Monday, April 15, 2019

Principle of constructive fulfillment, Article 1186 of the Civil Code

2018 Jun 20
G.R. No. 195999
3rd Division

LILY S. VILLAMIL, SUBSTITUTED BY HER HEIRS RUDY E. VILLAMIL, SOLOMON E. VILLAMIL, TEDDY E. VILLAMIL, JR., DEBORAH E. VILLAMIL, FLORENCE E. VILLAMIL, GENEVIEVE E. VILLAMIL, AND MARC ANTHONY E. VILLAMIL, PETITIONER, V. SPOUSES JUANITO ERGUIZA AND MILA ERGUIZA, RESPONDENTS.


D E C I S I O N

MARTIRES, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision,[1] dated 29 June 2010, and Resolution,[2] dated 2 February 2011, of the Court of Appeals (CA) in CA-G.R. SP No. 109813 which nullified the Decision,[3] dated 2 October 2008, of the Regional Trial Court, Dagupan City, Branch 44 (RTC), in Civil Case No. 2007-0014-D, an action for recovery of possession.

THE FACTS

On 6 February 2003, petitioner Lily Villamil (petitioner) filed a Complaint[4] for recovery of possession and damages against respondent-spouses Juanito and Mila Erguiza (respondent-spouses) before the Municipal Trial Court in Cities (MTCC) of Dagupan City. The complaint alleges, among others, the following:

x x x x

2. Plaintiff is the absolute and exclusive owner of that certain parcel ofland more particularly described as follows:

''A parcel of land (Lot 3371-C) of the subdivision plan (LRC) Psd-111002, being a portion of Lot 3371 Dagupan Cadastre, LRC Cad. Record No. 925, situated in the District of Pantal, City of Dagupan, Island of Luzon, x x x containing an area or one hundred ninety-one (191) square meters, more or less. Covered by Transfer Certificate Title No. 31225 with assessed value of P2,290.00 under Tax Declaration No. 221092."

A copy of Transfer Certificate of Title No. 31225 and Tax Declaration No. 221092 are hereto attached and marked as Annexes "A" and "B," respectively;

3. Previously, said parcel of land was covered by Transfer Certificate of Title No. 23988 registered under the names of plaintiff Corazon Villamil, Efren Villamil, Teddy Villamil, Florencio Villamil, Rodrigo Villamil, Nicasio Villamil, John Villamil, Marcelina Villamil and Feliciano Villamil, all related. Copy of Transfer Certificate of title No. 23988 is hereto attached as Annex "C";

4. On 20 September 1972, plaintiff together with her deceased sister, Corazon Villamil, and deceased brother, Teddy Villamil, entered into an agreement with Juanito Erguiza for the purpose of selling the above-described property to the latter subject to the condition that plaintiff and her siblings would file a petition to secure authorization for minor children from the proper courts. Likewise, that in case of failure of the plaintiff and her siblings to obtain said authority, the partial payment made by the defendant Juanito Erguiza shall be applied as rent for twenty (20) years of the premises. A copy of the agreement is hereto attached as Annex "D";

5. During the course of time, TCT No. 23988 was cancelled and TCT No. 30049 was issued by virtue of a quitclaim executed by Corazon Villamil and her children in favor of the plaintiff. Likewise, TCT No. 30049 was cancelled and TCT No. 31125 (Annex "A") was issued by virtue of a Deed of Sale executed by Efren Villamil and Teddy Villamil in favor of the plaintiff. Copies of TCT No. 30049 are hereto attached and marked as Annex "E";

6. Plaintiff has been paying religiously the real estate taxes due on said property;

7. Sometime in 1992 or after the lapse of twenty (20) years and the expiration of the twenty (20) years lease, plaintiff demanded from the defendants to return possession of the property but the latter failed and refused, and still fails (sic) and refuses (sic) to return possession of the property to the damage and prejudice of the plaintiff;

8. The continued occupation by the defendants of the property is by mere tolerance of the plaintiff and has been staying thereon without paying any rent to the plaintiff;

9. On 7 January 2002, plaintiff again demanded from the defendant[s] to return the possession of the property by way of a formal letter dated December 18, 2001 which was received by the defendant[s] on January 11, 2002. Notwithstanding receipt of said letter, defendants just ignored the valid pleas of the plaintiff; Annex "F";

10. A period of thirty (30) [days] had lapsed without the said agreement having been enforced, hence, the defendants have lost whatever rights they have under said agreement;

11. The matter was brought to the Office of the Barangay of Pantal District but no conciliation or settlement was reached between the parties hence, a certification to file action was issued by said office. A copy of the certification is hereto attached as Annex "G";

x x x x[5]

The Agreement, which petitioner and respondent-spouses entered into in the sale and purchase of the subject property, states:

KNOW ALL MEN BY THESE PRESENTS:

That we, CORAZON G. VILLAMIL, widow, LILY VILLAMIL, married and TEDDY S. VILLAMIL, married, all of legal ages, Filipinos and residents of Dagupan City, Philippines, for and in consideration of the sum two thousand six hundred fifty seven pesos (P2,657.00), Philippine currency, to us in hand paid and a receipt of which is hereby acknowledged of JUANITO ERGUIZA, married, of legal age, Filipino and a resident of Dagupan City, Philippines, BY THESE PRESENTS do hereby promise to sell absolutely unto the said Juanito Erguiza, his heirs or assigns, a parcel of land covered [by] Transfer Certificate of Title No. 23988 of the land records of Dagupan City, identified as Lot No. 2371, under the following terms and conditions:

That the total purchase price of the said land is FIVE THOUSAND ONE HUNDRED FIFTY SEVEN PESOS P5,157.00. Because of us receiving today the sum of two thousand six hundred and fifty seven pesos (P2,657.00), there is still a balance of two thousand five hundred pesos (P2,500.00);

That because there is still lacking document or that court approval of the sale of the shares of the minor-owners of parts of this land, the final deed of absolute sale be made and executed upon issuance by the competent court; that the balance of P2,500.00 will also be given in this stage of execution of this document;

In the event however that the petition for the sale of the shares of the minor-owners of the parts of this land is [disapproved] by the court, the amount of P2,657.00 be considered as lease of the land subject matwr of this contract for a duration of twenty (20) years.

WITNESS OUR HANDS THIS 29th of September 1972 at Dagupan City, Philippines.[6]

On 26 May 2003, respondent-spouses filed their Answer,[7] which effectively denied the material allegations in petitioner's complaint and by way of special and affirmative defenses, aver that:

x x x x

5. That plaintiff has no cause of action.

6. The agreement between the co-heirs of plaintiff and defendants is for the sale on condition of the subject property. A sale even if conditional transfers ownership to the vendees. And before plaintiff could claim any right, there are certain proceedings which must first be complied [with]. Defendants did not violate any of the terms and conditions contained in the agreement to which plaintiff is trying to base her cause of action. It was plaintiff who made sure that the condition contained under the contract to sell will not be complied with. She caused the execution of documents to violate such rights and it was only now that defendants learned of the same;

7. That defendants never received a letter coming from the plaintiff regarding the subject property. As a matter of fact, defendants are trying to enforce the agreement although the conditions contained therein will be left to the sole will of the vendors:

8. That granting arguendo that the plaintiff has the right to damages, such could only be in the form of accrued rentals. x x x[8]

On 14 October 2004, the MTCC dismissed the complaint on the ground that the cause of action thereof was one for the interpretation of the agreement and the determination of the parties' respective rights. It reasoned that such action was incapable of pecuniary estimation and, therefore, jurisdiction lies with the RTC.[9]

On appeal, the RTC reversed the decision of the MTCC on the ground that the cause of action was one for recovery of possession of real property. Considering that the assessed value of the subject property is P2,290.00, the MTCC has original and exclusive jurisdiction over the case. Thus, the case was remanded to the MTCC.[10]

The MTCC Ruling

In its decision,[11] dated 15 November 2006, the MTCC ruled in favor of petitioner. It gave credence to petitioner's claim that she communicated to respondent-spouses the fact of consolidation of ownership in her name. The MTCC held that being an interested party in the collection of the remaining balance, petitioner would naturally have made respondent-spouses aware of the consolidation of ownership over the subject property. It declared that it was unbelievable that respondent-spouses did not exert any effort to inquire from petitioner about the status of their agreement. The MTCC concluded that respondent-spouses had no intention to pay the balance of the purchase price and that they had become lessees of the subject property for twenty (20) years with their down payment being treated as rentals. It ruled that after the lapse of the said period, respondent-spouses were bound to leave the premises. The fallo reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff as follows:

Ordering the defendants, their assigns, agents or other persons acting for themselves, to vacate the premises in question and to restore possession thereof to the plaintiff;

Ordering the defendants to pay the plaintiff jointly and severally, the amount of P500.00 a month from date of demand which was on December 18, 2001, until they finally vacate the premises, as reasonable compensation for the use and occupation of the same;

Ordering the defendants to pay the plaintiff, jointly and severally, the amount of P5,000.00 as attorney's fees and to pay the costs of suit.

SO ORDERED.[12]

Aggrieved, respondent-spouses elevated an appeal to the RTC.

The RTC Ruling

In its decision, the RTC affirmed the ruling of the MTCC. It opined that the condition with respect to judicial approval of the sale had become irrelevant when ownership over the subject property was consolidated in favor of petitioner in 1973; thus, at that time, respondent-spouses were bound to comply with their undertaking to pay the balance of the purchase price which they failed to do. The dispositive portion states:

WHEREFORE, judgment is hereby rendered AFFIRMING the appealed decision with modification deleting the award of attorney's fees.

SO ORDERED.[13]

Unconvinced, respondent-spouses moved for reconsideration. However, in a Resolution,[14] dated 18 May 2009, the RTC denied the motion for lack of notice of hearing.

The CA Ruling

In its decision, the CA reversed and set aside the decision of the RTC. As to the procedural aspect, it observed that despite omission of the name of petitioner's counsel in the notice of hearing, petitioner appeared at the scheduled hearing and even filed her opposition to respondent-spouses' motion for reconsideration. The CA declared that the right of respondent-spouses to appeal should not be curtailed by the mere expediency of holding that there was lack of notice of hearing since the objective of Sections 4, 5, and 7 under Rule 15 of the Rules of Court to allow the adverse party the opportunity to oppose the motion has been clearly met in this case.

