FIRST DIVISION

G.R. Nos. 197592 & 20262 November 27, 2013

THE PROVINCE OF AKLAN, Petitioner,

vs.
JODY KING CONSTRUCTION AND DEVELOPMENT CORP., Respondent.

DECISION

VILLARAMA, JR., J.:

These consolidated petitions for review on certiorari seek to reverse and set aside the
following: (1) Decision1 dated October 18, 2010 and Resolution2 dated July 5, 2011 of
the Court of Appeals (CA) in CA-G.R. SP No. 111754; and (2) Decision3 dated August
31, 2011 and Resolution4 dated June 27, 2012 in CA-G.R. SP No. 114073.

The Facts

On January 12, 1998, the Province of Aklan (petitioner) and Jody King Construction and
Development Corp. (respondent) entered into a contract for the design and -
construction of the Caticlan Jetty Port and Terminal (Phase I) in Malay, Aklan. The total
project cost is P38,900,000: P 18,700,000 for the design and construction of passenger
terminal, and P20,200,000 for the design and construction of the jetty port facility. 5 In
the course of construction, petitioner issued variation/change orders for additional
works. The scope of work under these change orders were agreed upon by petitioner
and respondent.6

On January 5, 2001, petitioner entered into a negotiated contract with respondent for
the construction of Passenger Terminal Building (Phase II) also at Caticlan Jetty Port in
Malay, Aklan. The contract price for Phase II is P2,475,345.54.7

On October 22, 2001, respondent made a demand for the total amount
of P22,419,112.96 covering the following items which petitioner allegedly failed to settle:

1. Unpaid accomplishments on additional works

undertaken - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 12,396,143.09

2. Refund of taxes levied despite it not being

covered by original contract- - - - - - - - - - - - - - - - - - - - - - Php 884,098.59

3. Price escalation (Consistent with Section 7.5,

Original Contract- - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 1,291,714.98

4. Additional Labor Cost resulting [from]

numerous change orders issued sporadically - - - - - - - - Php 3,303,486.60
 5. Additional Overhead Cost resulting [from]
numerous Orders issued sporadically - - - - - - - - - - - - - Php 1,101,162.60

6. Interest resulting [from] payment delays

consistent with Section 7.3.b of the Original
Contract - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 3,442,507.50.8

On July 13, 2006, respondent sued petitioner in the Regional Trial Court (RTC) of
Marikina City (Civil Case No. 06-1122-MK) to collect the aforesaid amounts.9 On August
17, 2006, the trial court issued a writ of preliminary attachment. 10

Petitioner denied any unpaid balance and interest due to respondent. It asserted that
the sums being claimed by respondent were not indicated in Change Order No. 3 as
approved by the Office of Provincial Governor. Also cited was respondents June 10,
2003 letter absolving petitioner from liability for any cost in connection with the Caticlan
Passenger Terminal Project.11

After trial, the trial court rendered its Decision12 on August 14, 2009, the dispositive
portion of which reads:

WHEREFORE, foregoing premises considered, judgment is hereby rendered in favor of

plaintiff Jody King Construction And Development Corporation and against defendant
Province of Aklan, as follows:

1. ordering the defendant to pay to the plaintiff the amount of Php7,396,143.09

representing the unpaid accomplishment on additional works undertaken by the
plaintiff;

2. ordering the defendant to refund to the plaintiff the amount of Php884,098.59

representing additional 2% tax levied upon against the plaintiff;

3. ordering the defendant to pay to the plaintiff price escalation in the amount of
Php1,291,714.98 pursuant to Section 7.5 of the original contract;

4. ordering the defendant to pay to the plaintiff the amount of Php3,303,486.60

representing additional labor cost resulting from change orders issued by the
defendant;

5. ordering the defendant to pay to the plaintiff the sum of Php1,101,162.00

overhead cost resulting from change orders issued by the defendant;

6. ordering the defendant to pay the sum of Php3,442,507.50 representing

interest resulting from payment delays up to October 15, 2001 pursuant to
Section 7.3.b of the original contract;
 7. ordering the defendant to pay interest of 3% per month from unpaid claims as
of October 16, 2001 to date of actual payment pursuant to Section 7.3.b[;]

8. ordering the [defendant] to pay to the plaintiff the sum of Php500,000.00 as

moral damages;

9. ordering the defendant to pay to the plaintiff the sum of Php300,000.00 as

exemplary damages;

10. ordering the defendant to pay the plaintiff the sum of Php200,000.00, as and
for attorneys fees; and

11. ordering the defendant to pay the cost of suit.

