OF

PECUNIARY ESTIMATION
By
Dean Arturo M. de Castro
AB (UP Economics, 1966), Ll.B (Cum Laude, UP Law 1970)
Ll.M., S.J.D., University of Michigan School of Law
Dean, Graduate School of Law and
Bar Review Director, College of Law
University of Manila

INTRODUCTION
It is important to distinguish between an action incapable of pecuniary estimation and a
real action to recover title or possession of real property or a personal action to recover a
sum of money.
The recent decision of the Supreme Court en banc, First Sarmiento Property Holdings,
Inc. v. Philippine Bank of Communications, G.R. No. 102836, June 19, 2018, thru the
Ponencia of Associate Justice Marvic Leonen, re-affirms and re-establishes the ruling that
the nature of the subject matter of the action, whether it is capable of pecuniary
estimation or not, is determined by the nature of the principal action or relief. If the
principal relief is for recovery of a sum of money or title to or possession of real property,
the action is capable of pecuniary estimation.
If the principal relief sought is not for recovery of sum of money or real property, even if a
claim of a sum of money or a real property results as a consequence as a relief, the action
is incapable of pecuniary estimation (First Sarmiento Property Holdings, Inc. v. Philippine
Bank of Communications, G.R. No. 102836, June 19, 2018)

ACTION INCAPABLE OF PECUNIARY ESTIMATION

Special Civil Action for Declaratory Relief and Quieting of Title to remove the cloud over
Torrens Title are actions incapable of pecuniary estimation. An action for rescission or
specific performance of contracts is an action incapable of pecuniary estimation, but an
action for damages for breach of contract is an ordinary action capable of pecuniary
estimation (Spouses Pajares v. Remarkable Laundry & Dry Cleaning, G.R. No. 212690,
February 20, 2017).
An action for breach of contract is incapable of pecuniary estimation if the principal relief
is for rescission of contract. If the principal relief is to recover damages, the action is
capable of pecuniary estimation (Spouses Pajares v. Remarkable Laundry & Dry
Cleaning, G.R. No. 212690, February 20, 2017).
A Question of Jurisdiction
In the recent case of Spouses Pajares v. Remarkable Laundry & Dry Cleaning, G.R. No.
212690, February 20, 2017, a cause for breach of contract for rescission or specific
performance is incapable of pecuniary estimation regardless of the amount involved
which is exclusively cognizable by the Regional Trial Court. If the cause of action for
breach of contract is to recover damages, it is an ordinary action capable of pecuniary
estimation and jurisdiction is determined by the amount of damages claimed. The RTC of
Cebu was held bereft of jurisdiction because the amount claimed as damages is less than
Php 300.000.00, which exclusively falls under the jurisdiction of the Metropolitan Trial
Court (Section 5, RA 7691).
Special Civil Action for Declaratory Relief
Petition for Declaratory Relief is governed by Section 1, Rule 63 of the Revised Rules of
Civil Procedure, which provides as follows:
Section 1. Who may file petition. – Any person interested under a deed, will, contract or
other written instrument, or whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental regulation may, before breach or
violation thereof bring an action in the appropriate Regional Trial Court to determine any
question of construction or validity arising, and for a declaration of his rights or duties,
thereunder. (Bar Matter No. 803, 17 February 1998)
An action for the reformation of an instrument, to quiet title to real property or remove
clouds therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may
be brought under this Rule.
As held by the Supreme Court in Velarde v. Social Justice Society, 428 SCRA 283, G.R.
No. 159357, April 28, 2004:
“Based on the foregoing, an action for declaratory relief should be filed by a person
interested under a deed, a will, a contract or other written instrument, and whose rights
are affected by a statute, an executive order, a regulation or an ordinance. The purpose
of the remedy is to interpret or to determine the validity of the written instrument and to
seek a judicial declaration of the parties rights or duties thereunder. (Gozun v. Liangco,
339 SCRA 253, August 30, 2000; Vda. De Aviles v. Court of Appeals, 264 SCRA 473,
November 21, 1996.) The essential requisites of the action are as follows: (1) there is a
justiciable controversy; (2) the controversy is between persons whose interests are
adverse; (3) the party seeking the relief has a legal interest in the controversy; and (4) the
issue is ripe for judicial determination.( Board of Optometry v. Colet, 260 SCRA 88, July
30, 1996; Gozun v. Liangco, supra; citing Galarosa v. Valencia, 227 SCRA 728, 737,
November 11, 1993; Office of the Ombudsman v. Judge Ibay, 364 SCRA 281, September
3, 2001.)
Extra-Judicial Foreclosure is an action incapable of pecuniary estimation even if recovery
of title, possession and a sum of money are involved.
