Civ Pro Batch 2 of Rule 1 and 2 Cases

7/30/2019 Civ Pro Batch 2 of Rule 1 and 2 Cases

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Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 85419 March 9, 1993

DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner,vs.SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN INDUSTRIAL PLASTICCORPORATION and PRODUCERS BANK OF THE PHILIPPINES, defendants-respondents.

Yngson & Associates for petitioner.

Henry A. Reyes & Associates for Samso Tung & Asian Industrial Plastic Corporation.

Eduardo G. Castelo for Sima Wei.

Monsod, Tamargo & Associates for Producers Bank.

Rafael S. Santayana for Mary Cheng Uy.

CAMPOS, JR., J.:

On July 6, 1986, the Development Bank of Rizal (petitioner Bank for brevity) filed a complaint for a sum ofmoney against respondents Sima Wei and/or Lee Kian Huat, Mary Cheng Uy, Samson Tung, Asian IndustrialPlastic Corporation (Plastic Corporation for short) and the Producers Bank of the Philippines, on two causes ofaction:

(1) To enforce payment of the balance of P1,032,450.02 on a promissory note executed byrespondent Sima Wei on June 9, 1983; and

(2) To enforce payment of two checks executed by Sima Wei, payable to petitioner, and drawnagainst the China Banking Corporation, to pay the balance due on the promissory note.

Except for Lee Kian Huat, defendants filed their separate Motions to Dismiss alleging a common ground thatthe complaint states no cause of action. The trial court granted the defendants' Motions to Dismiss. The Courtof Appeals affirmed this decision, * to which the petitioner Bank, represented by its Legal Liquidator, filed this

Petition for Review by Certiorari, assigning the following as the alleged errors of the Court of Appeals:

1

(1) THE COURT OF APPEALS ERRED IN HOLDING THAT THE PLAINTIFF-PETITIONERHAS NO CAUSE OF ACTION AGAINST DEFENDANTS-RESPONDENTS HEREIN.

(2) THE COURT OF APPEALS ERRED IN HOLDING THAT SECTION 13, RULE 3 OF THEREVISED RULES OF COURT ON ALTERNATIVE DEFENDANTS IS NOT APPLICABLE TOHEREIN DEFENDANTS-RESPONDENTS.

The antecedent facts of this case are as follows:


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In consideration for a loan extended by petitioner Bank to respondent Sima Wei, the latter executed anddelivered to the former a promissory note, engaging to pay the petitioner Bank or order the amount ofP1,820,000.00 on or before June 24, 1983 with interest at 32% per annum. Sima Wei made partial paymentson the note, leaving a balance of P1,032,450.02. On November 18, 1983, Sima Wei issued two crossedchecks payable to petitioner Bank drawn against China Banking Corporation, bearing respectively the serialnumbers 384934, for the amount of P550,000.00 and 384935, for the amount of P500,000.00. The said checkswere allegedly issued in full settlement of the drawer's account evidenced by the promissory note. These twochecks were not delivered to the petitioner-payee or to any of its authorized representatives. For reasons notshown, these checks came into the possession of respondent Lee Kian Huat, who deposited the checks

without the petitioner-payee's indorsement (forged or otherwise) to the account of respondent PlasticCorporation, at the Balintawak branch, Caloocan City, of the Producers Bank. Cheng Uy, Branch Manager ofthe Balintawak branch of Producers Bank, relying on the assurance of respondent Samson Tung, President ofPlastic Corporation, that the transaction was legal and regular, instructed the cashier of Producers Bank toaccept the checks for deposit and to credit them to the account of said Plastic Corporation, inspite of the factthat the checks were crossed and payable to petitioner Bank and bore no indorsement of the latter. Hence,petitioner filed the complaint as aforestated.

The main issue before Us is whether petitioner Bank has a cause of action against any or all of the defendantsin the alternative or otherwise.

A cause of action is defined as an act or omission of one party in violation of the legal right or rights of another.The essential elements are: (1) legal right of the plaintiff; (2) correlative obligation of the defendant; and (3) anact or omission of the defendant in violation of said legal right. 2

The normal parties to a check are the drawer, the payee and the drawee bank. Courts have long recognizedthe business custom of using printed checks where blanks are provided for the date of issuance, the name ofthe payee, the amount payable and the drawer's signature. All the drawer has to do when he wishes to issue acheck is to properly fill up the blanks and sign it. However, the mere fact that he has done these does not giverise to any liability on his part, until and unless the check is delivered to the payee or his representative. Anegotiable instrument, of which a check is, is not only a written evidence of a contract right but is also aspecies of property. Just as a deed to a piece of land must be delivered in order to convey title to the grantee,so must a negotiable instrument be delivered to the payee in order to evidence its existence as a bindingcontract. Section 16 of the Negotiable Instruments Law, which governs checks, provides in part:

Every contract on a negotiable instrument is incomplete and revocable until delivery of theinstrument for the purpose of giving effect thereto. . . .

Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery tohim. 3Delivery of an instrument means transfer of possession, actual or constructive, from one person toanother. 4Without the initial delivery of the instrument from the drawer to the payee, there can be no liability onthe instrument. Moreover, such delivery must be intended to give effect to the instrument.

The allegations of the petitioner in the original complaint show that the two (2) China Bank checks, numbered384934 and 384935, were not delivered to the payee, the petitioner herein. Without the delivery of said checks

to petitioner-payee, the former did not acquire any right or interest therein and cannot therefore assert anycause of action, founded on said checks, whether against the drawer Sima Wei or against the Producers Bankor any of the other respondents.

In the original complaint, petitioner Bank, as plaintiff, sued respondent Sima Wei on the promissory note, andthe alternative defendants, including Sima Wei, on the two checks. On appeal from the orders of dismissal ofthe Regional Trial Court, petitioner Bank alleged that its cause of action was not based on collecting the sum ofmoney evidenced by the negotiable instruments stated but on quasi-delict a claim for damages on theground of fraudulent acts and evident bad faith of the alternative respondents. This was clearly an attempt bythe petitioner Bank to change not only the theory of its case but the basis of his cause of action. It is well-settled that a party cannot change his theory on appeal, as this would in effect deprive the other party of hisday in court. 5


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Notwithstanding the above, it does not necessarily follow that the drawer Sima Wei is freed from liability topetitioner Bank under the loan evidenced by the promissory note agreed to by her. Her allegation that she haspaid the balance of her loan with the two checks payable to petitioner Bank has no merit for, as We haveearlier explained, these checks were never delivered to petitioner Bank. And even granting, without admitting,that there was delivery to petitioner Bank, the delivery of checks in payment of an obligation does notconstitute payment unless they are cashed or their value is impaired through the fault of the creditor. 6 None ofthese exceptions were alleged by respondent Sima Wei.

Therefore, unless respondent Sima Wei proves that she has been relieved from liability on the promissory noteby some other cause, petitioner Bank has a right of action against her for the balance due thereon.

However, insofar as the other respondents are concerned, petitioner Bank has no privity with them. Sincepetitioner Bank never received the checks on which it based its action against said respondents, it neverowned them (the checks) nor did it acquire any interest therein. Thus, anything which the respondents mayhave done with respect to said checks could not have prejudiced petitioner Bank. It had no right or interest inthe checks which could have been violated by said respondents. Petitioner Bank has therefore no cause ofaction against said respondents, in the alternative or otherwise. If at all, it is Sima Wei, the drawer, who wouldhave a cause of action against herco-respondents, if the allegations in the complaint are found to be true.

With respect to the second assignment of error raised by petitioner Bank regarding the applicability of Section13, Rule 3 of the Rules of Court, We find it unnecessary to discuss the same in view of Our finding that thepetitioner Bank did not acquire any right or interest in the checks due to lack of delivery. It therefore has nocause of action against the respondents, in the alternative or otherwise.

In the light of the foregoing, the judgment of the Court of Appeals dismissing the petitioner's complaint isAFFIRMED insofar as the second cause of action is concerned. On the first cause of action, the case isREMANDED to the trial court for a trial on the merits, consistent with this decision, in order to determinewhether respondent Sima Wei is liable to the Development Bank of Rizal for any amount under the promissorynote allegedly signed by her.

SO ORDERED.


Manila

THIRD DIVISION

G.R. No. 74938-39 January 17, 1990

ANGELINA J. MALABANAN, petitioner,vs.GAW CHING and THE INTERMEDIATE APPELLATE COURT, respondents.