SO ORDERED.13

Petitioner filed its motion for reconsideration14 on October 9, 2009 stating that it
received a copy of the decision on September 25, 2009. In its Order15 dated October 27,
2009, the trial court denied the motion for reconsideration upon verification from the
records that as shown by the return card, copy of the decision was actually received by
both Assistant Provincial Prosecutor Ronaldo B. Ingente and Atty. Lee T. Manares on
September 23, 2009. Since petitioner only had until October 8, 2009 within which to file
a motion for reconsideration, its motion filed on October 9, 2009 was filed one day after
the finality of the decision. The trial court further noted that there was a deliberate
attempt on both Atty. Manares and Prosecutor Ingente to mislead the court and make it
appear that their motion for reconsideration was filed on time. Petitioner filed a
Manifestation16 reiterating the explanation set forth in its Rejoinder to respondents
comment/opposition and motion to dismiss that the wrong date of receipt of the decision
stated in the motion for reconsideration was due to pure inadvertence attributable to the
staff of petitioners counsel. It stressed that there was no intention to mislead the trial
court nor cause undue prejudice to the case, as in fact its counsel immediately
corrected the error upon discovery by explaining the attendant circumstances in the
Rejoinder dated October 29, 2009.

On November 24, 2009, the trial court issued a writ of execution ordering Sheriff IV
Antonio E. Gamboa, Jr. to demand from petitioner the immediate payment
of P67,027,378.34 and tender the same to the respondent. Consequently, Sheriff
Gamboa served notices of garnishment on Land Bank of the Philippines, Philippine
National Bank and Development Bank of the Philippines at their branches in Kalibo,
Aklan for the satisfaction of the judgment debt from the funds deposited under the
account of petitioner. Said banks, however, refused to give due course to the court
order, citing the relevant provisions of statutes, circulars and jurisprudence on the
determination of government monetary liabilities, their enforcement and satisfaction. 17
Petitioner filed in the CA a petition for certiorari with application for temporary restraining
order (TRO) and preliminary injunction assailing the Writ of Execution dated November
24, 2009, docketed as CA-G.R. SP No. 111754.

On December 7, 2009, the trial court denied petitioners notice of appeal filed on
December 1, 2009. Petitioners motion for reconsideration of the December 7, 2009
Order was likewise denied.18 On May 20, 2010, petitioner filed another petition for
certiorari in the CA questioning the aforesaid orders denying due course to its notice of
appeal, docketed as CA-G.R. SP No. 114073.

By Decision dated October 18, 2010, the CAs First Division dismissed the petition in
CA-G.R. SP No. 111754 as it found no grave abuse of discretion in the lower courts
issuance of the writ of execution. Petitioner filed a motion for reconsideration which was
likewise denied by the CA. The CA stressed that even assuming as true the alleged
errors committed by the trial court, these were insufficient for a ruling that grave abuse
of discretion had been committed. On the matter of execution of the trial courts
decision, the appellate court said that it was rendered moot by respondents filing of a
petition before the Commission on Audit (COA).

On August 31, 2011, the CAs Sixteenth Division rendered its Decision dismissing the
petition in CA-G.R. SP No. 114073. The CA said that petitioner failed to provide valid
justification for its failure to file a timely motion for reconsideration; counsels
explanation that he believed in good faith that the August 14, 2009 Decision of the trial
court was received on September 25, 2009 because it was handed to him by his
personnel only on that day is not a justifiable excuse that would warrant the relaxation of
the rule on reglementary period of appeal. The CA also held that petitioner is estopped
from invoking the doctrine of primary jurisdiction as it only raised the issue of COAs
primary jurisdiction after its notice of appeal was denied and a writ of execution was
issued against it.

The Cases

In G.R. No. 197592, petitioner submits the following issues:

I.

WHETHER OR NOT THE DECISION DATED 14 AUGUST 2009 RENDERED

BY THE REGIONAL TRIAL COURT, BRANCH 273, MARIKINA CITY AND THE
WRIT OF EXECUTION DATED 24 NOVEMBER 2009 SHOULD BE RENDERED
VOID FOR LACK OF JURISDICTION OVER THE SUBJECT MATTER OF THE
CASE.