An action to declare null and void an extra-judicial foreclosure proceedings involves issue
of ownership or title, possession or recovery of a sum of money. Generally, it is classified
as a real action. However, if the issue of ownership, possession or title or recovery of a
sum of money is only a consequence of the principal action and relief incapable of
pecuniary estimation, the annulment of extra-judicial foreclosure proceedings is part of
the action incapable of pecuniary estimation and may not be separately classified as
capable of pecuniary estimation since it results only from the principal relief to declare the
real estate mortgage involved in the foreclosure proceedings null and void.
In the recent case of First Sarmiento Property Holdings, Inc. v. Philippine Bank of
Communications, G.R. No. 202836, June 19, 2018, the Supreme Court held that an action
to declare the Real Estate Mortgage null and void and to declare the extra-judicial
foreclosure proceedings null and void is an action incapable of pecuniary estimation
because the nullification of the extra-judicial foreclosure proceeding is only a
consequence from the relief in the principal action.
An action to rescind or set aside the Real Estate Mortgage is a principal action incapable
of pecuniary estimation. Nullification of the foreclosure sale is only a consequence of the
principal action and relief to nullify the Real Estate Mortgage which is the basis for the
extra-judicial foreclosure proceedings. It is logical that if the Real Estate Mortgage is null
and void, the extra-judicial proceedings are equally null and void. The spring cannot rise
higher than the source.
In First Sarmiento Property Holdings, Inc. v. Philippine Bank of Communications, G.R.
No. 202836, June 19, 2018, First Sarmiento Property Holdings, Inc. (First Sarmiento)
obtained a loan from Philippine Bank of Communication (PBCom) for Php 40,000,000.00
secured by real estate mortgage over 1,076 parcels of land on June 19, 2002. The loan
agreement was amended on March 15, 2003 increasing the loan amount to Php
51,000,000.00 and further amended on September 15, 2003 increasing the loan to Php
100,000,000.00.
On January 2, 2006, PBCom filed an Extra-Judicial Foreclosure of Real Estate Mortgage
for failure of First Sarmiento to pay the principal amount and accrued interest.
On December 11, 2011, First Sarmiento attempted to file a Complaint for Annulment of
Real Estate Mortgage with the Regional Trial Court, but the Clerk of Court refused to
accept the Complaint, in the absence of the Tax Declarations of the mortgaged properties
on which to base the amount of docket fees for real action.
The Executive Judge of the Regional Trial Court of Malolos, Bulacan granted First
Sarmiento’s “Urgent Motion To Consider the Value of the Subject Matter of Complaint As
Not Capable of Pecuniary Estimation” and ruled that the First Sarmiento’s action for
annulment of real estate mortgage was incapable of pecuniary estimation.
On December 2, 2011, the mortgaged properties were auctioned and sold to PBCom as
the highest bidder.
First Sarmiento filed on January 2, 2012 a “Complaint for Annulment of Mortgage with
Prayer for Issuance of Temporary Restraining Order and Preliminary Injunction” to enjoin
the foreclosure and registration of Certificate of Sale in favor of PBCom. That same day
the Court issued an ex-parte Restraining Order for 72 hours, and on January 4, 2012, the
Court issued a Status Quo Ante Order.
On January 24, 2012, the Sheriff issued a Certificate of Sale in favor of PBCom.
PBCom argued that the action for annulment of Real Estate Mortgage was a real action
and the filing fee should be based on the fair market value of the mortgaged properties.
On April 3, 2012, the Regional Trial Court dismissed the Complaint for lack of jurisdiction
for failure to pay the docket fee for real action ruling that the action for annulment or
rescission of contract has the nature and objective to recover real property, as follows:
“Following the High Court's ruling in the case of Home Guaranty Corporation v. R. II
Builders, Inc. and National Housing Authority, G.R. No. 192549, March 9, 2011, cited by
the bank in its Rejoinder, which appears to be the latest jurisprudence on the matter to
the effect that an action for annulment or rescission of contract does not operate to efface
the true objective and nature of the action which is to recover real property, this Court
hereby RESOLVES TO DISMISS the instant case for lack of jurisdiction, plaintiff having
failed to pay the appropriate filing fees.
Accordingly, the instant case is hereby DISMISSED.
SO ORDERED.”
First Sarmiento elevated the case directly to the Supreme Court on pure questions of law
whether an action for annulment of Real Estate Mortgage is an action incapable of
pecuniary estimation or real action to recover real property.
The Supreme Court granted the petition of First Sarmiento, reversed the stray decision in
Home Guaranty Corporation v. R. II Builders, Inc. and National Housing Authority, G.R.