With respect to the substantive issue, the appellate court declared that the agreement between the parties was a contract to sell involving the subject property because the vendors reserved ownership and it was subject to a suspensive condition, i.e., submission of the sellers of lacking documents or court approval of the sale of the shares of the minor owners.

The CA did not acquiesce with the trial court's reasoning that respondent-spouses were already notified of the transfer of title in petitioner's name because such alleged notice was not supported by any evidence on record. It lends credence to respondent-spouses' evidence that they came to know of the fact that petitioner "was already the registered owner of the subject property when a written demand letter was sent to them by the former on 18 December 2001. The CA opined that respondent--spouses' passive and complacent position in not asserting from the sellers what was incumbent under the subject agreement should not be taken against the former. It stressed that the obligation to secure the necessary documents or approval of the court for the minor children to be represented in the Deed of Absolute Sale, was incumbent upon the sellers.

While the appellate court agreed with the lower courts' disquisition that the court's approval for the minor children to be represented in the sale would no longer be necessary as the ownership and title in the subject property were already consolidated to petitioner, it ruled that the same would not operate like a magic wand to automatically make respondent-spouses perform what was required of them in the subject agreement. On the contrary, the sellers had the positive duty to make known to the buyers that they were ready to comply with what was mandated upon them, which act petitioner failed to prove by any evidence. Thus, the CA concluded that respondent-spouses had more right to possess the subject property pending consummation of the agreement or any outcome thereof. The CA disposed of the case in this wise:

WHEREFORE, in consideration of the foregoing premises, the instant petition is perforce GRANTED. Accordingly, the Decision dated October 02, 2008 and Resolution dated May 18, 2009 are perforce reversed and set aside. Thus, petitioners Erguiza shall remain in actual and peaceful possession of the subject property.

No pronouncement as to costs.

SO ORDERED.[15]

Petitioner moved for reconsideration but the CA denied the same in its 2 February 2011 resolution. Hence, this petition.

ISSUES

Petitioner submits the following assignment of errors:

I.

WHETHER OR NOT THE 2 OCTOBER 2008 DECISION OF RTC, BRANCH 44, AFFIRMING THE DECISION OF MTCC, BRANCH 3, DATED 15 NOVEMBER 2006 HAS BECOME FINAL AND EXECUTORY AFTER RESPONDENTS FILED A DEFECTIVE MOTION FOR RECONSIDERATION WHICH DID NOT TOLL THE RUNNING OF THE REGLEMENTARY PERIOD TO FILE A PETITION FOR REVIEW; AND WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN IT GAVE DUE COURSE TO THE PETITION.

II.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN IT REVERSED THE DECISION OF RTC, BRANCH 44, AFFIRMING THE DECISION OF MTCC, BRANCH 3, WHICH RULED THAT PETITIONER HAD A BETTER RIGHT TO POSSESS THE PROPERTY AFTER PETITIONERS FAILED TO PAY THE BALANCE OF THE PURCHASE PRICE AND THE SECOND CONDITION HAD SET IN, THAT IS, THE DOWN PAYMENT WAS APPLIED AS RENTALS FOR TWENTY (20) YEARS FROM 1972 TO 1992.[16]

Petitioner argues: that the RTC decision has actually become final and executory after respondent-spouses filed a defective motion for reconsideration which did not toll the running of the reglementary period to appeal the decision before the CA; that the motion for reconsideration was a mere scrap of paper as it did not contain notice of the time and place of hearing; that respondent-spouses knew that petitioner was the owner of the subject property because they sought her permission to build their house thereon; and that it is contrary to human experience that, being interested persons, respondent-spouses would not inquire about the status of the subject property.[17]

In their Comment,[18] respondent-spouses contend that they complied with the provision of the Rules of Court as regards notice of hearing such that on the day the motion for reconsideration was to be heard, petitioner was present and she even filed her opposition to the motion; that while the notice of hearing was only addressed to the Branch Clerk of Court, petitioner was furnished with a copy of the motion for reconsideration; that petitioner and her siblings did not take steps to fulfil the suspensive condition; that they made an illegal act of transferring the share of the minors in the name of petitioner; that petitioner only informed them of the consolidation of ownership when they received a demand letter on 18 December 2001 and when they were summoned to appear before the office of the Barangay Captain sometime in April 2002; and that if petitioner had the slightest intention of informing them of her ownership of the subject property and for them to pay the remaining balance, she should have done so immediately upon the transfer of the title in her name.

In her Reply,[19] petitioner avers that upon seeing the minor owners reach the age of majority, it would be logical for respondent-spouses to follow up with her and her co-owners since court approval was no longer necessary; that notwithstanding this information, respondent-spouses did not pay the balance of the consideration; and that being an interested party in the collection of the remaining balance, it is more in accord with human experience that she would have informed respondent-spouses about the consolidation of ownership in her name.

THE COURT'S RULING

Petitioner had the opportunity to be heard despite the lack of notice of hearing.

Sections 4 and 5, Rule 15 of the Rules of Court provide that:

Sec. 4. Hearing of motion. - Except for motions which the court may act upon without prejudicing the rights of the adverse party, every written motion shall be set for hearing by the applicant.

Every written motion required to be heard and the notice of the hearing thereof shall be served in such a manner as to ensure its receipt by the other party at least three (3) days before the date of hearing, unless the court for good cause sets the hearing on shorter notice.

Sec. 5. Notice of hearing. The notice of hearing shall be addressed to all parties concerned, and shall specify the time and date of the hearing which must not be later than ten (10) days after the filing of the motion.

The general rule is that the three-day notice requirement in motions under Sections 4 and 5 of the Rules of Court is mandatory. It is an integral component of procedural due process.[20] "The purpose of the three-day notice requirement, which was established not for the benefit of the movant but rather for the adverse party, is to avoid surprises upon the latter and to grant it sufficient time to study the motion and to enable it to meet the arguments interposed therein."[21]

"A motion that does not comply with the requirements of Sections 4 and 5 of Rule 15 of the Rules of Court is a worthless piece of paper which the clerk of court has no right to receive and which the court has no authority to act upon."[22] "Being a fatal defect, in cases of motions to reconsider a decision, the running of the period to appeal is not tolled by their filing or pendency."[23]

Nevertheless, the three-day notice requirement is not a hard and fast rule. When the adverse party had been afforded the opportunity to be heard, and has been indeed heard through the pleadings filed in opposition to the motion, the purpose behind the three-day notice requirement is deemed served. In such case, the requirements of procedural due process are substantially complied with. Thus, in Preysler, Jr. v. Manila Southcoast Development Corporation,[24] the Court ruled that:

The three-day notice rule is not absolute. A liberal construction of the procedural rules is proper where the lapse in the literal observance of a rule of procedure has not prejudiced the adverse party and has not deprived the court of its authority. Indeed, Section 6, Rule I of the Rules of Court provides that the Rules should be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding. Rules of procedure are tools designed to facilitate the attainment of justice, and courts must avoid their strict and rigid application which would result in technicalities that tend to frustrate rather than promote substantial justice.[25]

Likewise, in Jehan Shipping Corporation v. National Food Authority,[26] the Court held that despite the lack of notice of hearing in a motion for reconsideration, there was substantial compliance with the requirements of due process where the adverse party actually had the opportunity to be heard and had filed pleadings in opposition to the motion. The Court declared:

This Court has indeed held time and again, that under Sections 4 and 5 of Rule 15 of the Rules of Court, mandatory is the notice requirement in a motion, which is rendered defective by failure to comply with the requirement. As a rule, a motion without a notice of hearing is considered pro forma and does not affect the reglementary period for the appeal or the filing of the requisite pleading.

As an integral component of procedural due process, the three-day notice required by the Rules is not intended for the benefit of the movant. Rather, the requirement is for the purpose of avoiding surprises that may be sprung upon the adverse party, who must be given time to study and meet the arguments in the motion before a resolution by the court. Principles of natural justice demand that the right of a party should not be affected without giving it an opportunity to be heard.

The test is the presence of opportunity to be heard, as well as to have time to study the motion and meaningfully oppose or controvert the grounds upon which it is based. x x x[27]

A perusal of the records reveals that the trial court gave petitioner ten days within which to comment on private respondents' motion for reconsideration.[28] Petitioner filed its Opposition the Motion on 7 January 2009, and in fact, filed a Motion for Entry of Judgment.[29] Thus, it cannot be gainsaid that petitioner was not given her day in court as she in fact contested private respondents' motion for reconsideration. While it is true that the name of petitioner's counsel was not indicated in the notice of hearing, nonetheless, she was furnished a copy thereof which she received before the date of the scheduled hearing. The requirement of notice of time and hearing in the pleading filed by a party is necessary only to apprise the other party of the actions of the former.[30] Under the circumstances of the present case, the purpose of a notice of hearing was served. Hence, the Court finds no reversible error committed by the CA in ruling that the motion for reconsideration was not pro forma.

Parties entered into a contract to sell

A contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the latter upon his fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or compliance with the other obligations stated in the contract to sell. Given its contingent nature, the failure of the prospective buyer to make full payment and/or abide by his commitments stated in the contract to sell prevents the obligation of the prospective seller to execute the corresponding deed of sale to effect the transfer of ownership to the buyer from arising.[31] A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.[32] In a contract to sell, the fulfillment of the suspensive condition will not automatically transfer ownership to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.[33] On the other hand, in a conditional contract of sale, the fulfillment of the suspensive condition renders the sale absolute and the previous delivery of the property has the effect of automatically transferring the seller's ownership or title to the property to the buyer.[34]

In Coronel v. Court of Appeals,[35] the Court declared:

The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicity reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz, this Court had occasion to rule:

Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective seller's obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price.[36]

In this case, the parties entered into an agreement with the following terms and conditions:

KNOW ALL MEN BY THESE PRESENTS:

That we, CORAZON G. VILLAMIL, widow, LILY VILLAMIL, married and TEDDY S. VILLAMIL, married, all of legal ages, Filipinos and residents of Dagupan City, Philippines, for and in consideration of the sum two thousand six hundred fifty seven pesos (P2,657.00), Philippine currency, to us in hand paid and a receipt of which is hereby acknowledged of JUANITO ERGUIZA, married, of legal age, Filipino and a resident of Dagupan City, Philippines, BY THESE PRESENTS do hereby promise to sell absolutely unto the said Juanito Erguiza, his heirs or assigns, a parcel of land covered [by] Transfer Certificate of Title No. 23988 of the land records of Dagupan City, identified as Lot No. 2371, under the following terms and conditions:

6. That the total purchase price of the said land is FIVE THOUSAND ONE HUNDRED FIFTY SEVEN PESOS P5,157.00. Because of us receiving today the sum of two thousand six hundred and fifty seven pesos (P2,657.00), there is still a balance of two thousand five hundred pesos (P2,500.00);

7. That because there is still lacking document or that court approval of the sale of the shares of the minor-owners of parts of this land, the final deed of absolute sale he made and executed upon issuance by the competent court; that the balance of P2,500.00 will also be given in this stage of execution of this document;

8. In the event however that the petition for the sale of the shares of the minor-owners of the parts of this land is [disapproved] by the court, the amount of P2,657.00 be considered as lease of the land subject matter of this contract for a duration of twenty (20) years.