II.

WHETHER OR NOT THE REGIONAL TRIAL COURT, BRANCH 273,

MARIKINA CITY GRAVELY ABUSED ITS DISCRETION AMOUNTING TO
 LACK OR IN EXCESS OF JURISDICTION IN RENDERING THE DECISION
DATED 14 AUGUST 2009 AND ISSUING THE WRIT OF EXECUTION DATED
24 NOVEMBER 2009 EVEN IT FAILED TO DISPOSE ALL THE ISSUES OF
THE CASE BY NOT RESOLVING PETITIONERS "URGENT MOTION TO
DISCHARGE EX-PARTE WRIT OF PRELIMINARY ATTACHMENT" DATED 31
AUGUST 2006.

III.

WHETHER OR NOT THE WRIT OF EXECUTION DATED 24 NOVEMBER 2009

WHICH WAS HASTILY ISSUED IN VIOLATION OF SUPREME COURT
ADMINISTRATIVE CIRCULAR NO. 10-2000 SHOULD BE RENDERED VOID.19

The petition in G.R. No. 202623 sets forth the following arguments:

Petitioner is not estopped in questioning the jurisdiction of the Regional Trial Court,
Branch 273, Marikina City over the subject matter of the case.20

The petition for certiorari filed before the CA due to the RTCs denial of petitioners
Notice of Appeal was in accord with jurisprudence.21

The Issues

The controversy boils down to the following issues: (1) the applicability of the doctrine of
primary jurisdiction to this case; and (2) the propriety of the issuance of the writ of
execution.

Our Ruling

The petitions are meritorious.

COA has primary jurisdiction over private respondents money claims Petitioner is not
estopped from raising the issue of jurisdiction

The doctrine of primary jurisdiction holds that if a case is such that its determination
requires the expertise, specialized training and knowledge of the proper administrative
bodies, relief must first be obtained in an administrative proceeding before a remedy is
supplied by the courts even if the matter may well be within their proper jurisdiction. 22 It
applies where a claim is originally cognizable in the courts, and comes into play
whenever enforcement of the claim requires the resolution of issues which, under a
regulatory scheme, have been placed within the special competence of an
administrative agency. In such a case, the court in which the claim is sought to be
enforced may suspend the judicial process pending referral of such issues to the
administrative body for its view or, if the parties would not be unfairly disadvantaged,
dismiss the case without prejudice.23
The objective of the doctrine of primary jurisdiction is to guide the court in determining
whether it should refrain from exercising its jurisdiction until after an administrative
agency has determined some question or some aspect of some question arising in the
proceeding before the court.24

As can be gleaned, respondent seeks to enforce a claim for sums of money allegedly
owed by petitioner, a local government unit.

Under Commonwealth Act No. 327,25 as amended by Section 26 of Presidential Decree

No. 1445,26 it is the COA which has primary jurisdiction over money claims against
government agencies and instrumentalities.

Section 26. General jurisdiction. The authority and powers of the Commission shall
extend to and comprehend all matters relating to auditing procedures, systems and
controls, the keeping of the general accounts of the Government, the preservation of
vouchers pertaining thereto for a period of ten years, the examination and inspection of
the books, records, and papers relating to those accounts; and the audit and settlement
of the accounts of all persons respecting funds or property received or held by them in
an accountable capacity, as well as the examination, audit, and settlement of all debts
and claims of any sort due from or owing to the Government or any of its subdivisions,
agencies and instrumentalities. The said jurisdiction extends to all government-owned
or controlled corporations, including their subsidiaries, and other self-governing boards,
commissions, or agencies of the Government, and as herein prescribed, including non-
governmental entities subsidized by the government, those funded by donations
through the government, those required to pay levies or government share, and those
for which the government has put up a counterpart fund or those partly funded by the
government. (Emphasis supplied.)