No. 192549, March 9, 2011, and re-affirms and re-establishes that the principal nature
and relief determines the nature of the action. If the principal nature and relief is not for
sum of money or recovery of real property, such as rescission and nullification or specific
performance of a contract, the action is incapable of pecuniary estimation even if the
action results in the recovery of real property or a sum of money as a consequence. If the
principal action is to recover the title to or possession of real property, which is a real
action, or recovery of sum of money or an action for damages, the action is capable of
pecuniary estimation.
The ponencia of Justice Leonen reviewed the cases on action incapable of pecuniary
estimation as follows:
Section 19(1) of Batas Pambansa Blg. 129, as amended, provides Regional Trial Courts
with exclusive, original jurisdiction over "all civil actions in which the subject of the litigation
is incapable of pecuniary estimation."
Lapitan v. Scandia (133 Phil 526 (1968) [Per J. Reyes, J.B.L, En Banc]) instructed that to
determine whether the subject matter of an action is incapable of pecuniary estimation,
the nature of the principal action or remedy sought must first be established. This finds
support in this Court's repeated pronouncement that jurisdiction over the subject matter
is determined by examining the material allegations of the complaint and the relief sought
(Figueroa v. People, 580 Phil. 58, 78 (2008) [Per J. Nachura, Third Division] citing
Villagracia v. Fifth Shari'a District Court, 734 Phil. 239 (2014) [Per J. Leonen, Third
Division]; Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto Cruz, 512 Phil.
389 (2005) [Per J. Callejo, Second Division]; Spouses Atuel v. Spouses Valdez, 451 Phil.
631 (2003) [Per J. Carpio, First Division].) Heirs of Dela Cruz v. Heirs of Cruz (512 Phil.
389 (2005) [Per J. Callejo, Second Division]) stated, thus:
It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or
government agency, over the nature and subject matter of a petition or complaint is
determined by the material allegations therein and the character of the relief prayed for,
irrespective of whether the petitioner or complainant is entitled to any or all such reliefs
(Id. at 400).
However, Lapitan stressed that where the money claim is only a consequence of the
remedy sought, the action is said to be one incapable of pecuniary estimation:
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. If it is primarily for the recovery of a sum of money, the claim is considered
capable of pecuniary estimation, and whether jurisdiction is in the municipal courts or in
the courts of first instance would depend on the amount of the claim. However, where the
basic issue is something other than the right to recover a sum of money, or where the
money claim is purely incidental to, or a consequence of, the principal relief sought like in
suits to have the defendant perform his part of the contract (specific performance) and in
actions for support, or for annulment of a judgment or to foreclose a mortgage, this Court
has considered such actions as cases where the subject of the litigation may not be
estimated in terms of money, and are cognizable exclusively by courts of first instance.
The rationale of the rule is plainly that the second class cases, besides the determination
of damages, demand an inquiry into other factors which the law has deemed to be more
within the competence of courts of first instance, which were the lowest courts of record
at the time that the first organic laws of the Judiciary were enacted allocating jurisdiction
(Act 136 of the Philippine Commission of June 11, 1901) (Lapitan v. Scandia, 133 Phil.
526, 528 (1968) [Per J. Reyes, J.B.L, En Banc] ) (Citation omitted)
Heirs of Sebe v. Heirs of Sevilla (Lapitan v. Scandia, 133 Phil. 526, 528 (1968) [Per J.
Reyes, J.B.L, En Banc]) likewise stressed that if the primary cause of action is based on
a claim of ownership or a claim of legal right to control, possess, dispose, or enjoy such
property, the action is a real action involving title to real property (Id. at 407.).
xxx xxx xxx
Far East Bank and Trust Company v. Shemberg Marketing Corporation (540 Phil. 7
(2006) [Per J. Sandoval-Gutierrez, Second Division]) stated that an action for cancellation
of mortgage has a subject that is incapable of pecuniary estimation:
Here, the primary reliefs prayed for by respondents in Civil Case No. MAN-4045 is the
cancellation of the real estate and chattel mortgages for want of consideration. In
Bumayog v. Tumas, this Court ruled that where the issue involves the validity of a
mortgage, the action is one incapable of pecuniary estimation. In the more recent case of
Russell v. Vestil, this Court, citing Bumayog, held that an action questioning the validity
of a mortgage is one incapable of pecuniary estimation. Petitioner has not shown
adequate reasons for this Court to revisit Bumayog and Russell. Hence, petitioner's
contention [cannot] be sustained. Since respondents paid the docket fees, as computed
by the clerk of court, consequently, the trial court acquired jurisdiction over Civil Case No.
MAN-4045 (Id. at 21 citing Bunayog v. Tunas, 106 Phil. 715 (1959) [Per J. Bautista
Angelo, En Banc] and Russell v. Vestil, 364 Phil. 392 (1999) [Per J. Kapunan, First
Division]).
xxx xxx xxx
Significantly, the ponencia of Justice Leonen reversed and abandoned the contrary ruling
in Home Guaranty Corporation v. R. II Builders, Inc. and National Housing Authority, G.R.