G.R. No. L-75524-25 January 17, 1990

LEONIDA CHY SENOLOS, LEONARD CHAN and LEONSO CHY CHAN, petitioners,vs.INTERMEDIATE APPELLATE COURT and GAW CHING, respondents.

Puruganan, Chato, Chato, Chato & Tan and Romero, Lagman, Torres, Arrieta & Evangelista for petitioners in75524-25.


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Quiason, Makalintal, Barot & Torres for petitioners in 74938-39.

Limqueco & Macaraeg Law Office and Herminio T. Sugay for respondent Gaw Ching.

R E S O L U T I O N

FELICIANO, J.:

The two (2) Petitions before us G.R. Nos. 74938-39 and 75524-25 assail the decision of the thenIntermediate Appellate Court in A.C.-G.R. CV Nos. 05136-05137 dated 31 January 1986, which reversed thedecision of the Regional Trial Court in two (2) consolidated cases, namely: Civil Case No. R-81-416 and CivilCase No. R-82-6789. Upon motion of petitioners, we ordered the consolidation of the two (2) Petitions.

Respondent Gaw Ching instituted two (2) cases against petitioners Angelina Malabanan, Leonida Senolos, etal. in connection with the sale of piece of land located in Binondo, Manila. The first case, Civil Case No. R-81-416, sought to annul such sale and to enjoin the demolition of a building standing on that piece of land, andalso prayed for the award of damages. The second case, Civil Case No. G.R. 82-6798, demanded damagesfrom petitioner Senolos for bringing about the demolition of the building.

The following facts found by the trial court, and adopted and incorporated by the appellate court, areundisputed:

Evidence for plaintiff showed that Gaw Ching has been leasing the house and lot located [in]697-699 Asuncion Street, Binondo, Manila from Mr. Jabit since 1951. Plaintiff conducted hisbusiness (Victoria Blacksmith Shop) on the ground floor and lived on the second floor. When MrJabit died, his daughter, defendant Malabanan continued to lease the premises to plaintiff but atan increased rental of P1,000.00 per month. Before the increase, Gaw Ching paid P700.00 permonth, as evidenced by receipts of rentals. There was no written contract of lease betweenplaintiff and Mr. Jabit as to its duration but the rentals were evidently, paid monthly. On April 27,1980, Angelina Malabanan told him that she was selling the house and lot for P5,000.00 per

square meter. Plaintiff told her however, that the price is prohibitive. On May 13, 1980,defendant Malabanan wrote plaintiff, reiterating that she was selling the house and lot atP5,000.00 per square meter and that if he is not agreeable, she will sell it to another person.

After receiving the letter, plaintiff turned over the letter to his counsel, Atty. Sugay. Gaw Chingclaims that he is not in a position to buy the property at P5,000.00 per square meter because itwas expensive. Subsequently, Gaw Ching tried to pay the rent for June, 1980, but Malabananrefused to accept it. Plaintiff's counsel advised him to deposit the rentals in a bank which he did,after which, his counsel wrote Malabanan informing her about the deposit (Exh. B). On October2, 1980, plaintiff received another letter from defendant Malabanan which he gave to hiscounsel who told him that said defendant is offering the house and lot at P5,000.00 per squaremeter and that if he is not agreeable, she will sell the premises to another person at P4,000.00per square meter. Plaintiff testified that he was willing to buy the subject property at P4,000.00

but hastened to add that it was still expensive and did not ask his counsel to write Malabananabout it. So, also, it was the opinion of his counsel that it was not necessary to reply becausethe context of the letter was invariably a threat. On November 3, 1980, plaintiff received anotherletter from Defendant Malabanan, informing him that the premises in question had already beensold to defendant Leonida Senolos. This time, Atty. Sugay sent a reply dated November 24,1980, requesting that the pertinent documents of the sale be sent to them but according toplaintiff, they were not furnished a copy of said sale. Consequently, plaintiff received a letterfrom Atty. Techico dated December 5, 1980 demanding that he vacate the premises and to paythe arrearages in rentals from October to December, as they were more importantly, going torepair and convert the dwelling into a warehouse. Atty. Sugay sent a reply dated February 17,1981 (Exh. C) requesting Atty. Techico to furnish them with the Deed of Sale and TCT becausehe doubted the veracity of the sale. It took a long time before Atty. Sugay's letter was answered


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and he was never furnished a copy of the Deed of Sale and Transfer Certificate of Title. Afterexerting all efforts, plaintiff finally was able to procure a copy of the Deed of Sale and TCT No.14789 (Exh- A) which reflected that the date of entry of the Deed of Sale was December 9, 1980whereas the Deed of Sale was dated August 23, 1979 (Exh. I). Plaintiff then told Atty. Sugay tofile a civil case against defendants. On October 7, 1981, Atty. Techico sent a reply to Atty.Sugay's letter of February 17, 1981 (Exh K). Plaintiff presented the receipt of rentals he paid(Exhs. L to L-6). He deposited the monthly rentals which Malabanan refused to accept, with thePacific Banking Corporation (Exh. M). At a later period, plaintiff had to move out of the premiseswhen it was demolished by the defendant. Gaw Ching however, admitted that he was not yet a

Filipino Citizen at the time the offer to sell was made, i.e., on April 27, 1980, May 13, 1980 andOctober 2, 1980 and that he became a Filipino citizen only on October 7, 1980, when he wasissued a certificate of naturalization (Exh. 1-Malabanan). He did not, however, informMalabanan on the matter of his newly acquired citizenship. Likewise, Gaw Ching admitted thathe did not make any counter-offer in writing so as to price the property.

As to plaintiffs claim for damages, he testified, that this was motivated by the incident onNovember 16, 1981, while he was on the ground floor, when there was a sudden brownout, andaround 50 people came thereat, climbed the roof with the use of a ladder, cut the electric wiresand started banging the roof. Plaintiff, his wife, and mother-in-law were in the house and about 7laborers were in the shop when the incident happened. Plaintiff then immediately called up Atty.Sugay and told him that Leonida Senolos called some people to demolish the house. Plaintiff

further testified that ... he was not notified of the demolition. . . . On that same day, Atty. Sugayarrived at about 10:00 a.m. and told plaintiff that he was going to the City Hall. When Atty.Sugay came back, he was with Roldan (Building Inspector), who ordered that the demolition bestopped, but Leonida Senolos refused to heed the order. Atty. Sugay and Roldan went back tothe City Hall. . . . At about 3:00 p.m., Atty. Sugay came back with another person from the CityHall who presented a letter to Leonida Senolos to which defendant affixed her signature. Theformal letter was dated November 6, 1981 addressed to Leonida Senolos by Romulo delRosario, City Engineer and Building Officer. Upon receipt of the letter, the policeman remainedbut the demolition continued. Plaintiff together with Atty. Sugay, and the City Hall official, went tothe police precinct where the City Hall Official talked with somebody in the precinct. It was onlywhen they returned to the premises at about 4:00 p.m. with a policeman that the demolition wasstopped. . . .

On cross examination, plaintiff admitted that he received a letter from the Office of the CityEngineer dated July 29, 1981 (Exh. 1-Senolos) condemning the building. He also admitted thathe was furnished a copy of the Demolition Order (Exh. 2-Senolos) to which he affixed hissignature.

After receiving Exhibits "I" and "2," Gaw Ching still refused to vacate the premises because hewas told that the building was still in good condition and he continued paying the monthly rental.

On redirect, plaintiff declared that after receiving the notice of the City Engineer, he filed acomplaint with the Ministry of Public Works and Highways by reason of which, the MPWHissued an order that the demolition to be stopped. (Exh. 3).

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Another witness presented by plaintiff was Felix Tienzo, Actg. Chief of Enforcement Division,(Ministry of Public Works and Highways). . .

Mr. Felix Tienzo believes that the City of Manila was correct in ordering the demolition of thebuilding but he intended to hold in abeyance the demolition of the building only in obedience tothe order of the MPWH. However, both Mr. Tienzo and Mr. Roldan claim that they do not usuallyreceive an order from the MPWH stopping the demolitions.