Pursuant to its rule-making authority conferred by the 1987 Constitution27 and existing
laws, the COA promulgated the 2009 Revised Rules of Procedure of the Commission
on Audit. Rule II, Section 1 specifically enumerated those matters falling under COAs
exclusive jurisdiction, which include "money claims due from or owing to any
government agency." Rule VIII, Section 1 further provides:

Section 1. Original Jurisdiction - The Commission Proper shall have original jurisdiction
over:

a) money claim against the Government; b) request for concurrence in the hiring of legal
retainers by government agency; c) write off of unliquidated cash advances and
dormant accounts receivable in amounts exceeding one million pesos (P1,000,000.00);
d) request for relief from accountability for loses due to acts of man, i.e. theft, robbery,
arson, etc, in amounts in excess of Five Million pesos (P5,000,000.00).

In Euro-Med Laboratories Phil., Inc. v. Province of Batangas,28 we ruled that it is the

COA and not the RTC which has primary jurisdiction to pass upon petitioners money
claim against respondent local government unit. Such jurisdiction may not be waived by
the parties failure to argue the issue nor active participation in the proceedings. Thus:

This case is one over which the doctrine of primary jurisdiction clearly held sway for
although petitioners collection suit for P487,662.80 was within the jurisdiction of the
RTC, the circumstances surrounding petitioners claim brought it clearly within the ambit
of the COAs jurisdiction.

First, petitioner was seeking the enforcement of a claim for a certain amount of money
against a local government unit. This brought the case within the COAs domain to pass
upon money claims against the government or any subdivision thereof under Section 26
of the Government Auditing Code of the Philippines:

The authority and powers of the Commission [on Audit] shall extend to and comprehend
all matters relating to x x x the examination, audit, and settlement of all debts and claims
of any sort due from or owing to the Government or any of its subdivisions, agencies,
and instrumentalities. x x x.

The scope of the COAs authority to take cognizance of claims is circumscribed,

however, by an unbroken line of cases holding statutes of similar import to mean only
liquidated claims, or those determined or readily determinable from vouchers, invoices,
and such other papers within reach of accounting officers. Petitioners claim was for a
fixed amount and although respondent took issue with the accuracy of petitioners
summation of its accountabilities, the amount thereof was readily determinable from the
receipts, invoices and other documents. Thus, the claim was well within the COAs
jurisdiction under the Government Auditing Code of the Philippines.

Second, petitioners money claim was founded on a series of purchases for the medical
supplies of respondents public hospitals. Both parties agreed that these transactions
were governed by the Local Government Code provisions on supply and property
management and their implementing rules and regulations promulgated by the COA
pursuant to Section 383 of said Code. Petitioners claim therefore involved compliance
with applicable auditing laws and rules on procurement. Such matters are not within the
usual area of knowledge, experience and expertise of most judges but within the special
competence of COA auditors and accountants. Thus, it was but proper, out of fidelity to
the doctrine of primary jurisdiction, for the RTC to dismiss petitioners complaint.

Petitioner argues, however, that respondent could no longer question the RTCs
jurisdiction over the matter after it had filed its answer and participated in the
subsequent proceedings. To this, we need only state that the court may raise the issue
of primary jurisdiction sua sponte and its invocation cannot be waived by the failure of
the parties to argue it as the doctrine exists for the proper distribution of power between
judicial and administrative bodies and not for the convenience of the
parties.29 (Emphasis supplied.)
Respondents collection suit being directed against a local government unit, such
money claim should have been first brought to the COA.30 Hence, the RTC should have
suspended the proceedings and refer the filing of the claim before the COA. Moreover,
petitioner is not estopped from raising the issue of jurisdiction even after the denial of its
notice of appeal and before the CA.

There are established exceptions to the doctrine of primary jurisdiction, such as: (a)
where there is estoppel on the part of the party invoking the doctrine; (b) where the
challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c)
where there is unreasonable delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively small so as to make the rule
impractical and oppressive; (e) where the question involved is purely legal and will
ultimately have to be decided by the courts of justice; (f) where judicial intervention is
urgent; (g) when its application may cause great and irreparable damage; (h) where the
controverted acts violate due process; (i) when the issue of non-exhaustion of
administrative remedies has been rendered moot; (j) when there is no other plain,
speedy and adequate remedy; (k) when strong public interest is involved; and, (l) in quo
warranto proceedings.31 However, none of the foregoing circumstances is applicable in
the present case.