WITNESS OUR HANDS THIS 29th of September 1972 at Dagupan City, Philippines.[37] (emphases supplied)

An examination of the agreement would reveal that the parties entered into a contract to sell the subject property. First, petitioner and her siblings who were then co-owners merely promised to sell the subject property, thus, signifying their intention to reserve ownership. Second, the execution of a deed of absolute sale was made dependent upon the proper court's approval of the sale of the shares of the minor owners. Third, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership.[38] Fourth, petitioner retained possession of the certificate of title of the lot. This is an additional indication that the agreement did not transfer to private respondents, either by actual or constructive delivery, ownership of the property.[39] Finally, respondent Juanito admitted during trial that they have not finalized the sale in 1972 because there were minor owners[40] such that when they constructed their house thereon, they sought the permission of petitioner.[41]

Now, the next question to be resolved is whether the suspensive condition, i.e., judicial approval of the sale of the minor owners' shares, upon which the obligation of the sellers to execute a deed of sale depends, is fulfilled.

Principle of constructive fulfillment applies

Article 1186 of the Civil Code reads:

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

This provision refers to the constructive fulfillment of a suspensive condition, whose application calls for two requisites, namely: (a) the intent of the obligor to prevent the fulfillment of the condition, and (b) the actual prevention of the fulfillment. Mere intention of the debtor to prevent the happening of the condition, or to place ineffective obstacles to its compliance, without actually preventing the fulfillment, is insufficient.[42]

Petitioner and her then co-owners undertook, upon receipt of the down payment from respondent-spouses, the filing of a petition in court, after which they promised the latter to execute the deed of absolute sale whereupon the latter shall, in turn, pay the entire balance of the purchase price. The balance of the consideration shall be paid only upon grant of the court's approval and upon execution of the deed of absolute sale.

Here, there is no doubt that petitioner prevented the fulfillment of the suspensive condition. She herself admitted that they did not file any petition to seek approval of the court as regards the sale of the shares of the minor owners.[43] In addition, the other co-owners sold their shares to petitioner such that she was able to consolidate the title in her name.[44] Thus, the condition is deemed constructively fulfilled, as the intent to prevent fulfillment of the condition and actual prevention thereof were definitely present. Consequently, it was incumbent upon the sellers to enter into a contract with respondent-spouses for the purchase of the subject property.

Respondent-spouses' obligation to pay the balance of the purchase price arises only when the court's approval of the sale of the minor owners' shares shall have been successfully secured, in accordance with Article 1181 of the New Civil Code.[45] Judicial approval is a condition the operative act of which sets into motion the period of compliance by respondent-spouses of their own obligation, i.e., to pay the balance of the purchase price. Accordingly, an obligation dependent upon a suspensive condition cannot be demanded until after the condition takes place because it is only after the fulfillment of the condition that the obligation arises.[46] Petitioner cannot invoke the non-fulfillment of the condition in the contract to sell when she and her then co-owners themselves are guilty of preventing the fulfillment of such condition. When it has become evident that the condition would no longer be fulfilled, it was incumbent upon petitioner to inform respondent--spouses of such circumstance because the choice whether to waive the condition or continue with the agreement clearly belongs to the latter. Petitioner's claim that respondent-spouses should have known that the condition would no longer be necessary because the latter knew that the minor owners had already reached the age of majority and that they should have been more proactive in following up the status of the contract to sell, deserves scant consideration. While petitioner may have been right in the aforementioned instances, the same will not negate her obligation to inform respondent-spouses of the non-fulfillment of the condition especially in view of the fact that it was her fault that the condition became irrelevant and unnecessary.

Who has better right of possession?

Inasmuch as petitioner has not yet complied with her obligation to execute a deed of sale after the condition has been deemed fulfilled, respondent-spouses are still entitled to possess the subject property. Petitioner cannot anchor her claim on the supposed conversion of their agreement from a contract to sell into a contract of lease as provided in the third paragraph of the agreement which provides that should the court disapprove the sale of the shares of the minor owners, the down payment would be treated as rentals for twenty (20) years. The agreement, however, could not have been converted into a contract of lease for the simple reason that there was no petition filed before any court seeking the approval of the sale as regards the shares of the minor owners. Hence, the court did not have any occasion to approve much less disapprove the sale of such shares. As a result, there was no reason for the contract to sell to be converted into a contract of lease.

Respondent-spouses did not become lessees. They remained to be prospective buyers of the subject property who, up to now, are awaiting fulfillment of the obligation of the prospective sellers to execute a deed of sale. Hence, inasmuch as the sellers allowed them to have the subject property in their possession pending the execution of a deed of sale, respondent-spouses are entitled to possession pending the outcome of the contract to sell.

WHEREFORE, the petition is DENIED. The Decision, dated 29 June 2010, and Resolution, dated 2 February 2011, of the Court of Appeals in CA-G.R. SP No. 109813 are AFFIRMED. The Entry of Judgment in Civil Case No. 2007-0014-D is hereby LIFTED.

SO ORDERED.

Velasco, Jr., (Chairperson), Leonen, and Gesmundo, JJ., concur.
Bersamin, J., on official leave.

August 10, 2018

NOTICE OF JUDGMENT

Sirs/Mesdames:

Please take notice that on June 20, 2018 a Decision, copy attached hereto, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on August 10, 2018 at 1:19 p.m.

Very truly yours,
(SGD.) WILFREDO V. LAPITAN
Division Clerk of Court

[1] Rollo, pp. 35-52; penned by Associate Justice Bienvenido L. Reyes (retired member of this Court) with Associate Justice Estela M. Perlas-Bernabe (now member of this Court) and Associate Justice Elihu A. Ybañez, concurring.

[2] Id. at 54-55.

[3] Id. at 89-94; penned by Judge Genoveva Coching Maramba.

[4] Records, pp 1-3.

[5] Id.

[6] Id. at 8.

[7] Id. at 27-29.

[8] Id. at 27-28.

[9] Rollo, pp. 76-80.

[10] Id. at 81-82.

[11] Id. at 83-88; penned by Acting Presiding Judge Edgardo M. Caldona.

[12] Id. at 88.

[13] Id. at 94.

[14] Id. at 102-104.

[15] Id. at 51.

[16] Id. at 18; petition for review on certiorari.

[17] Id. at 13-28.

[18] Id. at 144-154.

[19] Id. at 162-170.

[20] Jehan Shipping Corporation v. National Food Authority, 514 Phil. 166, 173 (2005).

[21] United Pulp and Paper Co. Inc. v. Acropolis Central Guaranty Corporation, 680 Phil. 64, 79 (2012).

[22] Pallada v. RTC of Kalibo, Aklan, Br. I, 364 Phil. 81, 89 ( 1999).

[23] Nuñez v. GSIS Family Bank, 511 Phil. 735, 747-748 (2005).

[24] 635 Phil. 598 (2010).

[25] Id. at 604.

[26] Supra note 20.

[27] Id. at 173-174

[28] Records, p. 442.

[29] Id. at 445-447

[30] CMH Agricultural Corp. v. Court of Appeals, 428 Phil. 610, 621-622 (2002).

[31] Ventura, et al. v. Heirs of Spouses Endaya, 718 Phil. 620, 630 (2013).

[32] Sps. Serrano and Herrera v. Caguiat, 545 Phil. 660, 667 (2007).

[33] Coronel v. CA, 331 Phil. 294 , 310-311 (1996).

[34] Id. at 311.

[35] Id.

[36] Id. at 309-310.

[37] Records, p. 8.

[38] Chua v. Court of Appeals, 449 Phil. 25, 42 (2003).

[39] Id. at 43.

[40] Records, p. 236.

[41] Id. at 247.

[42] International Hotel Corporation v. Joaquin, Jr. and Suarez, 708 Phil. 361, 373 (2013).

[43] Records, p. 258.

[44] Id.

[45] Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

[46] Catungal, et al. v. Rodriguez, 661 Phil. 484, 508 (2011).

Guidelines for the procedure for actions seeking (1) modification of penalties; and (2) immediate release of convict based on RA No. 10951

2018 Jul 31
G.R. No. 237721
En Banc

IN RE: CORRECTION/ADJUSTMENT OF PENALTY PURSUANT TO REPUBLIC ACT NO. 10951, IN RELATION TO HERNAN V. SANDIGANBAYAN – ROLANDO ELBANBUENA Y MARFIL, PETITIONER.