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On 10 August 1984, the trial court rendered a decision which upheld the validity of the contract of sale betweenpetitioner Malabanan and petitioner Senolos. The trial court declared that petitioner Malabanan had notviolated Sections 4 and 6 of Presidential Decree No. 1517 in relation to Presidential Proclamation No. 1893and Letter of Instruction (LOI) No. 935 which provide for a preemptive right on the part of a lessee over leasedproperty. The trial court stressed that respondent Gaw Ching had been given ample opportunity to exerciseany right of first refusal he might have had, but he had chosen not to do so.

Respondent Gaw Ching went on appeal to the then Intermediate Appellate Court. By a vote of three (3) to two(2), the appellate court voted to reverse the decision of the trial court and hence to nullify the contract of salebetween petitioners Malabanan and Senolos inter se. 2 The majority also held that the transaction betweenpetitioners was vitiated by fraud, deceit and bad faith allegedly causing damage to respondent Gaw Ching.Petitioners were held liable jointly and severally to respondent for moral, exemplary and actual damages in theamount of P350,000.00 and for attorney's fees in the amount of P20,000.00

for the indulgence in inequitous conduct to plaintiff-appellant's (respondent Gaw Ching)prejudice and for the unwarranted demolition of the building by defendants-appellees(petitioners herein) after the issuance of the cease-and-desist order on October 30, 1981.

While holding that the land in question was located outside the Urban Land Reform Zone declared byProclamations Nos. 1767 and 1967, the majority ruled that circumstances surrounding the sale of theland to petitioner Senolos had rendered that sale null and void. The majority were here referring to thefinding that when petitioner Malabanan offered in October 1980 to sell the land involved to respondentGaw Ching at P5,000.00 per square meter, that land had already been sold to petitioner Senolos asearly as August 1979 for only P1,176.48 per square meter. On the matter of the demolition of thebuilding, the majority held that the same was unwarranted and that even if petitioner Senolos had ademolition order,

that order of demolition was valid only if there are no more tenants residing in the building. Ifthere are tenants and they refused to vacate, the order of demolition is unavailing. It could notrise higher than the Civil Code and the Rules of Court. 3

In the instant Petitions forCertiorari, petitioners assail both the annulment of the deed of sale and the grant ofP350,000.00 worth of "moral, exemplary and actual damages" to respondent Gaw Ching.

We believe that the Petitions must be granted.

I

The firmly settled rule is that strangers to a contract cannot sue either or both of the contracting parties toannul and set aside that contract. Article 1397 of the Civil Code embodies that rule in the following formulation:

Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby

obliged principally or subsidiarily. However, persons who are capable cannot allege theincapacity of those with whom they contracted; nor can those who exerted intimidation, violenceor undue influence, or employed fraud, or caused mistake base their action upon these flaws ofthe contract. (Emphasis supplied)

Article 1397 itself follows from Article 1311 of the Civil Code which establishes the fundamental rulethat:

Art. 1311. Contracts take effect only between the parties, their assigns andheirs, except in casewhere the rights and obligations arising from the contract are not transmissible by their nature,


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or by stipulation or by provision of law. The heir is not liable beyond the value of the property hereceived from the decedent.

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(Emphasis supplied)

As long ago as 1912, this Court in Ibanez v. Hongkong and Shanghai Bank, 4 pointed out that it is the

existence of an interest in a particular contract that is the basis of one's right to sue for nullification ofthat contract and that essential interest in a given contract is, in general, possessed only by one who isa party to the contract. In Ibanez, Mr. Justice Torres wrote:

From these legal provisions it is deduced that it is the interest had in a given contract, that is thedetermining reason of the right which lies in favor of the party obligated principally or subsidiarilyto enable him to bring an action for the nullity of the contract in which he intervened, and,therefore, he who has no right in a contract is not entitled to prosecute an action for nullity, for,according to the precedents established by the courts, the person who is not a party to acontract nor has any cause of action or representation from those who intervened therein, ismanifestly without right of action and personality such as to enable him to assail the validity ofthe contract. (Decisions of the Supreme Court of Spain, of April 18, 1901, and November 23,

1903, pronounced in cases requiring an application of the preinserted article 1302 of the CivilCode. 5

Mr. Justice Torres went on to indicate a possible qualification to the above general principle, that is, asituation where a non-party to a contract could be allowed to bring an action for declaring that contractnull:

He who is not the party obligated principally or subsidiarily in a contract may perhapsbe entitledto exercise an action for nullity, if he is prejudiced in his rights with respect to one of thecontracting parties; but, in order that such be the case, it is indispensable to show the detrimentwhich positively would result to him from the contract in which he had no intervention

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(Emphasis supplied)

There is an important and clear, albeit implicit, limitation upon the right of a person who is in fact injuredby the very operation of a contract between two (2) third parties to sue to nullify that contract: thatcontract may be nullified only to the extent that such nullification is absolutely necessary to protect theplaintiff's lawful rights. It may be expected that in most instances, an injunction restraining the carryingout of acts in fact injurious to the plaintiff's rights would be sufficient and that there should be no need toset aside the contract itselfwhich is a res inter alios actaand which may have any number of otherprovisions, implementation of which might have no impact at all upon the plaintiff's rights and interests.

What is important for present purposes is that respondent Gaw Ching, admittedly a stranger to the contract ofsale of a piece of land between petitioners Malabanan and Senolos inter se, does notfall within the possibleexception recognized in Ibanez v. Hongkong & Shanghai Bank. In the first place, Gaw Ching had no legal rightof preemption in respect of the house and lot here involved. The majority opinion of the appellate court itselfexplicitly found that the subject piece of land is locatedoutsidethe Urban Land Reform Zones declaredpursuant to P.D. No. 1517. 7 Even assuming for purposes of argument merely, that the land here involved wasin fact embraced in a declared Urban Land Reform Zone (which it was not), Gaw Ching would still not havebeen entitled to a right of preemption in respect of the land sold. In Santos v. Court of Appeals, 8 this Courtheld that the preemptive or redemptive rights of a lessee under P.D. No. 1517 exists only in respect of theurban land under lease on which the tenant or lessee had built his home and in which he had resided for ten


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(10) years or more and that, in consequence, where both land and building belong to the lessor, thatpreemptive or redemptive right was simply not available under the law.

Finally, we are unable to understand the respondent appellate court's view that respondent Gaw Ching havingbeen a long-time tenant of the property in question, had acquired a preferred right to purchase that property.This holding is simply bereft of any legal basis. We know of no law, outside the Urban Land Reform Zone orP.D. No. 1517, that grants such a right to a lessee no matter how long the period of the lease has been. If suchright existed at all, it could only have been created by contract; 9respondent Gaw Ching does not, however,pretend that there had been such a contractual stipulation between him and petitioners.

In the second place, assuming once again, for present purposes only, that respondent Gaw Ching did have apreemptive right to purchase the land from petitioner Malabanan (which he did not), it must be stressed thatpetitioner Malabanan did thrice offer the land to Gaw Ching but the latter had consistently refused to buy. SinceGaw Ching did not in fact accept the offer to sell and did not buy the land, he suffered no prejudice, and couldnot have suffered any prejudice, by the sale of the same piece of land to petitioner Senolos. No fraud was thusworked upon him notwithstanding his insinuation that the sale of the land to petitioner Senolos had precededthe offer of the same piece of land to himself.

In the third place, and contrary to the holding of the majority appellate court opinion, the fact that Gaw Chinghad been lessee of the house and lot was simply not enough basis for a right to bring an action to set aside thecontract of sale between the petitioners

inter se. A lessee, it is elementary, cannot attack the title of his lessor

over the subject matter of the lease. 10 Moreover, the lease contract between petitioner Malabanan andrespondent Gaw Ching must in any case be held to have lapsed when the leased house was condemned andthe order of demolition issued.

II

We consider next petitioners' claim that the appellate court erred grievously in imposing upon them an awardof P350,000.00 for "moral, exemplary and actual damages" not only because petitioners had "indulged ininequitous conduct to [respondent Gaw Ching's] prejudice" but also "for the unwarranted demolition of thebuilding by [petitioners] after the issuance of the cease and desist order on October 30, 1981."

Here again, we are compelled to hold that the appellate court lapsed into reversible error. The relevantconclusions of fact which the trial court arrived at are set out in its decision in the following manner:

On the legality of the demolition necessarily raising the question: (3) whether or not plaintiff wasnotified within a reasonable period of time of the demolition, and a fortioriwhether this admittedlyexercise of police power, the validity of which was already being determined by the Court couldbe stopped by a pretenatural [sic] administrative order from the office of the Assistant Secretaryfor Operation of the MPWH brought about by an appeal by a person other than the owner of thebuilding, which office had not done anything to immediately forestall the imminent injury toperson and damage to property. (Please seeP.D. 1096, Rule XII, Sec. 5 thereof).