The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself
authority to resolve a controversy the jurisdiction over which is initially lodged with an
administrative body of special competence.32 All the proceedings of the court in violation
of the doctrine and all orders and decisions rendered thereby are null and void.33

Writ of Execution issued in violation of COAs primary jurisdiction is void

Since a judgment rendered by a body or tribunal that has no jurisdiction over the subject
matter of the case is no judgment at all, it cannot be the source of any right or the
creator of any obligation.34 All acts pursuant to it and all claims emanating from it have
no legal effect and the void judgment can never be final and any writ of execution based
on it is likewise void.35

Clearly, the CA erred in ruling that the RTC committed no grave abuse of discretion
when it ordered the execution of its judgment against petitioner and garnishment of the
latters funds.

In its Supplement to the Motion for Reconsideration, petitioner argued that it is the COA
and not the RTC which has original jurisdiction over money claim against government
agencies and subdivisions.1wphi1 The CA, in denying petitioner's motion for
reconsideration, simply stated that the issue had become moot by respondent's filing of
the proper petition with the COA. However, respondent's belated compliance with the
formal requirements of presenting its money claim before the COA did not cure the
serious errors committed by the RTC in implementing its void decision. The RTC's
orders implementing its judgment rendered without jurisdiction must be set aside
because a void judgment can never be validly executed.
Finally, the RTC should have exercised utmost caution, prudence and judiciousness in
issuing the writ of execution and notices of garnishment against petitioner. The RTC
had no authority to direct the immediate withdrawal of any portion of the garnished
funds from petitioner's depositary banks.36 Such act violated the express directives of
this Court under Administrative Circular No. 10-2000,37 which was issued "precisely in
order to prevent the circumvention of Presidential Decree No. 1445, as well as of the
rules and procedures of the COA."38WHEREFORE, both petitions in G.R. Nos. 197592
and 202623 are GRANTED. The Decision dated October 18, 2010 and Resolution
dated July 5 2011 of the Court of Appeals in CA-G.R. SP No. 111754, and Decision
dated August 31, 2011 and Resolution dated June 27, 2012 in CA- G.R. SP No. 114073
are hereby REVERSED and SET ASIDE. The Decision dated August 14 2009, Writ of
Execution and subsequent issuances implementing the said decision of the Regional
Trial Court of Marikina City in Civil Case No. 06-1122-MK are all SET ASIDE. No
pronouncement as to costs.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice
PANTRANCO NORTH EXPRESS, INC., and ALEXANDER BUNCAN, petitioners,
vs. STANDARD INSURANCE COMPANY, INC., and MARTINA
GICALE, respondents.

DECISION
SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari assailing the Decision[1] dated July 23
1999 and Resolution[2] dated November 4, 1999 of the Court of Appeals in CA-G.R. CV
No. 38453, entitled Standard Insurance Company, Inc., and Martina Gicale vs.
PANTRANCO North Express, Inc., and Alexander Buncan.
In the afternoon of October 28, 1984, Crispin Gicale was driving the passenger
jeepney owned by his mother Martina Gicale, respondent herein. It was then raining.
While driving north bound along the National Highway in Talavera, Nueva Ecija, a
passenger bus, owned by Pantranco North Express, Inc., petitioner, driven by
Alexander Buncan, also a petitioner, was trailing behind. When the two vehicles were
negotiating a curve along the highway, the passenger bus overtook the jeepney. In so
doing, the passenger bus hit the left rear side of the jeepney and sped away.
Crispin reported the incident to the Talavera Police Station and respondent
Standard Insurance Co., Inc. (Standard), insurer of the jeepney. The total cost of the
repair was P21,415.00, but respondent Standard paid only P8,000.00. Martina Gicale
shouldered the balance of P13,415.00.
Thereafter, Standard and Martina, respondents, demanded reimbursement from
petitioners Pantranco and its driver Alexander Buncan, but they refused. This prompted
respondents to file with the Regional Trial Court (RTC), Branch 94, Manila, a complaint
for sum of money.
In their answer, both petitioners specifically denied the allegations in the complaint
and averred that it is the Metropolitan Trial Court, not the RTC, which has jurisdiction
over the case.
On June 5, 1992, the trial court rendered a Decision [3] in favor of respondents
Standard and Martina, thus:

WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered in

favor of the plaintiffs, Standard Insurance Company and Martina Gicale, and against defendants
Pantranco Bus Company and Alexander Buncan, ordering the latter to pay as follows:

(1) to pay plaintiff Standard Insurance the amount of P8,000.00 with interest due thereon from
November 27, 1984 until fully paid;

(2) to pay plaintiff Martina Gicale the amount of P13,415.00 with interest due thereon from
October 22, 1984 until fully paid;

(3) to pay the sum of P10,000.00 for attorneys fees;

(4) to pay the expenses of litigation and the cost of suit.