D E C I S I O N

JARDELEZA, J.:

This is a petition[1] praying for the release of petitioner Rolando M. Elbanbuena (Elbanbuena) pursuant to the provisions of Republic Act (RA) No. 10951[2] and this Court's ruling in Hernan v. Sandiganbayan.[3]

Petitioner Elbanbuena worked as a Disbursing Officer of Alingilan National High School in Alingilan, Bacolod. He was charged with four counts of malversation of public funds through falsification of a public document under Articles 217 and 171 in relation to Article 48 of the Revised Penal Code (RPC). After trial, Elbanbuena was found guilty beyond reasonable doubt of the crimes charged in the Information.[4] The dispositive portion of the Decision states:

WHEREFORE, the accused is hereby found guilty of the complex crime of Malversation of Public Funds through falsification of public or commercial documents in Criminal Cases Nos. 95-17264, 95-17265, and 95-17266 and for Malversation of Public Funds in Criminal Case No. 95-17263, and the accused is hereby sentenced as follows:

1) To suffer imprisonment in Criminal Cases Nos. 95- 17264, 95-17265, 95-17266, from prision mayor maximum or ten (10) years one (1) day to twelve (12) years to reclusion temporal maximum or seventeen (17) years four (4) months and one (1) day to twenty (20) years; in three (3) counts;

2) To suffer imprisonment in Criminal Case No. 95- 17263 of prision mayor medium or eight years one (1) day to ten (10) years to reclusion temporal minimum or twelve (12) years one (1) day to fourteen (14) years and eight (8) months; and

3) To suffer civil interdiction and absolute disqualification during the period of the sentence.

SO ORDERED.[5]

Since Elbanbuena did not appeal the ruling, it became final and executory on August 10, 2000.[6] On January 9, 2003, Elbanbuena started serving his sentence at the New Bilibid Prison in Muntinlupa City.[7]

On August 29, 2017, RA No. 10951 was promulgated. It amended Act No. 3815, otherwise known as the Revised Penal Code, and reduced the penalties for certain crimes. Pertinently, Section 40 of RA No. 10951 provides:

Sec. 40. Article 217 of the same Act, as amended by Republic Act No. 1060, is hereby further amended to read as follows:

Art. 217. Malversation of public funds or property. – Presumption of malversation. – Any public officer who, by reason of the duties of his office, is accountable for public funds or property, shall appropriate the same, or shall take or misappropriate or shall consent, through abandonment or negligence, shall permit any other person to take such public funds or property, wholly or partially, or shall otherwise be guilty of the misappropriation or malversation of such funds or property, shall suffer:

1. The penalty of prision correccional in its medium and maximum periods, if the amount involved in the misappropriation or malversation does not exceed Forty thousand pesos (P40,000).

2. The penalty of prision mayor in its minimum and medium periods, if the amount involved is more than Forty thousand pesos (P40,000) but does not exceed One million two hundred thousand pesos (P1,200,000).

3. The penalty of prision mayor in its maximum period to reclusion temporal in its minimum period, if the amount involved is more than One million two hundred thousand pesos (P1,200,000) but does not exceed Two million four hundred thousand pesos (P2,400,000).

4. The penalty of reclusion temporal, in its medium and maximum periods, if the amount involved is more than Two million four hundred thousand pesos (P2,400,000) but does not exceed Four million four hundred thousand pesos (P4,400,000).

5. The penalty of reclusion temporal in its maximum period, if the amount involved is more than Four million four hundred thousand pesos (P4,400,000) but does not exceed Eight million eight hundred thousand pesos (P8,800,000). If the amount exceeds the latter, the penalty shall be reclusion perpetua.

In all cases, persons guilty of malversation shall also suffer the penalty of perpetual special disqualification and a fine equal to the amount of the funds malversed or equal to the total value of the property embezzled.

The failure of a public officer to have duly forthcoming any public funds or property with which is chargeable, upon demand by any duly authorized officer, shall be prima facie evidence that he has put such missing funds or property to personal uses. (Emphasis supplied.)

On December 5, 2017, this Court issued its ruling in Hernan v. Sandiganbayan.[8] There, the Court held:

The general rule is that a judgment that has acquired finality becomes immutable and unalterable, and may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law and whether it will be made by the court that rendered it or by the highest court of the land. When, however, circumstances transpire after the finality of the decision rendering its execution unjust and inequitable, the Court may sit en banc and give due regard to such exceptional circumstance warranting the relaxation of the doctrine of immutability. The same is in line with Section 3(c), Rule II of the Internal Rules of the Supreme Court, which provides that cases raising novel questions of law are acted upon by the Court en banc. To the Court, the recent passage of Republic Act (R.A.) No. 10951 x x x which accordingly reduced the penalty applicable to the crime charged herein is an example of such exceptional circumstance. x x x

x x x x

Pursuant to the aforequoted provision, therefore, We have here a novel situation wherein the judgment convicting the accused, petitioner herein, has already become final and executory and yet the penalty imposed thereon has been reduced by virtue of the passage of said law. x x x

Thus, in order to effectively avoid any injustice that petitioner may suffer as well as a possible multiplicity of suits arising therefrom, the Court deems it proper to reopen the instant case and recall the Entry of Judgment dated June 26, 2013 of the Sandiganbayan, x x x.

On a final note, judges, public prosecutors, public attorneys, private counsels, and such other officers of the law are hereby advised to similarly apply the provisions of RA No. 10951 whenever it is, by reason of justice and equity, called for by the facts of each case. Hence, said recent legislation shall find application in cases where the imposable penalties of the affected crimes such as theft, qualified theft, estafa, robbery with force upon things, malicious mischief, malversation, and such other crimes, the penalty of which is dependent upon the value of the object in consideration thereof, have been reduced, as in the case at hand, taking into consideration the presence of existing circumstances attending its commission. For as long as it is favorable to the accused, said recent legislation shall find application regardless of whether its effectivity comes after the time when the judgment of conviction is rendered and even if service of sentence has already begun. The accused, in these applicable instances, shall be entitled to the benefits of the new law warranting him to serve a lesser sentence, or to his release, if he has already begun serving his previous sentence, and said service already accomplishes the term of the modified sentence. In the latter case, moreover, the Court, in the interest of justice and expediency, further directs the appropriate filing of an action before the Court that seeks the reopening of the case rather than an original petition filed for a similar purpose.

Indeed, when exceptional circumstances exist, such as the passage of the instant amendatory law imposing penalties more lenient and favorable to the accused, the Court shall not hesitate to direct the reopening of a final and immutable judgment, the objective of which is to correct not so much the findings of guilt but the applicable penalties to be imposed.[9] (Emphasis supplied; citations omitted.)

Hence, this petition which seeks, among others, the modification, in conformity with RA No. 10951, of the Decision[10] dated July 5, 2000 rendered by Branch 41 of the Regional Trial Court of Bacolod City and, pursuant thereto, Elbanbuena's immediate release from confinement.

In a Resolution[11] dated April3, 2018, this Court required the Office of the Solicitor General (OSG) to comment on the petition (and its consolidated cases) and recommend guidelines relative thereto and similar petitions.

On July 4, 2018, the OSG filed its consolidated comment wherein it agreed that petitioners may invoke RA No. 10951 to seek a modification/reduction of the penalties for some of the crimes for which they are presently serving sentence. The OSG, however, took the position that Elbanbuena (and the other petitioners similarly situated) may not be immediately released at this point:

12. x x x While R.A. No. 10951 did reduce the imposable penalties for petitioners' crimes under the RPC, the reduced penalties to be actually imposed for these crimes have yet to be fixed by a court of competent jurisdiction.

13. The determination of whether petitioners are now entitled to be released requires that the court exercising jurisdiction over this petition first: (a) fix the new penalties for the crimes for which petitioners are presently serving sentence, as provided under R.A. No. 10951; and, thereafter (b) ascertain whether petitioners have indeed fully served their respective sentences based on such new penalties. Both have yet to be made.[12] (Italics in the original.)

As held by this Court in Hernan v. Sandiganbayan, the passage of RA No. 10951 is an exceptional circumstance which warrants not only the re-opening of an already terminated case, but also the recall of an Entry of Judgment for purposes of modifying the penalty to be served. Thus, in Hernan, this Court re-opened the case for the sole purpose of re-computing the proper sentence to be imposed in accordance with RA No. 10951. In contrast, petitioner Elbanbuena here seeks not only a modification of his sentence in accordance with RA No. 10951; he also seeks immediate release from confinement on account of his alleged full service of the re-computed sentence. The determination of whether he is entitled to immediate release, however, would necessarily involve ascertaining, among others, the actual length of time Elbanbuena has actually been in confinement and whether time allowance for good conduct should be allowed. Such an exercise would, at the first instance, be better undertaken by a trial court, which is relatively more equipped to make findings of both fact and law.

However, and especially in view of the anticipated influx of similar petitions,[13] the Court, in the interest of justice and efficiency, resolves to issue the following guidelines:[14]

I. Scope.

These guidelines shall govern the procedure for actions seeking (1) the modification, based on the amendments introduced by RA No. 10951, of penalties imposed by final judgments; and, (2) the immediate release of the petitioner-convict on account of full service of the penalty/penalties, as modified.

II. Who may file.

The Public Attorney's Office, the concerned inmate, or his/her counsel/representative, may file the petition.

III. Where to file.

The petition shall be filed with the Regional Trial Court exercising territorial jurisdiction over the locality where the petitioner-convict is confined. The case shall be raffled and referred to the branch to which it is assigned within three (3) days from the filing of the petition.

IV. Pleadings.

(A) Pleadings allowed. - The only pleadings allowed to be filed are the petition and the comment from the OSG. No motions for extension of time, or other dilatory motions for postponement, shall be allowed. The petition must contain a certified true copy of the Decision sought to be modified and, where applicable, the mittimus and/or a certification from the Bureau of Corrections as to the length of the sentence already served by petitioner-convict.

(B) Verification.- The petition must be in writing and verified by the petitioner-convict himself.

V. Comment by the OSG.

Within ten (10) days from notice, the OSG shall file its comment to the petition.

VI. Effect of failure to file comment.

Should the OSG fail to file the comment within the period provided, the court, motu proprio, or upon motion of the petitioner-convict, shall render judgment as may be warranted.

VII. Judgment of the court.

To avoid any prolonged imprisonment, the court shall promulgate judgment no later than ten (10) calendar days after the lapse of the period to file comment. The judgment shall set forth the following:

a. The penalty/penalties imposable in accordance with RA No. 10951;

b. Where proper, the length of time the petitioner-convict has been in confinement (and whether time allowance for good conduct should be allowed); and

c. Whether the petitioner-convict is entitled to immediate release due to complete service of his sentence/s, as modified in accordance with RA No. 10951.

The judgment of the court shall be immediately executory, without prejudice to the filing before the Supreme Court of a special civil action under Rule 65 of the Revised Rules of Court where there is showing of grave abuse of discretion amounting to lack or excess of jurisdiction.