No. 192549, March 9, 2011 to the effect that an action for annulment or rescission of
contract does not operate to efface the true objective and nature of the action which is to
recover real property notwithstanding that the principal action is for nullification of
contract, as follows: .
Home Guaranty stated that to determine whether an action is capable or incapable of
pecuniary estimation, the nature of the principal action or remedy prayed for must first be
determined.110 Nonetheless, in citing Ruby Shelter Builders v. Formaran, Home
Guaranty looked beyond R-II Builder's principal action for annulment or rescission of
contract to purportedly unmask its true objective and nature of its action, which was to
recover real property (Id. at 537-538.)
In a dissenting opinion in the Home Guaranty ((667 Phil. 781 (2011) [Per J. Perez, Special
First Division] ) June 22, 2011 Resolution that dismissed R-II Builders' motion for
reconsideration, Associate Justice Presbitero Velasco, Jr. stressed that one must first
look at the principal action of the case to determine if it is capable or incapable of
pecuniary estimation:
Whether or not the case is a real action, and whether or not the proper docket fees were
paid, one must look to the main cause of action of the case. In all instances, in the original
Complaint, the Amended and Supplemental Complaint and the Amended Complaint, it
was all for the resolution or rescission of the [Deed of Assignment and Conveyance], with
the prayer for the provisional remedy of injunction and the appointment of a trustee and
subsequently a receiver. In the Second Amended Complaint, the return of the remaining
assets of the asset pool, if any, to respondent R-II Builders would only be the result of the
resolution or rescission of the [Deed of Assignment and Conveyance].
Even if real property in the Asset Pool may change hands as a result of the case in the
trial court, the fact alone that real property is involved does not make that property the
basis of computing the docket fees. De Leon v. Court of Appeals has already settled the
matter. That case, citing Bautista v, Lim, held that a case for rescission or annulment of
contract is not susceptible of pecuniary estimation. On the other hand, in the Decision We
rendered on July 25, 2005 in Serrano v. Delica, We ruled that the action for cancellation
of contracts of sale and the titles is a real action. Similarly, on February 10, 2009, We
ruled in Ruby Shelter Builders and Realty Development Corporation v. Formaran III (Ruby
Shelter) that an action for nullification of a Memorandum of Agreement which required the
lot owner to issue deeds of sale and cancellation of the. Deeds of Sale is a real action (Id.
at 802.)
Whatever confusion there might have been regarding the nature of actions for nullity of
contracts or legality of conveyances, which would also involve recovery of sum of money
or real property, was directly addressed by Lu v. Lu Ym (585 Phil. 251 (2008) [Per J.
Nachura, En Banc]). Lu underscored that "where the basic issue is something other than
the right to recover a sum of money, the money claim being only incidental to or merely
a consequence of, the principal relief sought, the action is incapable of pecuniary
estimation." (Id. at 273.)
This finds support in numerous decisions where this Court proclaimed that the test to
determine whether an action is capable or incapable of pecuniary estimation is to
ascertain the nature of the principal action or relief sought. Thus, if the principal relief
sought is the recovery of a sum of money or real property, then the action is capable of
pecuniary estimation. However, if the principal relief sought is not for the recovery of
money or real property and the money claim is only a consequence of the principal relief,
then the action is incapable of pecuniary estimation (See Lapitan v. Scandia, Inc., et al.,
133 Phil. 526, 528 (1968) [Per J. Reyes, J.B.L, En Banc]; Singson v. Isabela Sawmill, 177
Phil. 575, 588 (1979) [Per J. Fernandez, First Division]; Spouses Huguete v. Spouses
Embudo, 453 Phil. 170, 176-177 (2003) Far East Bank and Trust Company v. Shemberg
Marketing Corporation, 540 Phil. 7, 21 (2006) [Per J. Sandoval-Gutierrez, Second
Division]).
Considering that the principal remedy sought by R-II Builders was the resolution of the
Deed of Assignment and Conveyance, the action was incapable of pecuniary estimation
and Home Guaranty erred in treating it as a real action simply because the principal action
was accompanied by a prayer for conveyance of real property.
(G.R. No. 202836, June 19, 2018 - FIRST SARMIENTO PROPERTY HOLDINGS, INC.,
Petitioner, v. PHILIPPINE BANK OF COMMUNICATIONS, Respondent.)
CONCLUSION
Annulment of extra-judicial foreclosure sale and reconveyance and reversion of title to
the mortgagor is incapable of pecuniary estimation if it is pleaded as a consequence of
annulment or rescission of a Real Estate Mortgage which is the basis of the extra-judicial
foreclosure proceedings resulting in the transfer of title to the highest bidder.