SO ORDERED.

On appeal, the Court of Appeals, in a Decision[4] dated July 23, 1999, affirmed the
trial courts ruling, holding that:

The appellants argue that appellee Gicales claim of P13,415.00 and appellee insurance companys
claim of P8,000.00 individually fell under the exclusive original jurisdiction of the municipal
trial court. This is not correct because under the Totality Rule provided for under Sec. 19, Batas
Pambansa Bilang 129, it is the sum of the two claims that determines the jurisdictional amount.

xxx

In the case at bench, the total of the two claims is definitely more than P20,000.00 which at the
time of the incident in question was the jurisdictional amount of the Regional Trial Court.

Appellants contend that there was a misjoinder of parties. Assuming that there was, under the
Rules of Court (Sec. 11, Rule 7) as well as under the Rules of Civil Procedure (ditto), the same
does not affect the jurisdiction of the court nor is it a ground to dismiss the complaint.

xxx

It does not need perspicacity in logic to see that appellees Gicales and insurance companys
individual claims against appellees (sic) arose from the same vehicular accident on October 28,
1984 involving appellant Pantrancos bus and appellee Gicales jeepney. That being the case, there
was a question of fact common to all the parties: Whose fault or negligence caused the damage
to the jeepney?

Appellants submit that they were denied their day in court because the case was deemed
submitted for decision without even declaring defendants in default or to have waived the
presentation of evidence. This is incorrect. Of course, the court did not declare defendants in
default because that is done only when the defendant fails to tender an answer within the
reglementary period. When the lower court ordered that the case is deemed submitted for
decision that meant that the defendants were deemed to have waived their right to present
evidence. If they failed to adduce their evidence, they should blame nobody but themselves.
They failed to be present during the scheduled hearing for the reception of their evidence despite
notice and without any motion or explanation. They did not even file any motion for
reconsideration of the order considering the case submitted for decision.

Finally, contrary to the assertion of the defendant-appellants, the evidence preponderantly

established their liability for quasi-delict under Article 2176 of the Civil Code.

Petitioners filed a motion for reconsideration but was denied by the Appellate Court
in a Resolution dated November 4, 1999.
 Hence, this petition for review on certiorari raising the following assignments of
error:
I

WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT OF
THE ACTION CONSIDERING THAT RESPONDENTS RESPECTIVE CAUSE OF ACTION
AGAINST PETITIONERS DID NOT ARISE OUT OF THE SAME TRANSACTION NOR
ARE THERE QUESTIONS OF LAW AND FACTS COMMON TO BOTH PETITIONERS
AND RESPONDENTS.

II

WHETHER OR NOT PETITIONERS ARE LIABLE TO RESPONDENTS CONSIDERING

THAT BASED ON THE EVIDENCE ADDUCED AND LAW APPLICABLE IN THE CASE
AT BAR, RESPONDENTS HAVE NOT SHOWN ANY RIGHT TO THE RELIEF PRAYED
FOR.

III

WHETHER OR NOT PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO DUE

PROCESS.

For their part, respondents contend that their individual claims arose out of the
same vehicular accident and involve a common question of fact and law. Hence, the
RTC has jurisdiction over the case.
I
Petitioners insist that the trial court has no jurisdiction over the case since the cause
of action of each respondent did not arise from the same transaction and that there are
no common questions of law and fact common to both parties. Section 6, Rule 3 of the
Revised Rules of Court,[5] provides:

Sec. 6. Permissive joinder of parties. All persons in whom or against whom any right to relief in
respect to or arising out of the same transaction or series of transactions is alleged to exist,
whether jointly, severally, or in the alternative, may, except as otherwise provided in these Rules,
join as plaintiffs or be joined as defendants in one complaint, where any question of law or fact
common to all such plaintiffs or to all such defendants may arise in the action; but the court may
make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or
put to expense in connection with any proceedings in which he may have no interest.