VIII. Applicability of the regular rules.

The Rules of Court shall apply to the special cases herein provided in a suppletory capacity insofar as they are not inconsistent therewith.

WHEREFORE, premises considered, the petition is GRANTED. The Decision dated July 5, 2000 in Criminal Cases Nos. 95-17263, 95-17264, 95-17265, and 95-17266 is hereby REMANDED to the Regional Trial Court in Muntinlupa City for the determination of: (1) the proper penalty/penalties in accordance with RA No. 10951; and (2) whether petitioner ROLANDO ELBANBUENA y MARFIL is entitled to immediate release on account of full service of his sentences, as modified.

Let copies of this Decision also be furnished to the Office of the Court Administrator for dissemination to the First and Second Level courts, and also to the Presiding Justices of the appellate courts, the Department of Justice, Office of the Solicitor General, Public Attorney's Office, Prosecutor General's Office, the Directors of the National Penitentiary and Correctional Institution for Women, and the Integrated Bar of the Philippines for their information, guidance, and appropriate action.

SO ORDERED.

Carpio,[*] Velasco, Jr., Leonardo-De Castro, Peralta, Bersamin, Del Castillo, Perlas-Bernabe, Leonen, Caguioa, Martires, Tijam, Reyes, Jr., and Gesmundo, JJ., concur.

NOTICE OF JUDGMENT

Sirs/Mesdames:

Please take notice that on July 31, 2018 a Decision, copy attached herewith, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on August 16, 2018 at 3:00 p.m.

Very truly yours,

(SGD.) EDGAR O. ARICHETA
Clerk of Court

[*] Senior Associate Justice, Per Section 12, Republic Act No. 296, The Judiciary Act of 1948, as amended.

[1] Rollo, pp. 3-20.

[2] An Act Adjusting the Amount or the Value of Property and Damage on Which a Penalty is Based, and the Fines Imposed Under the Revised Penal Code, Amending for the Purpose Act No. 3815, Otherwise Known as "The Revised Penal Code," as Amended.

[3] G.R. No. 217874, December 5, 2017.

[4] On October 15, 1993, and by virtue of his office, Elbanbuena received Land Bank Check No. 8617487 in the amount of P29,000.00, intended for deposit in the school's Maintenance and Other Operating Expenses (MOOE) account. He, however, failed to deposit said check.

On October 18, 1993, Elbanbuena received two (2) Land Bank Check Nos. 8617490 and 8617425 in the amount of P100.00 and P595.00, respectively. However, he falsified the amounts stated in the checks, making it appear that the checks were issued in the amounts of P38,100.00 and P24,595.00, respectively. He encashed the checks against the MOOE Fund account in Land Bank and misappropriated the same for his own personal use.

On October 20, 1993, Elbanbuena received Land Bank Check No. 8617486 in the amount of P8,350.24. Once again, he falsified the amount in the check by changing the amount in words and figures to P98,350.24. He encashed the check against the MOOE Fund account in Land Bank and misappropriated the amount of P98,350.24 for his own personal use. Rollo, pp. 28-32.

[5] Id. at 32.

[6] Id. at 33.

[7] Id. at 25.

[8] Supra note 3.

[9] Id.

[10] Rollo, pp. 27-32.

[11] Id. at 34-37.

[12] OSG consolidated comment, p. 6.

[13] See list submitted by the Deputy Director General for Operations of the Bureau of Corrections pursuant to the Court's order in Hernan v. Sandiganbayan. (Rollo, pp. 21-24.)

[14] Pursuant to this Court's power under Section 5(5) of Article VIII of the Constitution which provides:

Sec. 5(5). Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts, the admission to the practice of law, the Integrated Bar, and legal assistance to the underprivileged. Such rules shall provide a simplified and inexpensive procedure for the speedy disposition of cases, shall be uniform for all courts of the same grade, and shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court.

Remedial Law > New Rulings > Pecuniary Estimation

2018 Jun 19
G.R. No. 202836
En Banc

FIRST SARMIENTO PROPERTY HOLDINGS, INC., PETITIONER, VS. PHILIPPINE BANK OF COMMUNICATIONS, RESPONDENT.


D E C I S I O N

LEONEN, J.:

To determine the nature of an action, whether or not its subject matter is capable or incapable of pecuniary estimation, the nature of the principal action or relief sought must be ascertained. If the principal relief is for 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 sum of money or real property, even if a claim over a sum of money or real property results as a consequence of the principal relief, the action is incapable of pecuniary estimation.

This resolves the Petition for Review[1] filed by First Sarmiento Property Holdings, Inc. (First Sarmiento) assailing the April 3, 2012 Decision[2] and July 25, 2012 Order[3] of Branch 11, Regional Trial Court, Malolos City, Bulacan in Civil Case No. 04-M-2012.

The facts as established by the parties are as follows:

On June 19, 2002,[4] First Sarmiento obtained from Philippine Bank of Communications (PBCOM) a P40,000,000.00 loan, which was secured by a real estate mortgage[5] over 1,076 parcels of land.[6]

On March 15, 2003,[7] the loan agreement was amended[8] with the increase of the loan amount to P51,200,000.00. On September 15, 2003, the loan agreement was further amended[9] when the loan amount was increased to P100,000,000.00.

On January 2, 2006,[10] PBCOM filed a Petition for Extrajudicial Foreclosure of Real Estate Mortgage.[11] It claimed in its Petition that it sent First Sarmiento several demand letters, yet First Sarmiento still failed to pay the principal amount and accrued interest on the loan. This prompted PBCOM to resort to extrajudicial foreclosure of the mortgaged properties, a recourse granted to it under the loan agreement.[12]

On December 27, 2011, First Sarmiento attempted to file a Complaint for annulment of real estate mortgage with the Regional Trial Court. However, the Clerk of Court refused to accept the Complaint in the absence of the mortgaged properties' tax declarations, which would be used to assess the docket fees.[13]

On December 29, 2011, Executive Judge Renato C. Francisco (Judge Francisco), First Vice-Executive Judge Ma. Theresa A. Mendoza Arcega, Second Vice-Executive Judge Ma. Belen R. Liban, and Third Vice-Executive Judge Basilio R. Gabo, Jr. of the Regional Trial Court of City of Malolos, Bulacan, granted First Sarmiento's Urgent Motion to Consider the Value of Subject Matter of the Complaint as Not Capable of Pecuniary Estimation, and ruled that First Sarmiento's action for annulment of real estate mortgage was incapable of pecuniary estimation.[14]

Also on December 29, 2011, the mortgaged properties were auctioned and sold to PBCOM as the highest bidder.[15]

On January 2, 2012, First Sarmiento filed a Complaint for annulment of real estate mortgage and its amendments, with prayer for the issuance of temporary restraining order and preliminary injunction.[16] It paid a filing fee of P5,545.00.[17]

First Sarmiento claimed in its Complaint that it never received the loan proceeds of P100,000,000.00 from PBCOM, yet the latter still sought the extrajudicial foreclosure of real estate mortgage. It prayed for the issuance of a temporary restraining order and preliminary injunction to enjoin the Ex-Officio Sheriff from proceeding with the foreclosure of the real estate mortgage or registering the certificate of sale in PBCOM's favor with the Registry of Deeds of Bulacan.[18]

That same day, Judge Francisco issued an ex-parte temporary restraining order for 72 hours, enjoining the registration of the certificate of sale with the Registry of Deeds of Bulacan.[19]

On January 4, 2012, the Regional Trial Court directed the parties to observe the status quo ante.[20]

On January 24, 2012, the Clerk of Court and Ex-Officio Sheriff of Malolos City, Bulacan issued a certificate of sale to PBCOM.[21]

In its Opposition (Re: Application for Issuance of Temporary Restraining Order),[22] PBCOM asserted that the Regional Trial Court failed to acquire jurisdiction over First Sarmiento's Complaint because the action for annulment of mortgage was a real action; thus, the filing fees filed should have been based on the fair market value of the mortgaged properties.[23]

PBCOM also pointed out that the Regional Trial Court's directive to maintain the status quo order beyond 72 hours constituted an indefinite extension of the temporary restraining order, a clear contravention of the rules.[24]

On April 3, 2012, Branch 11, Regional Trial Court,[25] Malolos City, Bulacan dismissed the Complaint for lack of jurisdiction:

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.[26]

On July 25, 2012, the Regional Trial Court[27] denied First Sarmiento's motion for reconsideration.[28]

On August 17, 2012, First Sarmiento sought direct recourse to this Court with its Petition for Review[29] under Rule 45. It insists that its Complaint for the annulment of real estate mortgage was incapable of pecuniary estimation.[30] It points out that the Executive Judge and Vice-Executive Judges of the Regional Trial Court likewise acknowledged that its action was incapable of pecuniary estimation.[31]

Petitioner highlights that the Supreme Court En Banc in Lu v. Lu Ym held "that an action for declaration of nullity of issuance of shares or an action questioning the legality of a conveyance is one not capable of pecuniary estimation."[32] Furthermore, petitioner maintains that the Supreme Court En Banc in Bunayog v. Tunas also established that a complaint questioning the validity of a mortgage is an action incapable of pecuniary estimation.[33]

It emphasizes that Home Guaranty Corporation v. R-II Builders, which the Regional Trial Court relied on to dismiss its complaint for lack of jurisdiction, was rendered by a division of the Supreme Court; hence, it cannot modify or reverse a doctrine or principle of law laid down by the Supreme Court En Banc.[34]

On September 19, 2012,[35] this Court directed respondent PBCOM to comment on the petition.

In its Comment,[36] respondent contends that petitioner's action to annul the real estate mortgage and enjoin the foreclosure proceedings did not hide the true objective of the action, which is to restore petitioner's ownership of the foreclosed properties.[37]

Respondent maintains that this Court has already settled that "a complaint for cancellation of sale which prayed for both permanent and preliminary injunction aimed at the restoration of possession of the land in litigation is a real action."[38]

It likewise stresses that since petitioner's primary objective in filing its Complaint was to prevent the scheduled foreclosure proceedings over the mortgaged properties and the conveyance of their ownership to the highest bidder, the case was a real action.[39]

Finally, it denies that Home Guaranty Corporation modified and reversed Lu v. Lu Ym because the factual and legal milieus of these two (2) cases were different.[40]

On November 26, 2012,[41] this Court required petitioner to file a reply to the comment.