In the first place, the claim of the plaintiff that the demolition of the house rented by him came as

a surprise, is fiercely contradicted by his own evidence. A copy of the demolition order isattached to the complaint as Annex "L", now marked as Exhibit "9" for the defendant Senolos,unmistakably show that plaintiff received a copy of the order of demolition from the CityEngineer's Office, approved by the Mayor, on October 5, 1981.

Verily, the present action before the Court is procedurally and substantially correct in abating anuisance. This exercise of police power is not only being cordoned sanitaired [sic] by thedoctrinal pronouncements, the provisions of Art. 482 in relation to Art. 436 of the Civil Code,Sections 275 and 276 of the compilation of ordinances of the City of Manila but also by Rule VII,par. 5 of the implementing Rules and Regulations of the National Building Code of thePhilippines (P.D. 1096). Indeed, the latter law does not authorize any person other than the


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owner, to appeal the order of the City Engineer to the Ministry of Public Works and Highways.This is the position espoused by the City Legal Officer of Manila in defense of the City Engineerand the Mayor, in opposition to the move of the plaintiff to dismiss the order of demolition asimprovidently issued.

The demolition was invariably a valid exercise of police power which may be ordered done bythe authorities or caused to be done at the expense of the owner. The exigency is made moredemanding especially, the demolition, when it was ordered stopped thru an order inadvertentlyissued, as it was not as a consequence of an appeal by the owner of the building, but by thelessee, was during its last stages.

It therefore stands to reason that the order of demolition which is unquestionably legal could notbe stopped by an inoperative administrative order, assuming that the appeal to the MPWH couldvalidly be filed by the lessee, as it was filed only during the finishing touches of a demolition.Decidedly, the move exude physiological features of delay. This is compounded by the failure ofthe MPWH to act assertively, which in a sense, could be interpreted as an admission that theissuance of the order was inopportune.

On the claim for damages predicated on (4) whether or not there was an indscriminate carelesshandling and pilferage of the properties of the plaintiff, causing their loss or destruction:

It is readily explained that between October 5, 1981 to November 6,1981, plaintiff could haveavoided the misplaced fear, but assuming without having necessarily to concede that he wasnot able to guard against an actual demolition on November 6, 1981, rendering him so helpless,and prompting him to just sit on the sidewalk and watch the demolition team wreck the buildingindiscriminately, thereby causing destruction and loss of his personal properties, such as: (a)office equipment; (b) assorted tools; (c) machines; (d) finished products; and (e) steel boxcontaining jewelries. The claim is almost too good to be true, considering first, that these itemswere so huge that they could not be spirited away without being noticed and, secondly; it hasbeen established that there was a policeman detailed to the demolition scene from the start ofthe said demolition, to whom he could have easily reported the matter, caused theapprehension of the culprits, and prevent the loss of his personal properties, thirdly, he could

have grabbed the steel box containing jewelries if this were the last thing he would have done.Waiting idly by the sidewalk and watching your properties pilfered by persons whom you couldhave successfully identified at the time and referring the matter to the policeman on duty, whichplaintiff did not do, is certainly against the natural order of things and the legal presumption thata person takes great care of his concern. Plaintiff strongly relies on the alleged illegal andindiscriminate destruction of his properties as basis for his claim for damages. Truth to tell, therewas no suddenness or indiscriminate destruction of plaintiffs property nor pilferage thereof, asalleged, in the demolition of the house owned by the defendant. The order was lawful as it wasan abatement of a nuisance and the dismantling of the house owned by defendant Senoloscould only be conceived as having been carried out in a manner consistent only with utmostcare. Conversely, its indiscriminate destruction is contrary to the interest of the defendantSenolos as it is a truism that every bit of useful material should be preserved either for use of, orfor profit of the owner. It would be sheer folly to assume that the demolition team would havetaken a selective method of care for the still serviceable materials of the house and adestructive stance for the properties of the occupants. Understandably, the unorthodox positiontaken by plaintiff would not only lose his residence but also his place of business.

By and large, the basis for the claim for damages do not physically nor imaginatively exist, for ithas defied reason and common sense. 11

We note that the majority opinion chose to disregard the above conclusions of fact of the trial court andinstead quoted extensively from respondent Gaw Ching's brief and, presumably relied upon such briefThe majority opinion, however, failed to indicate why it preferred Gaw Ching's version of the facts setout in his brief over the trial court's findings. No indication was offered where the trial court had fallen


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into error or what evidence had been misapprehended by it. In this situation, the Court considers that itmust go back to the trial court's findings of fact in line with the time-honored rule that such findings areentitled to great respect from appellate courts since the trial court judge had the opportunity to examinethe evidence directly and to listen to the witnesses and observe their demeanor while testifying.

It appears therefore that firstly, the order of condemnation or demolition had been issued by the properauthorities which order was valid and subsisting at the time the demolition was actually carried out. Secondly,under Section 5.3 of Rule VII entitled "Abandonment/Demolition of Buildings" of the Rules and RegulationsImplementing the National Building Code of the Philippines (P.D. No. 1096, as amended dated 19 February1977), an order for demolition may be appealed, by the ownerof the building or installation to be demolished,to the Secretary of Public Works and Highways. In the case at bar, it was respondent Gaw Ching, a lesseemerely of the building condemned that sought to block the implementation of the demolition order. It does noteven appear from the record whether or not Gaw Ching actually filed a formal appeal to the Secretary, eventhough he was not entitled to do so. What does appear from the record 12 is that Gaw Ching's counsel, Atty.Sugay, was able to obtain a letter dated 6 November 1981 from the Office of the City Engineer and BuildingOfficial, enclosing a xerox copy of a letter from the Assistant Secretary for Operations, Ministry of Public Worksand Highways, "directing this office to hold the demolition in abeyance." This letter, which did notpurport to setaside the order of demolition, was served upon the demolition team on site while the demolition was inprogress. After some hesitation, the demolition was in fact stopped. 13

It is worth noting that officials from the Office of the City Engineer, City of Manila, testified that it was not"normal practice to receive an order from the Ministry of Public Works and Highways stopping demolitions."

In the fourth place, respondent Gaw Ching, in the action that he had filed before the Regional Trial Court ofManila to set aside the contract of sale between petitioners Malabanan and Senolos, had sought preliminaryinjunction precisely to restrain the implementation of the order for demolition. That application for preliminaryinjunction was denied by the trial court and the order for demolition was implemented only after such denial.Thus, there was no subsisting court order restraining the demolition at the time such demolition was carried ou

In the fifth place, Gaw Ching had ample notice of the demolition order and had adequate time to remove hisbelongings from the premises if he was minded to obey the order for demolition. He chose not to obey thatorder. If he did suffer any lossesthe trial court did not believe his claims that he didhe had only himself to

blame.

ACCORDINGLY, The Court Resolved to GRANT the Petition and to REVERSE and SET ASIDE the Decisionof the then Intermediate Appellate Court dated 31 January 1986 and its Resolution dated 5 June 1986, in AC-G.R. CV Nos. 05136-05137. The Decision of the trial court dated 10 August 1984 in consolidated Civil CasesNos. R-81-416 and R-82-6798, is hereby REINSTATED. No pronouncement as to costs.

Fernan C.J., Gutierrez, Jr. and Corts, JJ., concur.

Bidin J., took no part.

Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. 75919 May 7, 1987

MANCHESTER DEVELOPMENT CORPORATION, ET AL., petitioners,vs.COURT OF APPEALS, CITY LAND DEVELOPMENT CORPORATION, STEPHEN ROXAS, ANDREWLUISON, GRACE LUISON and JOSE DE MAISIP, respondents.


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Tanjuatco, Oreta and Tanjuatco for petitioners.

Pecabar Law Offices for private respondents.

R E S O L U T I O N

GANCAYCO, J.:

Acting on the motion for reconsideration of the resolution of the Second Division of January 28,1987 andanother motion to refer the case to and to be heard in oral argument by the Court En Bancfiled by petitioners,the motion to refer the case to the Court en bancis granted but the motion to set the case for oral argument isdenied.