Permissive joinder of parties requires that: (a) the right to relief arises out of the
same transaction or series of transactions; (b) there is a question of law or fact common
to all the plaintiffs or defendants; and (c) such joinder is not otherwise proscribed by the
provisions of the Rules on jurisdiction and venue.[6]
 In this case, there is a single transaction common to all, that is, Pantrancos bus
hitting the rear side of the jeepney. There is also a common question of fact, that is,
whether petitioners are negligent. There being a single transaction common to both
respondents, consequently, they have the same cause of action against petitioners.
To determine identity of cause of action, it must be ascertained whether the same
evidence which is necessary to sustain the second cause of action would have been
sufficient to authorize a recovery in the first.[7] Here, had respondents filed separate
suits against petitioners, the same evidence would have been presented to sustain the
same cause of action. Thus, the filing by both respondents of the complaint with the
court below is in order. Such joinder of parties avoids multiplicity of suit and ensures the
convenient, speedy and orderly administration of justice.
Corollarily, Section 5(d), Rule 2 of the same Rules provides:

Sec. 5. Joinder of causes of action. A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the
following conditions:

xxx

(d) Where the claims in all the causes of action are principally for recovery of money the
aggregate amount claimed shall be the test of jurisdiction.

The above provision presupposes that the different causes of action which are
joined accrue in favor of the same plaintiff/s and against the same defendant/s and that
no misjoinder of parties is involved.[8] The issue of whether respondents claims shall be
lumped together is determined by paragraph (d) of the above provision. This paragraph
embodies the totality rule as exemplified by Section 33 (1) of B.P. Blg. 129 [9] which
states, among others, that where there are several claims or causes of action between
the same or different parties, embodied in the same complaint, the amount of the
demand shall be the totality of the claims in all the causes of action, irrespective of
whether the causes of action arose out of the same or different transactions.
As previously stated, respondents cause of action against petitioners arose out of
the same transaction. Thus, the amount of the demand shall be the totality of the
claims.
Respondent Standards claim is P8,000.00, while that of respondent Martina Gicale
is P13,415.00, or a total of P21,415.00. Section 19 of B.P. Blg. 129 provides that the
RTC has exclusive original jurisdiction over all other cases, in which the demand,
exclusive of interest and cost or the value of the property in controversy, amounts to
more than twenty thousand pesos (P20,000.00). Clearly, it is the RTC that has
jurisdiction over the instant case. It bears emphasis that when the complaint was filed,
R.A. 7691 expanding the jurisdiction of the Metropolitan, Municipal and Municipal Circuit
Trial Courts had not yet taken effect. It became effective on April 15, 1994.
II
 The finding of the trial court, affirmed by the Appellate Court, that petitioners are
negligent and thus liable to respondents, is a factual finding which is binding upon us, a
rule well-established in our jurisprudence. It has been repeatedly held that the trial
court's factual findings, when affirmed by the Appellate Court, are conclusive and
binding upon this Court, if they are not tainted with arbitrariness or oversight of some
fact or circumstance of significance and influence. Petitioners have not presented
sufficient ground to warrant a deviation from this rule.[10]
III
There is no merit in petitioners contention that they were denied due process.
Records show that during the hearing, petitioner Pantrancos counsel filed two motions
for resetting of trial which were granted by the trial court. Subsequently, said counsel
filed a notice to withdraw. After respondents had presented their evidence, the trial
court, upon petitioners motion, reset the hearing to another date. On this date,
Pantranco failed to appear. Thus, the trial court warned Pantranco that should it fail to
appear during the next hearing, the case will be submitted for resolution on the basis of
the evidence presented. Subsequently, Pantrancos new counsel manifested that his
client is willing to settle the case amicably and moved for another postponement. The
trial court granted the motion. On the date of the hearing, the new counsel manifested
that Pantrancos employees are on strike and moved for another postponement. On the
next hearing, said counsel still failed to appear. Hence, the trial court considered the
case submitted for decision.
We have consistently held that the essence of due process is simply an opportunity
to be heard, or an opportunity to explain ones side or an opportunity to seek for a
reconsideration of the action or ruling complained of.[11]
Petitioner Pantranco filed an answer and participated during the trial and
presentation of respondents evidence. It was apprised of the notices of hearing issued
by the trial court. Indeed, it was afforded fair and reasonable opportunity to explain its
side of the controversy. Clearly, it was not denied of its right to due process. What is
frowned upon is the absolute lack of notice and hearing which is not present here.
WHEREFORE, the petition is DENIED. The assailed Decision dated July 23 1999
and Resolution dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No.
38453 are hereby AFFIRMED. Costs against petitioners.
SO ORDERED.
Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.
G.R. No. 181416 November 11, 2013