On February 1, 2013, petitioner filed its Reply[42] where it denies that its Complaint was for the annulment of the foreclosure sale, because when it filed its Complaint, the foreclosure sale had not yet happened.[43]

It proclaims that its Complaint sought the removal of the lien on the mortgaged properties and was not intended to recover ownership or possession since it was still the registered owner with possession of the mortgaged properties when it filed its Complaint.[44]

On February 27, 2013,[45] this Court noted petitioner's reply and directed the parties to submit their respective memoranda.

On May 30, 2013, the parties filed their respective memoranda.[46]

In its Memorandum,[47] petitioner continues to insist that it did not receive the loan proceeds from PBCOM which is why it filed its Complaint for annulment of real estate mortgage in response to the latter's Petition for Extrajudicial Foreclosure of Real Estate Mortgage.[48]

Petitioner reiterates that its Complaint for annulment of real estate mortgage was an action incapable of pecuniary estimation because it merely sought to remove the lien on its properties, not the recovery or reconveyance of the mortgaged properties.[49]

It states that it never expressly or impliedly sought the conveyance of the mortgaged properties because it was still the registered owner of the mortgaged properties when its Complaint was first presented for filing with the Clerk of Court.[50]

On the other hand, respondent in its Memorandum[51] restates its stand that petitioner's Complaint involved a real action; hence, the estimated value of the mortgaged properties should have been alleged and used as the basis for the computation of the docket fees.[52]

Respondent claims that the allegations in petitioner's Complaint reveal the latter's real intention to assert its title and recover the real properties sold at the public auction.[53]

The only issue for this Court's resolution is whether or not the Regional Trial Court obtained jurisdiction over First Sarmiento Corporation, Inc.'s Complaint for annulment of real estate mortgage.

I

Rule 45 of the Rules of Court allows for a direct recourse to this Court by appeal from a judgment, final order, or resolution of the Regional Trial Court. Rule 45, Section 1 provides:

Section 1. Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.

Rule 41, Section 2(c) likewise provides:

Section 2. Modes of appeal. —

....

(c) Appeal by certiorari. — In all cases where only questions of law are raised or involved, the appeal shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45.

Thus, there is no question that a petitioner may file a verified petition for review directly with this Court if only questions of law are at issue; however, if both questions of law and of facts are present, the correct remedy is to file a petition for review with the Court of Appeals.[54]

Doña Adela Export International v. Trade and Investment Development Corp.[55] differentiated between a question of law and a question of fact as follows:

We stress that a direct recourse to this Court from the decisions, final resolutions and orders of the RTC may be taken where only questions of law are raised or involved. There is a question of law when the doubt or difference arises as to what the law is on a certain state of facts, which does not call for an examination of the probative value of the evidence presented by the parties-litigants. On the other hand, there is a question of fact when the doubt or controversy arises as to the truth or falsity of the alleged facts. Simply put, when there is no dispute as to fact, the question of whether the conclusion drawn therefrom is correct or not, is a question of law.[56] (Citation omitted)

In the case at bar, the underlying question for this Court's resolution pertains to jurisdiction, or to be more precise, whether the Regional Trial Court attained jurisdiction over petitioner's Complaint with the amount of docket fees paid.

Considering that the issue of jurisdiction is a pure question of law,[57] petitioner did not err in filing its appeal directly with this Court pursuant to law and prevailing jurisprudence.

II

Petitioner contends that its Complaint for annulment of real estate mortgage has a subject incapable of pecuniary estimation because it was not intended to recover ownership or possession of the mortgaged properties sold to respondent during the auction sale.[58] It insists that it had ownership and possession of the mortgaged properties when it filed its Complaint; hence, it never expressly or impliedly sought recovery of their ownership or possession.[59]

The petition is meritorious.

Jurisdiction is "the power and authority of a court to hear, try and decide a case"[60] brought before it for resolution.

Courts exercise the powers conferred on them with binding effect if they acquire jurisdiction over: "(a) the cause of action or the subject matter of the case; (b) the thing or the res; (c) the parties; and (d) the remedy."[61]

Jurisdiction over the thing or the res is a court's authority over the object subject of litigation.[62] The court obtains jurisdiction or actual custody over the object through the seizure of the object under legal process or the institution of legal proceedings which recognize the power and authority of the court.[63]

Jurisdiction over the parties is the court's power to render judgment that are binding on the parties. The courts acquire jurisdiction over the plaintiffs when they file their initiatory pleading, while the defendants come under the court's jurisdiction upon the valid service of summons or their voluntary appearance in court.[64]

Jurisdiction over the cause of action or subject matter of the case is the court's authority to hear and determine cases within a general class where the proceedings in question belong. This power is conferred by law and cannot be acquired through stipulation, agreement between the parties,[65] or implied waiver due to the silence of a party.[66]

Jurisdiction is conferred by the Constitution, with Congress given the plenary power, for cases not enumerated in Article VIII, Section 5[67] of the Constitution, to define, prescribe, and apportion the jurisdiction of various courts.[68]

Batas Pambansa Blg. 129, or the Judiciary Reorganization Act of 1980 as amended by Republic Act No. 7691, provided for the jurisdictional division between the first and second level courts by considering the complexity of the cases and the experience needed of the judges assigned to hear the cases.

In criminal cases, first level courts are granted exclusive original jurisdiction to hear complaints on violations of city or municipal ordinances[69] and offenses punishable with imprisonment not exceeding six (6) years.[70] In contrast, second level courts, with more experienced judges sitting at the helm, are granted exclusive original jurisdiction to preside over all other criminal cases not within the exclusive jurisdiction of any other court, tribunal, or body.[71]

The same holds true for civil actions and probate proceedings, where first level courts have the power to hear cases where the value of personal property, estate, or amount of the demand does not exceed P100,000.00 or P200,000.00 if in Metro Manila.[72] First level courts also possess the authority to hear civil actions involving title to, possession of, or any interest in real property where the value does not exceed P20,000.00 or P50,000.00 if the real property is situated in Metro Manila.[73] Second level courts then assume jurisdiction when the values involved exceed the threshold amounts reserved for first level courts[74] or when the subject of litigation is incapable of pecuniary estimation.[75]

First level courts were also conferred with the power to hear the relatively uncomplicated cases of forcible entry and unlawful detainer,[76] while second level courts are authorized to hear all actions in admiralty and maritime jurisdiction[77] with claims above a certain threshold amount. Second level courts are likewise authorized to hear all cases involving the contract of marriage and marital relations,[78] in recognition of the expertise and probity required in deciding issues which traverse the marital sphere.

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[79] 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.[80] Heirs of Dela Cruz v. Heirs of Cruz[81] 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.[82]

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).[83] (Citation omitted)

Heirs of Sebe v. Heirs of Sevilla[84] 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.[85]

A careful reading of petitioner's Complaint convinces this Court that petitioner never prayed for the reconveyance of the properties foreclosed during the auction sale, or that it ever asserted its ownership or possession over them. Rather, it assailed the validity of the loan contract with real estate mortgage that it entered into with respondent because it supposedly never received the proceeds of the P100,000,000.00 loan agreement.[86] This is evident in its Complaint, which read:

GROUNDS FOR THE APPLICATION OF PRELIMINARY INJUNCTION AND TEMPORARY RESTRAINING ORDER

7. Defendant PBCOM knows fully well that plaintiff did not receive from it the loan it (PBCOM) alleged to have granted in its favor.

8. Despite this, defendant PBCOM has filed with the Ex-Officio Sheriff of Bulacan, a petition for extra judicial foreclosure of real estate mortgage, bent on foreclosing the real estate properties of plaintiff, photocopy of the petition is hereto attached as Annex "F".

9. The auction sale of the properties is set on December 29, 2011.

10. Defendant PBCOM, well knowing the facts narrated above and willfully disregarding the property rights of plaintiff, wrongfully filed an extra judicial foreclosure of real estate mortgage and pursuant to said petition, the Ex-Officio Sheriff now does offer for sale, the real estate properties of the plaintiff as set forth in its (PBCOM) said petition.

11. Unless defendants PBCOM and Ex-Officio Sheriff are restrained by this Honorable Court, they will infringe the property rights of the plaintiff in the manner herein before related.[87]

Far East Bank and Trust Company v. Shemberg Marketing Corporation[88] 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.[89]

It is not disputed that even if the Complaint were filed a few days after the mortgaged properties were foreclosed and sold at auction to respondent as the highest bidder, the certificate of sale was only issued to respondent after the Complaint was filed.

Section 6 of Act No. 3135,[90] as amended, provides that a property sold through an extrajudicial sale may be redeemed "at any time within the term of one year from and after the date of the sale":

Section 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.

Mahinay v. Dura Tire & Rubber Industries Inc.[91] clarified that "[t]he date of the sale' referred to in Section 6 is the date the certificate of sale is registered with the Register of Deeds. This is because the sale of registered land does not 'take effect as a conveyance, or bind the land' until it is registered."[92]

The registration of the certificate of sale issued by the sheriff after an extrajudicial sale is a mandatory requirement; thus, if the certificate of sale is not registered with the Registry of Deeds, the property sold at auction is not conveyed to the new owner and the period of redemption does not begin to run.[93]

In the case at bar, the Ex-Officio Sheriff of the City of Malolos, Bulacan was restrained from registering the certificate of sale with the Registry of Deeds of Bulacan and the certificate of sale was only issued to respondent after the Complaint for annulment of real estate mortgage was filed. Therefore, even if the properties had already been foreclosed when the Complaint was filed, their ownership and possession remained with petitioner since the certificate of sale was not registered with the Registry of Deeds. This supports petitioner's claim that it never asked for the reconveyance of or asserted its ownership over the mortgaged properties when it filed its Complaint since it still enjoyed ownership and possession over them.

Considering that petitioner paid the docket fees as computed by the clerk of court, upon the direction of the Executive Judge, this Court is convinced that the Regional Trial Court acquired jurisdiction over the Complaint for annulment of real estate mortgage.