Petitioners in support of their contention that the filing fee must be assessed on the basis of the amendedcomplaint cite the case ofMagaspi vs. Ramolete. 1 They contend that the Court of Appeals erred in that thefiling fee should be levied by considering the amount of damages sought in the original complaint.

The environmental facts of said case differ from the present in that

1. The Magaspi case was an action for recovery of ownership and possession of a parcel of land withdamages. 2While the present case is an action for torts and damages and specific performance with prayer fortemporary restraining order, etc. 3

2. In the Magaspi case, the prayer in the complaint seeks not only the annulment of title of the defendant to theproperty, the declaration of ownership and delivery of possession thereof to plaintiffs but also asks for thepayment of actual moral, exemplary damages and attorney's fees arising therefrom in the amounts specifiedtherein.

4However, in the present case, the prayer is for the issuance of a writ of preliminary prohibitory

injunction during the pendency of the action against the defendants' announced forfeiture of the sum of P3Million paid by the plaintiffs for the property in question, to attach such property of defendants that maybesufficient to satisfy any judgment that maybe rendered, and after hearing, to order defendants to execute a

contract of purchase and sale of the subject property and annul defendants' illegal forfeiture of the money ofplaintiff, ordering defendants jointly and severally to pay plaintiff actual, compensatory and exemplary damagesas well as 25% of said amounts as maybe proved during the trial as attorney's fees and declaring the tender ofpayment of the purchase price of plaintiff valid and producing the effect of payment and to make the injunctionpermanent. The amount of damages sought is not specified in the prayer although the body of the complaintalleges the total amount of over P78 Million as damages suffered by plaintiff. 5

3. Upon the filing of the complaint there was an honest difference of opinion as to the nature of the action in theMagaspi case. The complaint was considered as primarily an action for recovery of ownership and possessionof a parcel of land. The damages stated were treated as merely to the main cause of action. Thus, the docketfee of only P60.00 and P10.00 for the sheriff's fee were paid. 6

In the present case there can be no such honest difference of opinion. As maybe gleaned from the allegationsof the complaint as well as the designation thereof, it is both an action for damages and specific performance.The docket fee paid upon filing of complaint in the amount only of P410.00 by considering the action to bemerely one for specific performance where the amount involved is not capable of pecuniary estimation isobviously erroneous. Although the total amount of damages sought is not stated in the prayer of the complaintyet it is spelled out in the body of the complaint totalling in the amount of P78,750,000.00 which should be thebasis of assessment of the filing fee.

4. When this under-re assessment of the filing fee in this case was brought to the attention of this Courttogether with similar other cases an investigation was immediately ordered by the Court. Meanwhile plaintiffthrough another counsel with leave of court filed an amended complaint on September 12, 1985 for the


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inclusion of Philips Wire and Cable Corporation as co-plaintiff and by emanating any mention of the amount ofdamages in the body of the complaint. The prayer in the original complaint was maintained. After this Courtissued an order on October 15, 1985 ordering the reassessment of the docket fee in the present case andother cases that were investigated, on November 12, 1985 the trial court directed plaintiffs to rectify theamended complaint by stating the amounts which they are asking for. It was only then that plaintiffs specifiedthe amount of damages in the body of the complaint in the reduced amount of P10,000,000.00.

7Still no

amount of damages were specified in the prayer. Said amended complaint was admitted.

On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to pay the amount of P3,104.00 asfiling fee covering the damages alleged in the original complaint as it did not consider the damages to bemerely an or incidental to the action for recovery of ownership and possession of real property.

8An amended

complaint was filed by plaintiff with leave of court to include the government of the Republic as defendant andreducing the amount of damages, and attorney's fees prayed for to P100,000.00. Said amended complaint wasalso admitted. 9

In the Magaspi case, the action was considered not only one for recovery of ownership but also for damages,so that the filing fee for the damages should be the basis of assessment. Although the payment of thedocketing fee of P60.00 was found to be insufficient, nevertheless, it was held that since the payment was theresult of an "honest difference of opinion as to the correct amount to be paid as docket fee" the court "hadacquired jurisdiction over the case and the proceedings thereafter had were proper and regular." 10 Hence, asthe amended complaint superseded the original complaint, the allegations of damages in the amendedcomplaint should be the basis of the computation of the filing fee. 11

In the present case no such honest difference of opinion was possible as the allegations of the complaint, thedesignation and the prayer show clearly that it is an action for damages and specific performance. Thedocketing fee should be assessed by considering the amount of damages as alleged in the original complaint.

As reiterated in the Magaspi case the rule is well-settled "that a case is deemed filed only upon payment of thedocket fee regardless of the actual date of filing in court . 12 Thus, in the present case the trial court did notacquire jurisdiction over the case by the payment of only P410.00 as docket fee. Neither can the amendmentof the complaint thereby vest jurisdiction upon the Court. 13 For an legal purposes there is no such originalcomplaint that was duly filed which could be amended. Consequently, the order admitting the amended

complaint and all subsequent proceedings and actions taken by the trial court are null and void.

The Court of Appeals therefore, aptly ruled in the present case that the basis of assessment of the docket feeshould be the amount of damages sought in the original complaint and not in the amended complaint.

The Court cannot close this case without making the observation that it frowns at the practice of counsel whofiled the original complaint in this case of omitting any specification of the amount of damages in the prayeralthough the amount of over P78 million is alleged in the body of the complaint. This is clearly intended for noother purpose than to evade the payment of the correct filing fees if not to mislead the docket clerk in theassessment of the filing fee. This fraudulent practice was compounded when, even as this Court had takencognizance of the anomaly and ordered an investigation, petitioner through another counsel filed an amendedcomplaint, deleting all mention of the amount of damages being asked for in the body of the complaint. It was

only when in obedience to the order of this Court of October 18, 1985, the trial court directed that the amountof damages be specified in the amended complaint, that petitioners' counsel wrote the damages sought in themuch reduced amount of P10,000,000.00 in the body of the complaint but not in the prayer thereof. The designto avoid payment of the required docket fee is obvious.

The Court serves warning that it will take drastic action upon a repetition of this unethical practice.

To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar pleadingsshould specify the amount of damages being prayed for not only in the body of the pleading but also in theprayer, and said damages shall be considered in the assessment of the filing fees in any case. Any pleadingthat fails to comply with this requirement shall not bib accepted nor admitted, or shall otherwise be expungedfrom the record.


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The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. Anamendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much less thepayment of the docket fee based on the amounts sought in the amended pleading. The ruling in the Magaspicase 14 in so far as it is inconsistent with this pronouncement is overturned and reversed.

WHEREFORE, the motion for reconsideration is denied for lack of merit.

SO ORDERED.


Manila

EN BANC

G.R. Nos. 79937-38 February 13, 1989

SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS and D.J. WARBY, petitioners,vs.HON. MAXIMIANO C. ASUNCION, Presiding Judge, Branch 104, Regional Trial Court, Quezon City and

MANUEL CHUA UY PO TIONG, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Offices for petitioners. Tanjuatco, Oreta,Tanjuatco, Berenguer & Sanvicente Law Offices for private respondent.

GANCAYCO, J.:

Again the Court is asked to resolve the issue of whether or not a court acquires jurisdiction over a case whenthe correct and proper docket fee has not been paid.

On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a complaint with theRegional Trial Court of Makati, Metro Manila for the consignation of a premium refund on a fire insurancepolicy with a prayer for the judicial declaration of its nullity against private respondent Manuel Uy Po Tiong.Private respondent as declared in default for failure to file the required answer within the reglementary period.

On the other hand, on March 28, 1984, private respondent filed a complaint in the Regional Trial Court ofQuezon City for the refund of premiums and the issuance of a writ of preliminary attachment which wasdocketed as Civil Case No. Q-41177, initially against petitioner SIOL, and thereafter including E.B. Philipps andD.J. Warby as additional defendants. The complaint sought, among others, the payment of actual,compensatory, moral, exemplary and liquidated damages, attorney's fees, expenses of litigation and costs ofthe suit. Although the prayer in the complaint did not quantify the amount of damages sought said amount maybe inferred from the body of the complaint to be about Fifty Million Pesos (P50,000,000.00).