Furthermore, even if it is assumed that the instant case were a real action and the correct docket fees were not paid by petitioner, the case should not have been dismissed; instead, the payment of additional docket fees should have been made a lien on the judgment award. The records attest that in filing its complaint, petitioner readily paid the docket fees assessed by the clerk of court; hence, there was no evidence of bad faith or intention to defraud the government that would have rightfully merited the dismissal of the Complaint.[94]

III

Although not raised in the Petition, this Court nonetheless deems it proper to pass upon the legality of the Regional Trial Court January 4, 2012 Order, which directed the parties to observe the status quo ante,[95] effectively extending indefinitely its 72-hour ex-parte temporary restraining order issued on January 2, 2012.[96]

Rule 58, Section 5 of the Rules of Court provides the instances when a temporary restraining order may be issued:

Section 5. Preliminary injunction not granted without notice; exception. — No preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined. If it shall appear from facts shown by affidavits or by the verified application that great or irreparable injury would result to the applicant before the matter can be heard on notice, the court to which the application for preliminary injunction was made, may issue a temporary restraining order to be effective only for a period of twenty (20) days from service on the party or person sought to be enjoined, except as herein provided. Within the said twenty-day period, the court must order said party or person to show cause, at a specified time and place, why the injunction should not be granted, determine within the same period whether or not the preliminary injunction shall be granted, and accordingly issue the corresponding order.

However, and subject to the provisions of the preceding sections, if the matter is of extreme urgency and the applicant will suffer grave injustice and irreparable injury, the executive judge of a multiple-sala court or the presiding judge of a single-sala court may issue ex-parte a temporary restraining order effective for only seventy-two (72) hours from issuance but he shall immediately comply with the provisions of the next preceding section as to service of summons and the documents to be served therewith. Thereafter, within the aforesaid seventy-two (72) hours, the judge before whom the case is pending shall conduct a summary hearing to determine whether the temporary restraining order shall be extended until the application for preliminary injunction can be heard. In no case shall the total period of effectivity of the temporary restraining order exceed twenty (20) days, including the original seventy-two hours provided herein.

In the event that the application for preliminary injunction is denied or not resolved within the said period, the temporary restraining order is deemed automatically vacated. The effectivity of a temporary restraining order is not extendible without need of any judicial declaration to that effect and no court shall have authority to extend or renew the same on the same ground for which it was issued.

However, if issued by the Court of Appeals or a member thereof, the temporary restraining order shall be effective for sixty (60) days from service on the party or person sought to be enjoined. A restraining order issued by the Supreme Court or a member thereof shall be effective until further orders.

It is clear that a temporary restraining order may be issued by a trial court in only two (2) instances: first, when great or irreparable injury would result to the applicant even before the application for writ of preliminary injunction can be heard; and second, if the matter is of extreme urgency and the applicant will suffer grave injustice and irreparable injury. The executive judge of a multi-sala court or the presiding judge of a single-sala court may issue a 72-hour temporary restraining order.

In both instances, the temporary restraining order may be issued ex parte. However, in the first instance, the temporary restraining order has an effectivity of only 20 days to be counted from service to the party sought to be enjoined. Likewise, within those 20 days, the court shall order the enjoined party to show why the injunction should not be granted and shall then determine whether or not the injunction should be granted.

In the second instance, when there is extreme urgency and the applicant will suffer grave injustice and irreparable injury, the court shall issue a temporary restraining order effective for only 72 hours upon issuance. Within those 72 hours, the court shall conduct a summary hearing to determine if the temporary restraining order shall be extended until the application for writ of preliminary injunction can be heard. However, in no case shall the extension exceed 20 days.

If the application for preliminary injunction is denied or not resolved within the given periods, the temporary restraining order is automatically vacated and the court has no authority to extend or renew it on the same ground of its original issuance.

Despite the clear wording of the rules, the Regional Trial Court issued a status quo ante order dated January 4, 2012, indefinitely extending the temporary restraining order on the registration of the certificate of sale with the Registry of Deeds.

Petitioner applied for a writ of preliminary injunction, yet the Regional Trial Court did not conduct any hearing for that purpose and merely directed the parties to observe the status quo ante.

Miriam College Foundation, Inc v. Court of Appeals[97] explained the difference between preliminary injunction and a restraining order as follows:

Preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment or final order, requiring a party or a court, agency or a person to perform to refrain from performing a particular act or acts. As an extraordinary remedy, injunction is calculated to preserve or maintain the status quo of things and is generally availed of to prevent actual or threatened acts, until the merits of the case can be heard. A preliminary injunction persists until it is dissolved or until the termination of the action without the court issuing a final injunction.

The basic purpose of restraining order, on the other hand, is to preserve the status quo until the hearing of the application for preliminary injunction. Under the former A§5, Rule 58 of the Rules of Court, as amended by A§5, Batas Pambansa Blg. 224, a judge (or justice) may issue a temporary restraining order with a limited life of twenty days from date of issue. If before the expiration of the 20-day period the application for preliminary injunction is denied, the temporary order would thereby be deemed automatically vacated. If no action is taken by the judge on the application for preliminary injunction within the said 20 days, the temporary restraining order would automatically expire on the 20th day by the sheer force of law, no judicial declaration to that effect being necessary. In the instant case, no such preliminary injunction was issued; hence, the TRO earlier issued automatically expired under the aforesaid provision of the Rules of Court.[98] (Citations omitted)

A temporary restraining order cannot be extended indefinitely to take the place of a writ of preliminary injunction, since a temporary restraining order is intended only to have a limited lifespan and is deemed automatically vacated upon the expiration of 72 hours or 20 days, as the case may be. As such, the temporary restraining order has long expired and, in the absence of a preliminary injunction, there was nothing to stop the sheriff from registering the certificate of sale with the Registry of Deeds.

This Court has repeatedly expounded on the nature of a temporary restraining order[99] and a preliminary injunction.[100] Yet lower courts consistently interchange these ancillary remedies and disregard the sunset clause[101] inherent in a temporary restraining order by erroneously extending it indefinitely. Such ignorance or defiance of basic remedial measures is a gross disservice to the public, who look towards the court for legal guidance and legal remedy. More importantly, this cavalier attitude towards these injunctive reliefs might even be construed as a deliberate effort to look the other way to favor a party, which will then sully the image of the entire judiciary. Henceforth, this Court will demand stricter compliance with the rules from the members of the bench as regards their issuances of these injunctive reliefs.

IV

Finally, there is a need to reassess the place of Home Guaranty v. R-II Builders[102] in our jurisprudence.

In Home Guaranty, R-II Builders, Inc. (R-II Builders) filed a Complaint for the rescission of the Deed of Assignment and Conveyance it entered into with Home Guaranty Corporation and National Housing Authority. The Complaint was initially determined to have a subject that is incapable of pecuniary estimation and the docket fees were assessed and paid accordingly.[103]

R-II Builders later filed a motion to admit its Amended and Supplemental Complaint, which deleted its earlier prayer for the resolution of its Deed of Assignment and Conveyance, and prayed for the conveyance of title to and/or possession of the entire Asset Pool. The Regional Trial Court ruled that the Amended and Supplemental Complaint involved a real action and directed R-II Builders to pay the correct docket fees.[104]

Instead of paying the additional docket fees, R-II Builders withdrew its Amended and Supplemental Complaint and instead filed a motion to admit its Second Amended Complaint, which revived the prayer in its original Complaint to resolve the Deed of Assignment and Conveyance and deleted the causes of action for conveyance of title to and/or possession of the entire Asset Pool in its Amended and Supplemental Complaint.[105] The Regional Trial Court granted the motion to admit the Second Amended Complaint, ratiocinating that the docket fees to the original Complaint had been paid; that the Second Amended Complaint was not intended to delay the proceedings; and that the Second Amended Complaint was consistent with R-II Builders' previous pleadings.[106]

The Court of Appeals upheld the ruling of the Regional Trial Court and reiterated that the case involved a subject that was incapable of pecuniary estimation.[107] However, Home Guaranty reversed the Court of Appeals Decision, ruling that the Complaint and the Amended and Supplemental Complaint both involved prayers for the conveyance and/or transfer of possession of the Asset Pool, causes of action which were undoubtedly real actions. Thus, the correct docket fees had not yet been paid:[108]

Although an action for resolution and/or the nullification of a contract, like an action for specific performance, fall squarely into the category of actions where the subject matter is considered incapable of pecuniary estimation, we find that the causes of action for resolution and/or nullification of the [Deed of Assignment and Conveyance] was erroneously isolated by the [Court of Appeals] from the other causes of action alleged in R-II Builders' original complaint and Amended and Supplemental Complaint which prayed for the conveyance and/or transfer of possession of the Asset Pool. In Gochan v. Gochan, this Court held that an action for specific performance would still be considered a real action where it seeks the conveyance or transfer of real property, or ultimately, the execution of deeds of conveyance of real property.

....

Granted that R-II Builders is not claiming ownership of the Asset Pool because its continuing stake is, in the first place, limited only to the residual value thereof, the conveyance and/or transfer of possession of the same properties sought in the original complaint and Amended and Supplemental Complaint both presuppose a real action for which appropriate docket fees computed on the basis of the assessed or estimated value of said properties should have been assessed and paid. . . .[109] (Citations omitted)

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.[111]

In a dissenting opinion in the Home Guaranty[112] 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.[113] (Citations omitted)

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.[114] 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."[115]

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.[116]

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.

It is clear that subject matter jurisdiction cannot be dependent on the supposed ultimate motive or true objective of the complaint because this will require the judge to speculate on the defenses of the plaintiff beyond the material allegations contained in the complaint. Likewise, in attempting to pinpoint the true objective of the complaint at the initial stages of trial, the judge might end up dictating the result outside of the evidence still to be presented during the trial, opening up the judge to charges of partiality and even impropriety. Furthermore, the judge is not aware of the evidence to be presented by either party when the complaint is filed; thus, there is no reliable basis that can be used to infer the true objective of the complaint. It is imperative then that the competing claims as basis of subject matter jurisdiction be textually based, finding its basis in the body of the complaint and the relief sought without reference to extraneous facts not alleged or evidence still to be presented.

Nonetheless, if subject matter jurisdiction is assailed during the course of the trial and evidence is presented to prove the defense's allegation of lack of jurisdiction, this will lead to an anomaly where the defense's evidence, instead of the complaint, will effectively determine the remedy and cause of action.