Only the amount of P210.00 was paid by private respondent as docket fee which prompted petitioners' counselto raise his objection. Said objection was disregarded by respondent Judge Jose P. Castro who was thenpresiding over said case. Upon the order of this Court, the records of said case together with twenty-two othercases assigned to different branches of the Regional Trial Court of Quezon City which were under investigationfor under-assessment of docket fees were transmitted to this Court. The Court thereafter returned the saidrecords to the trial court with the directive that they be re-raffled to the other judges in Quezon City, to theexclusion of Judge Castro. Civil Case No. Q-41177 was re-raffled to Branch 104, a sala which was then vacan

On October 15, 1985, the Court en bancissued a Resolution in Administrative Case No. 85-10-8752-RTCdirecting the judges in said cases to reassess the docket fees and that in case of deficiency, to order its


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payment. The Resolution also requires all clerks of court to issue certificates of re-assessment of docket fees.All litigants were likewise required to specify in their pleadings the amount sought to be recovered in theircomplaints.

On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q-41177 was temporarilyassigned, issuedan order to the Clerk of Court instructing him to issue a certificate of assessment of the docketfee paid by private respondent and, in case of deficiency, to include the same in said certificate.

On January 7, 1984, to forestall a default, a cautionary answer was filed by petitioners. On August 30,1984, anamended complaint was filed by private respondent including the two additional defendants aforestated.

Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter assigned, after his assumptioninto office on January 16, 1986, issued a Supplemental Order requiring the parties in the case to comment onthe Clerk of Court's letter-report signifying her difficulty in complying with the Resolution of this Court ofOctober 15, 1985 since the pleadings filed by private respondent did not indicate the exact amount sought tobe recovered. On January 23, 1986, private respondent filed a "Compliance" and a "Re-Amended Complaint"stating therein a claim of "not less than Pl0,000,000. 00 as actual compensatory damages" in the prayer. In thebody of the said second amended complaint however, private respondent alleges actual and compensatorydamages and attorney's fees in the total amount of about P44,601,623.70.

On January 24, 1986, Judge Asuncion issued another Order admitting the second amended complaint andstating therein that the same constituted proper compliance with the Resolution of this Court and that a copythereof should be furnished the Clerk of Court for the reassessment of the docket fees. The reassessment bythe Clerk of Court based on private respondent's claim of "not less than P10,000,000.00 as actual andcompensatory damages" amounted to P39,786.00 as docket fee. This was subsequently paid by privaterespondent.

Petitioners then filed a petition for certiorari with the Court of Appeals questioning the said order of JudieAsuncion dated January 24, 1986.

On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim ofP20,000,000.00 as d.qmages so the total claim amounts to about P64,601,623.70. On October 16, 1986, or

some seven months after filing the supplemental complaint, the private respondent paid the additional docketfee of P80,396.00. 1

On August 13, 1987, the Court of Appeals rendered a decision ruling, among others, as follows:

WHEREFORE, judgment is hereby rendered:

1. Denying due course to the petition in CA-G.R. SP No. 1, 09715 insofar as it seeks annulmentof the order

(a) denying petitioners' motion to dismiss the complaint, as amended, and

(b) granting the writ of preliminary attachment, but giving due course to the portion thereofquestioning the reassessment of the docketing fee, and requiring the Honorable respondentCourt to reassess the docketing fee to be paid by private respondent on the basis of the amountof P25,401,707.00. 2

Hence, the instant petition.

During the pendency of this petition and in conformity with the said judgment of respondent court, privaterespondent paid the additional docket fee of P62,432.90 on April 28, 1988. 3


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The main thrust of the petition is that the Court of Appeals erred in not finding that the lower court did notacquire jurisdiction over Civil Case No. Q-41177 on the ground of nonpayment of the correct and proper docketfee. Petitioners allege that while it may be true that private respondent had paid the amount of P182,824.90 asdocket fee as herein-above related, and considering that the total amount sought to be recovered in theamended and supplemental complaint is P64,601,623.70 the docket fee that should be paid by privaterespondent is P257,810.49, more or less. Not having paid the same, petitioners contend that the complaintshould be dismissed and all incidents arising therefrom should be annulled. In support of their theory,petitioners cite the latest ruling of the Court in Manchester Development Corporation vs. CA, 4 as follows:

The Court acquires jurisdiction over any case only upon the payment of the prescribed docketfee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in theCourt, much less the payment of the docket fee based on the amounts sought in the amendedpleading. The ruling in the Magaspi Case in so far as it is inconsistent with this pronouncementis overturned and reversed.

On the other hand, private respondent claims that the ruling in Manchestercannot apply retroactively to CivilCase No. Q41177 for at the time said civil case was filed in court there was no such Manchesterruling as yet.Further, private respondent avers that what is applicable is the ruling of this Court in Magaspi v.Ramolete,5 wherein this Court held that the trial court acquired jurisdiction over the case even if the docket feepaid was insufficient.

The contention that Manchestercannot apply retroactively to this case is untenable. Statutes regulating theprocedure of the courts will be construed as applicable to actions pending and undetermined at the time oftheir passage. Procedural laws are retrospective in that sense and to that extent.

6

In Lazaro vs. Endencia and Andres,7this Court held that the payment of the full amount of the docket fee is anindispensable step for the perfection of an appeal. In a forcible entry and detainer case before the justice of thepeace court of Manaoag, Pangasinan, after notice of a judgment dismissing the case, the plaintiff filed a noticeof appeal with said court but he deposited only P8.00 for the docket fee, instead of P16.00 as required, withinthe reglementary period of appeal of five (5) days after receiving notice of judgment. Plaintiff deposited theadditional P8.00 to complete the amount of the docket fee only fourteen (14) days later. On the basis of thesefacts, this court held that the Court of First Instance did notacquire jurisdiction to hear and determine the

appeal as the appeal was not thereby perfected.

In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to become a Filipino citizen bysending it through registered mail to the Office of the Solicitor General in 1953 but the required filing fee waspaid only in 1956, barely 5V2 months prior to the filing of the petition for citizenship. This Court ruled that thedeclaration was not filed in accordance with the legal requirement that such declaration should be filed at leastone year before the filing of the petition for citizenship. Citing Lazaro, this Court concluded that the filing ofpetitioner's declaration of intention on October 23, 1953 produced no legal effect until the required filing feewas paid on May 23, 1956.

In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were applied. It was an originalpetition forquo warrantocontesting the right to office of proclaimed candidates which was mailed, addressed

to the clerk of the Court of First Instance, within the one-week period after the proclamation as providedtherefor by law.10

However, the required docket fees were paid only after the expiration of said period.Consequently, this Court held that the date of such payment must be deemed to be the real date of filing ofaforesaid petition and not the date when it was mailed.

Again, in Garica vs, Vasquez,11 this Court reiterated the rule that the docket fee must be paid before a courtwill act on a petition or complaint. However, we also held that said rule is not applicable when petitioner seeksthe probate of several wills of the same decedent as he is not required to file a separate action for each will butinstead he may have other wills probated in the same special proceeding then pending before the same court.

Then in Magaspi, 12this Court reiterated the ruling in Malimitand Leethat a case is deemed filed only uponpayment of the docket fee regardless of the actual date of its filing in court. Said case involved a complaint for


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recovery of ownership and possession of a parcel of land with damages filed in the Court of First Instance ofCebu. Upon the payment of P60.00 for the docket fee and P10.00 for the sheriffs fee, the complaint wasdocketed as Civil Case No. R-11882. The prayer of the complaint sought that the Transfer Certificate of Titleissued in the name of the defendant be declared as null and void. It was also prayed that plaintiff be declaredas owner thereof to whom the proper title should be issued, and that defendant be made to pay monthly rentalsof P3,500.00 from June 2, 1948 up to the time the property is delivered to plaintiff, P500,000.00 as moraldamages, attorney's fees in the amount of P250,000.00, the costs of the action and exemplary damages in theamount of P500,000.00.

The defendant then filed a motion to compel the plaintiff to pay the correct amount of the docket fee to whichan opposition was filed by the plaintiff alleging that the action was for the recovery of a parcel of land so thedocket fee must be based on its assessed value and that the amount of P60.00 was the correct docketing fee.The trial court ordered the plaintiff to pay P3,104.00 as filing fee.

The plaintiff then filed a motion to admit the amended complaint to include the Republic as the defendant. Inthe prayer of the amended complaint the exemplary damages earlier sought was eliminated. The amendedprayer merely sought moral damages as the court may determine, attorney's fees of P100,000.00 and thecosts of the action. The defendant filed an opposition to the amended complaint. The oppositionnotwithstanding, the amended complaint was admitted by the trial court. The trial court reiterated its order forthe payment of the additional docket fee which plaintiff assailed and then challenged before this Court. Plaintiffalleged that he paid the total docket fee in the amount of P60.00 and that if he has to pay the additional fee itmust be based on the amended complaint.

The question posed, therefore, was whether or not the plaintiff may be considered to have filed the case evenif the docketing fee paid was not sufficient. In Magaspi, We reiterated the rule that the case was deemed filedonly upon the payment of the correct amount for the docket fee regardless of the actual date of the filing of thecomplaint; that there was an honest difference of opinion as to the correct amount to be paid as docket fee inthat as the action appears to be one for the recovery of property the docket fee of P60.00 was correct; and thatas the action is also one, for damages, We upheld the assessment of the additional docket fee based on thedamages alleged in the amended complaint as against the assessment of the trial court which was based onthe damages alleged in the original complaint.

However, as aforecited, this Court overturned Magaspiin Manchester. Manchesterinvolves an action for tortsand damages and specific performance with a prayer for the issuance of a temporary restraining order, etc.The prayer in said case is for the issuance of a writ of preliminary prohibitory injunction during the pendency ofthe action against the defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for theproperty in question, the attachment of such property of defendants that may be sufficient to satisfy any

judgment that may be rendered, and, after hearing, the issuance of an order requiring defendants to execute acontract of purchase and sale of the subject property and annul defendants' illegal forfeiture of the money ofplaintiff. It was also prayed that the defendants be made to pay the plaintiff jointly and severally, actual,compensatory and exemplary damages as well as 25% of said amounts as may be proved during the trial forattorney's fees. The plaintiff also asked the trial court to declare the tender of payment of the purchase price ofplaintiff valid and sufficient for purposes of payment, and to make the injunction permanent. The amount ofdamages sought is not specified in the prayer although the body of the complaint alleges the total amount ofover P78 Millon allegedly suffered by plaintiff.

Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for the docket fee based on thenature of the action for specific performance where the amount involved is not capable of pecuniary estimation.However, it was obvious from the allegations of the complaint as well as its designation that the action was onefor damages and specific performance. Thus, this court held the plaintiff must be assessed the correct docketfee computed against the amount of damages of about P78 Million, although the same was not spelled out inthe prayer of the complaint.

Meanwhile, plaintiff through another counsel, with leave of court, filed an amended complaint on September 121985 by the inclusion of another co-plaintiff and eliminating any mention of the amount of damages in the bodyof the complaint. The prayer in the original complaint was maintained.


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On October 15, 1985, this Court ordered the re-assessment of the docket fee in the said case and other casesthat were investigated. On November 12, 1985, the trial court directed the plaintiff to rectify the amendedcomplaint by stating the amounts which they were asking for. This plaintiff did as instructed. In the body of thecomplaint the amount of damages alleged was reduced to P10,000,000.00 but still no amount of damages wasspecified in the prayer. Said amended complaint was admitted.

Applying the principle in Magaspithat "the case is deemed filed only upon payment of the docket feeregardless of the actual date of filing in court," this Court held that the trial court did not acquire jurisdiction overthe case by payment of only P410.00 for the docket fee. Neither can the amendment of the complaint therebyvest jurisdiction upon the Court. For all legal purposes there was no such original complaint duly filed whichcould be amended. Consequently, the order admitting the amended complaint and all subsequent proceedingsand actions taken by the trial court were declared null and void. 13

The present case, as above discussed, is among the several cases of under-assessment of docket fee whichwere investigated by this Court together with Manchester. The facts and circumstances of this case are similartoManchester. In the body of the original complaint, the total amount of damages sought amounted to aboutP50 Million. In the prayer, the amount of damages asked for was not stated. The action was for the refund ofthe premium and the issuance of the writ of preliminary attachment with damages. The amount of only P210.00was paid for the docket fee. On January 23, 1986, private respondent filed an amended complaint wherein inthe prayer it is asked that he be awarded no less than P10,000,000.00 as actual and exemplary damages butin the body of the complaint the amount of his pecuniary claim is approximately P44,601,623.70. Saidamended complaint was admitted and the private respondent was reassessed the additional docket fee ofP39,786.00 based on his prayer of not less than P10,000,000.00 in damages, which he paid.

On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim ofP20,000,000.00 in damages so that his total claim is approximately P64,601,620.70. On October 16, 1986,private respondent paid an additional docket fee of P80,396.00. After the promulgation of the decision of therespondent court on August 31, 1987 wherein private respondent was ordered to be reassessed for additionaldocket fee, and during the pendency of this petition, and after the promulgation ofManchester, on April 28,1988, private respondent paid an additional docket fee of P62,132.92. Although private respondent appears tohave paid a total amount of P182,824.90 for the docket fee considering the total amount of his claim in theamended and supplemental complaint amounting to about P64,601,620.70, petitioner insists that privaterespondent must pay a docket fee of P257,810.49.

The principle in Manchestercould very well be applied in the present case. The pattern and the intent todefraud the government of the docket fee due it is obvious not only in the filing of the original complaint butalso in the filing of the second amended complaint.

However, in Manchester, petitioner did not pay any additional docket fee until] the case was decided by thisCourt on May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this Court heldthat the court a quodid not acquire jurisdiction over the case and that the amended complaint could not havebeen admitted inasmuch as the original complaint was null and void.

In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester,

private respondent demonstrated his willingness to abide by the rules by paying the additional docket fees asrequired. The promulgation of the decision in Manchester must have had that sobering influence on privaterespondent who thus paid the additional docket fee as ordered by the respondent court. It triggered his changeof stance by manifesting his willingness to pay such additional docket fee as may be ordered.

Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the totalamount of the claim. This is a matter which the clerk of court of the lower court and/or his duly authorizeddocket clerk or clerk in-charge should determine and, thereafter, if any amount is found due, he must requirethe private respondent to pay the same.

Thus, the Court rules as follows:


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1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribeddocket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where thefiling of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow paymentof the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third party claims and similar pleadings, which shall notbe considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow paymentof said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementaryperiod.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and paymentof the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or ifspecified the same has been left for determination by the court, the additional filing fee therefor shall constitutea lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy toenforce said lien and assess and collect the additional fee.

WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of the court a quois herebyinstructed to reassess and determine the additional filing fee that should be paid by private respondentconsidering the total amount of the claim sought in the original complaint and the supplemental complaint asmay be gleaned from the allegations and the prayer thereof and to require private respondent to pay thedeficiency, if any, without pronouncement as to costs.

SO ORDERED.


Manila

THIRD DIVISION

G.R. No. 116121 July 18, 2011

THE HEIRS OF THE LATE RUBEN REINOSO, SR., represented by Ruben Reinoso Jr., Petitioners,vs.COURT OF APPEALS, PONCIANO TAPALES, JOSE GUBALLA, and FILWRITERS GUARANTYASSURANCE CORPORATION,** Respondent.

D E C I S I O N

MENDOZA, J.:

Before the Court is a petition for review assailing the May 20, 1994 Decision1and June 30, 1994 Resolution2ofthe Court of Appeals (CA), in CA-G.R. CV No. 19395, which set aside the March 22, 1988 Decision of theRegional Trial Court, Branch 8, Manila (RTC) for non-payment of docket fees. The dispositive portion of the CAdecision reads:

IN VIEW OF ALL THE FOREGOING, the decision appealed from is SET ASIDE and REVERSED and thecomplaint in this case is ordered DISMISSED.

No costs pronouncement.

SO ORDERED.

The complaint for damages arose from the collision of a passengerjeepneyand a truck at around 7:00 oclockin the evening of June 14, 1979 along E. Rodriguez Avenue, Quezon City. As a result, a passenger of
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thejeepney, Ruben Reinoso, Sr. (Reinoso), was killed. The passengerjeepneywas owned by PoncianoTapales (Tapales) and driven by Alejandro Santos (Santos), while the truck was owned by JoseGuballa (Guballa) and driven by Mariano Geronimo (Geronimo).

On November 7, 1979, the heirs of Reinoso (petitioners) filed a complaint for damages against Tapales andGuballa. In turn, Guballa filed a third party complaint against Filwriters Guaranty Assurance Corporation(FGAC) under Policy Number OV-09527.