In the case at bar, petitioner contends that its complaint prayed for the annulment of the real estate mortgage it entered into with respondent and not for the recovery or reconveyance of the mortgaged properties because it was still the registered owner when it filed its complaint. The evidence on record supports petitioner's claim; hence, there was no reason for the dismissal of its Complaint for lack of jurisdiction.

Home Guaranty likewise erred in dismissing the action because of non-payment of the correct filing fees. Fedman Development Corporation v. Agcaoili[117] reiterated that where the assessed docket fees have been paid and the assessment turns out to be insufficient, the court still acquires jurisdiction over the case, subject to payment of the deficiency assessment.[118] The only exception is when the deficiency in docket fees is accompanied with bad faith and an intention to defraud the government.[119] It is not disputed that R-II Builders paid the assessed docket fees when it filed its Complaint, negating bad faith or intent on its part to defraud the government.

In light of the foregoing, this Court reaffirms that the nature of an action is determined by the principal relief sought in the complaint, irrespective of the other causes of actions that may also crop up as a consequence of the principal relief prayed for. The contrary rule espoused in Home Guaranty is thereby set aside.

WHEREFORE, this Court resolves to GRANT the Petition. The assailed April 3, 2012 Decision and July 25, 2012 Order of Branch 11, Regional Trial Court, City of Malolos, Bulacan in Civil Case No. 04-M-2012 are REVERSED and SET ASIDE.

The case is ordered REMANDED to Branch 11, Regional Trial Court, City of Malolos, Bulacan for continued trial on First Sarmiento Property Holdings, Inc.'s Complaint for annulment of real estate mortgage and its amendments.

SO ORDERED.

Carpio, Acting C. J., Velasco, Jr., Leonardo-De Castro, Peralta, Bersamin, Del Castillo, Perlas-Bernabe, Jardeleza, Caguioa, Martires, Tijam, Reyes, Jr., and Gesmundo, JJ., concur.

NOTICE OF JUDGMENT

Sirs/Mesdames:

Please take notice that on June 19, 2018 a Decision, copy attached herewith, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on August 28,2018 at 2:30 p.m.

Very truly yours,

(SGD)
EDGAR O. ARICHETA
Clerk of Court

[1] Rollo, pp. 3-20.

[2] Id. at 21-22. The Decision was penned by Judge Basilio R. Gabo, Jr.

[3] Id. at 23. The Resolution was penned by Judge Basilio R. Gabo, Jr.

[4] Id. at 53.

[5] Id. at 33-34.

[6] Id. at 21 and 35-52.

[7] Id. at 21.

[8] Id. at 53-54.

[9] Id. at 55-56.

[10] Id. at 179.

[11] Id. at 57-64.

[12] Id. at 62-64.

[13] Id. at 155.

[14] Id. at 65-66.

[15] Id. at 179.

[16] Id. at 24-30.

[17] Id. at 67-68.

[18] Id. at 26-27.

[19] Id. at 69-70.

[20] Id. at 21.

[21] Id. at 179.

[22] Id. at 71-81.

[23] Id. at 76-77.

[24] Id. at 77-79.

[25] Id. at 21-22.

[26] Id. at 22.

[27] Id. at 23.

[28] Id. at 90-94.

[29] Id. at 3-20.

[30] Id. at 11-13.

[31] Id. at 10.

[32] Id. at 14.

[33] Id. at 14.

[34] Id. at 13-15.

[35] Id. at 113.

[36] Id. at 118-133.

[37] Id. at 122.

[38] Id.

[39] Id. at 125.

[40] Id. at 128-129.

[41] Id. at 137.

[42] Id. at 138-144.

[43] Id. at 138-139.

[44] Id. at 139-140.

[45] Id. at 145.

[46] Id. at 154-174, First Sarmiento's Memorandum; and rollo, pp. 175-196, PBCOM's Memorandum.

[47] Id. at 154-174.

[48] Id. at 155.

[49] Id. at 158-159.

[50] Id, at 166.

[51] Id. at 175-196.

[52] Id. at 181.

[53] Id. at 182-183.

[54] Marilao Water v. Intermediate Appellate Court, 278 Phil. 444, 452 (1991) [Per J. Narvasa, First Division]; Mendoza v. Villas, 659 Phil. 409, 415-416 (2011) [Per J. Velasco, Jr., First Division]; Doña Adela Export International v. Trade & Investment Development Corp., 753 Phil. 596, 610 (2015) [Per J. Villarama, Jr., Third Division].

[55] 753 Phil. 596 (2015) [Per J. Villarama, Jr., Third Division].

[56] Id. at 610.

[57] Victorias Milling Co. Inc. v. Intermediate Appellate Court, 277 Phil. 1, 8 (1991) [Per J. Davide, Jr., Third Division].

[58] Rollo, pp. 11-13.

[59] Id. at 166.

[60] Zamora v. Court of Appeals, 262 Phil. 298, 304 (1990) [Per J. Cruz, First Division].

[61] De Pedro v. Romasan Development Corp., 748 Phil. 706, 723 (2014) [Per J. Leonen, Second Division].

[62] Id. at 723-724.

[63] Macahilig v. Heirs of Magalit, 398 Phil. 802, 817 (2000) [Per J. Panganiban, Third Division].

[64] See Villagracia v. Fifth Shari'a District Court, 734 Phil. 239 (2014) [Per J. Leonen, Third Division].

[65] Heirs of Concha, Sr. v. Spouses Lumocso, 564 Phil. 580, 592-593 (2007) [Per C. J. Puno, First Division].

[66] Peralta-Labrador v. Bugarin, 505 Phil. 409, 415 (2005) [Per J. Ynares-Santiago, First Division]

[67] CONST., art. VIII, sec. 5 provides:

Section 5. The Supreme Court shall have the following powers:

(1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question.

(b) All cases involving the legality of any tax, impost, assessment, or toll, or any penalty imposed in relation thereto.

(c) All cases in which the jurisdiction of any lower court is in issue.

(d) All criminal cases in which the penalty imposed is reclusion perpetua or higher.

(e) All cases in which only an error or question of law is involved.

(3) Assign temporarily judges of lower courts to other stations as public interest may require. Such temporary assignment shall not exceed six months without the consent of the judge concerned.

(4) Order a change of venue or place of trial to avoid a miscarriage of justice.

(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts, the admission to the practice of law, the Integrated Bar, and legal assistance to the underprivileged. Such rules shall provide a simplified and inexpensive procedure for the speedy disposition of cases, shall be uniform for all courts of the same grade, and shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court.

(6) Appoint all officials and employees of the Judiciary in accordance with the Civil Service Law.

[68] CONST., art. VIII, sec. 2.

[69] Batas Blg. 129, sec. 32(1).

[70] Batas Blg. 129, sec. 32(2).

[71] Batas Blg. 129, sec. 20.

[72] Batas Blg. 129, sec. 33(1).

[73] Batas Blg. 129, sec. 33(3).

[74] Batas Blg. 129, sec. 19(2) and (4).

[75] Batas Blg. 129, sec. 19(1).

[76] Batas Blg. 129, sec. 33(2).

[77] Batas Blg. 129, sec. 19(3).

[78] Batas Blg. 129, sec. 19(5).

[79] 133 Phil 526 (1968) [Per J. Reyes, J.B.L, En Banc].

[80] 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].

[81] 512 Phil. 389 (2005) [Per J. Callejo, Second Division]

[82] Id. at 400.

[83] Lapitan v. Scandia, 133 Phil. 526, 528 (1968) [Per J. Reyes, J.B.L, En Banc]

[84] 618 Phil. 395 (2009) [Per J. Abad, Second Division].

[85] Id. at 407.

[86] Rollo, pp. 25-26.

[87] Id. at 26-27.

[88] 540 Phil. 7 (2006) [Per J. Sandoval-Gutierrez, Second Division].

[89] 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].

[90] An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed to Real-Estate Mortgages.

[91] G.R. No. 194152, June 5, 2017 [Per J. Leonen, Second Division].

[92] Id. at 5 citing Reyes v. Noblejas, 129 Phil. 256, 262 (1967) [Per J. Angeles, En Banc].

[93] Reyes v. Noblejas, 129 Phil. 256, 261-262 (1967) [Per J. Angeles, En Banc].

[94] Fedman Development Corp. v. Agcaoili, 672 Phil. 20 (2011) [Per J. Bersamin, First Division].

[95] Rollo, p. 21.

[96] Id. at 69-70.

[97] 401 Phil. 431 (2000) [Per J. Kapunan, First Division].

[98] Id. at 447-448.

[99] Carpio-Morales v. Court of Appeals, 772 Phil. 627, 736-738 (2015) [Per J. Perlas-Bernabe, En Banc]; Miriam College Foundation, Inc. v. Court of Appeals, 401 Phil. 431, 447-448 (2000) [Per J. Kapunan, First Division].

[100] Carpio-Morales v. Court of Appeals, 772 Phil. 627, 736-738 (2015) [Per J. Perlas-Bernabe, En Banc]; The Incorporators of Mindanao Institute, Inc. v. The United Church of Christ in the Philippines, 685 Phil. 21, 32-34 (2012) [Per J. Mendoza, Third Division]; Dungog v. Court of Appeals, 455 Phil. 675, 684-685 (2003) [Per J. Carpio, First Division].

[101] Bankers Association of the Philippines v. Comelec, 722 Phil. 92, 100 (2013) [Per J. Brion, En Banc].

[102] 660 Phil. 517 (2011) [Per J. Perez, First Division].

[103] Id. at 523.

[104] Id. at 524-525.

[105] Id. at 525.

[106] Id. at 526.

[107] Id. at 527.

[108] Id. at 532.

[109] Id. at 536 and 538.

[110] Id. at 535.

[111] Id. at 537-538.

[112] 667 Phil. 781 (2011) [Per J. Perez, Special First Division].

[113] Id. at 802.

[114] 585 Phil. 251 (2008) [Per J. Nachura, En Banc].

[115] Id. at 273.

[116] 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].

[117] 672 Phil 20 (2011) [Per J. Bersamin, First Division].

[118] Id. at 29-30.

[119] Id. at 29.