On March 22, 1988, the RTC rendered a decision in favor of the petitioners and against Guballa. The decisionin part, reads:

In favor of herein plaintiffs and against defendant Jose Guballa:

1. For the death of Ruben Reinoso, Sr. P 30,000.00

2. Loss of earnings (monthly income at the time ofdeath (P 2,000.00 Court used P 1,000.00 only permonth (or P 12,000.00 only per year) & victim thenbeing 55 at death had ten (10) years lifeexpectancy 120,000.00

3. Mortuary, Medical & funeral expenses and allincidental expenses in the wake in serving thosewho condoled 15,000.00

4. Moral damages .. 50,000.00

5. Exemplary damages 25,000.00

6. Litigation expenses . 15,000.00

7. Attorneys fees 25,000.00

Or a total of P 250,000.00

For damages to property:

In favor of defendant Ponciano Tapales and against defendant Jose Guballa:

1. Actual damages for repair is already awarded todefendant-cross-claimant Ponciano Tapales byBr. 9, RTC-Malolos, Bulacan (Vide: Exh. 1-G-Tapales); hence, cannot recover twice.

2. Compensatory damages (earnings at P 150.00

per day) and for two (2) months jeepney stayedat the repairshop. P 9,000.00

3. Moral damages ... 10,000.00

4. Exemplary damages . 10,000.00

5. Attorneys fees 15,000.00

or a total of P 44,000.00


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Under the 3rd party complaint against 3rd party defendant Filwriters Guaranty Assurance Corporation, theCourt hereby renders judgment in favor of said 3rd party plaintiff by way of 3rd party liability under policy No.OV-09527 in the amount of P 50,000.00 undertaking plus P 10,000.00 as and for attorneys fees.

For all the foregoing, it is the well considered view of the Court that plaintiffs, defendant Ponciano Tapales and3rd Party plaintiff Jose Guballa established their claims as specified above, respectively. Totality of evidencepreponderance in their favor.

J U D G M E N T

WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:

In favor of plaintiffs for the death of Ruben Reinoso, Sr.P250,000.00;

In favor of defendant Ponciano Tapales due to damage of his passenger jeepney . P44,000.00;

In favor of defendant Jose Guballa under Policy No. OV-09527 P60,000.00;

All the specified accounts with 6% legal rate of interest per annum from date of complaint until fully paid(Reformina vs. Tomol, 139 SCRA 260; and finally;

Costs of suit.

SO ORDERED.3

On appeal, the CA, in its Decision dated May 20, 1994, set aside and reversed the RTC decision anddismissed the complaint on the ground of non-payment of docket fees pursuant to the doctrine laid downin Manchester v. CA.4In addition, the CA ruled that since prescription had set in, petitioners could no longerpay the required docket fees.5

Petitioners filed a motion for reconsideration of the CA decision but it was denied in a resolution dated June 30,1994.6Hence, this appeal, anchored on the following

GROUNDS:

A. The Court of Appeals MISAPPLIED THE RULING of the Supreme Court in the case ofManchesterCorporation vs. Court of Appealsto this case.

B. The issue on the specification of the damages appearing in the prayer of the Complaint was NEVERPLACED IN ISSUE BY ANY OF THE PARTIES IN THE COURT OF ORIGIN (REGIONAL TRIALCOURT) NOR IN THE COURT OF APPEALS.

C. The issues of the case revolve around the more substantial issue as to the negligence of the private

respondents and their culpability to petitioners."

7

The petitioners argue that the ruling in Manchestershould not have been applied retroactively in this case,since it was filed prior to the promulgation of the Manchesterdecision in 1987. They plead that though thisCourt stated that failure to state the correct amount of damages would lead to the dismissal of the complaint,said doctrine should be applied prospectively.

Moreover, the petitioners assert that at the time of the filing of the complaint in 1979, they were not certain ofthe amount of damages they were entitled to, because the amount of the lost income would still be finallydetermined in the course of the trial of the case. They claim that the jurisdiction of the trial court remains even ifthere was failure to pay the correct filing fee as long as the correct amount would be paid subsequently.
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Finally, the petitioners stress that the alleged defect was never put in issue either in the RTC or in the CA.

The Court finds merit in the petition.

The rule is that payment in full of the docket fees within the prescribed period is mandatory.8In Manchester v.Court of Appeals,9it was held that a court acquires jurisdiction over any case only upon the payment of theprescribed docket fee. The strict application of this rule was, however, relaxed two (2) years after in the caseofSun Insurance Office, Ltd. v. Asuncion,10wherein the Court decreed that where the initiatory pleading is notaccompanied by the payment of the docket fee, the court may allow payment of the fee within a reasonableperiod of time, but in no case beyond the applicable prescriptive or reglementary period. This ruling was madeon the premise that the plaintiff had demonstrated his willingness to abide by the rules by paying the additionaldocket fees required.11Thus, in the more recent case ofUnited Overseas Bank v. Ros,12the Court explainedthat where the party does not deliberately intend to defraud the court in payment of docket fees, and manifestsits willingness to abide by the rules by paying additional docket fees when required by the court, the liberaldoctrine enunciated in Sun Insurance Office, Ltd., and not the strict regulations set in Manchester, will apply. Ithas been on record that the Court, in several instances, allowed the relaxation of the rule on non-payment ofdocket fees in order to afford the parties the opportunity to fully ventilate their cases on the merits. In the caseofLa Salette College v. Pilotin,13the Court stated:

Notwithstanding the mandatory nature of the requirement of payment of appellate docket fees, we alsorecognize that its strict application is qualified by the following:

first, failure to pay those fees within the

reglementary period allows only discretionary, not automatic, dismissal; second, such power should be used bythe court in conjunction with its exercise of sound discretion in accordance with the tenets of justice and fairplay, as well as with a great deal of circumspection in consideration of all attendant circumstances .14

While there is a crying need to unclog court dockets on the one hand, there is, on the other, a greater demandfor resolving genuine disputes fairly and equitably,15for it is far better to dispose of a case on the merit which isa primordial end, rather than on a technicality that may result in injustice.

In this case, it cannot be denied that the case was litigated before the RTC and said trial court had alreadyrendered a decision. While it was at that level, the matter of non-payment of docket fees was never an issue. Itwas only the CA which motu propiodismissed the case for said reason.

Considering the foregoing, there is a need to suspend the strict application of the rules so that the petitionerswould be able to fully and finally prosecute their claim on the merits at the appellate level rather than fail tosecure justice on a technicality, for, indeed, the general objective of procedure is to facilitate the application of

justice to the rival claims of contending parties, bearing always in mind that procedure is not to hinder but topromote the administration of justice.16

The Court also takes into account the fact that the case was filed before the Manchesterruling came out. Evenif said ruling could be applied retroactively, liberality should be accorded to the petitioners in view of therecency then of the ruling. Leniency because of recency was applied to the cases ofFarEastern ShippingCompany v. Court of Appeals17and Spouses Jimmy and Patri Chan v. RTC of Zamboanga.18In the caseofMactan Cebu International Airport Authority v. Mangubat (Mactan),19it was stated that the "intent of the

Court is clear to afford litigants full opportunity to comply with the new rules and to temper enforcement ofsanctions in view of the recencyof the changes introduced by the new rules." In Mactan, the Office of theSolicitor General (OSG) also failed to pay the correct docket fees on time.

We held in another case:

x x x It bears stressing that the rules of procedure are merely tools designed to facilitate the attainment ofjustice. They were conceived and promulgated to effectively aid the court in the dispensation of justice. Courtsare not slaves to or robots of technical rules, shorn of judicial discretion. In rendering justice, courts havealways been, as they ought to be, conscientiously guided by the norm that, on the balance, technicalities takea backseat against substantive rights, and not the other way around. Thus, if the application of the Rules would
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tend to frustrate rather than promote justice, it is always within the power of the Court to suspend the Rules, orexcept a particular case from its operation.20

The petitioners, however, are liable for the difference between the actual fees paid and the correct payabledocket fees to be assessed by the clerk of court which shall constitute a lien on the judgment pursuant toSection 2 of Rule 141 which provides:

SEC. 2. Fees in lien. Where the court in its final judgment awards a claim not alleged, or a relief differentfrom, or more than that claimed in the pleading, the party concerned shall pay the additional fees which shallconstitute a lien on the judgment in satisfaction of said lien. The clerk of court shall assess and collect thecorresponding fees.

As the Court has taken the position that it would be grossly unjust if petitioners claim would be dismissed on astrict application of the Manchesterdoctrine, the appropriate

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