MEDICAL PLAZA MAKATI CONDOMINIUM CORPORATION, Petitioner,

vs.
ROBERT H. CULLEN, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the Court of Appeals (CA) Decision1 dated July 10, 2007 and Resolution2 dated January
25, 2008 in CA-G.R. CV No. 86614. The assailed decision reversed and set aside the
September 9, 2005 Order3 of the Regional Trial Court (RTC) of Makati, Branch 58 in
Civil Case No. 03-1018; while the assailed resolution denied the separate motions for
reconsideration filed by petitioner Medical Plaza Makati Condominium Corporation
(MPMCC) and Meridien Land Holding, Inc. (MLHI).

The factual and procedural antecedents are as follows:

Respondent Robert H. Cullen purchased from MLHI condominium Unit No. 1201 of the
Medical Plaza Makati covered by Condominium Certificate of Title No. 45808 of the
Register of Deeds of Makati. Said title was later cancelled and Condominium Certificate
of Title No. 64218 was issued in the name of respondent.

On September 19, 2002, petitioner, through its corporate secretary, Dr. Jose Giovanni
E. Dimayuga, demanded from respondent payment for alleged unpaid association dues
and assessments amounting to P145,567.42. Respondent disputed this demand
claiming that he had been religiously paying his dues shown by the fact that he was
previously elected president and director of petitioner.4 Petitioner, on the other hand,
claimed that respondents obligation was a carry-over of that of MLHI.5 Consequently,
respondent was prevented from exercising his right to vote and be voted for during the
2002 election of petitioners Board of Directors.6 Respondent thus clarified from MLHI
the veracity of petitioners claim, but MLHI allegedly claimed that the same had already
been settled.7 This prompted respondent to demand from petitioner an explanation why
he was considered a delinquent payer despite the settlement of the obligation.
Petitioner failed to make such explanation. Hence, the Complaint for Damages8 filed by
respondent against petitioner and MLHI, the pertinent portions of which read:

xxxx

6. Thereafter, plaintiff occupied the said condominium unit no. 1201 and
religiously paid all the corresponding monthly contributions/association dues and
other assessments imposed on the same. For the years 2000 and 2001, plaintiff
served as President and Director of the Medical Plaza Makati Condominium
Corporation;
7. Nonetheless, on September 19, 2002, plaintiff was shocked/surprised to
receive a letter from the incumbent Corporate Secretary of the defendant Medical
Plaza Makati, demanding payment of alleged unpaid association dues and
assessments arising from plaintiffs condominium unit no. 1201. The said letter
further stressed that plaintiff is considered a delinquent member of the defendant
Medical Plaza Makati.

x x x;

8. As a consequence, plaintiff was not allowed to file his certificate of candidacy

as director. Being considered a delinquent, plaintiff was also barred from
exercising his right to vote in the election of new members of the Board of
Directors x x x;

9. x x x Again, prior to the said election date, x x x counsel for the defendant
[MPMCC] sent a demand letter to plaintiff, anent the said delinquency, explaining
that the said unpaid amount is a carry-over from the obligation of defendant
Meridien. x x x;

10. Verification with the defendant [MPMCC] resulted to the issuance of a

certification stating that Condominium Unit 1201 has an outstanding unpaid
obligation in the total amount of P145,567.42 as of November 30, 2002, which
again, was attributed by defendant [MPMCC] to defendant Meridien. x x x;

11. Due to the seriousness of the matter, and the feeling that defendant Meridien
made false representations considering that it fully warranted to plaintiff that
condominium unit 1201 is free and clear from all liens and encumbrances, the
matter was referred to counsel, who accordingly sent a letter to defendant
Meridien, to demand for the payment of said unpaid association dues and other
assessments imposed on the condominium unit and being claimed by defendant
[MPMCC]. x x x;

12. x x x defendant Meridien claimed however, that the obligation does not exist
considering that the matter was already settled and paid by defendant Meridien
to defendant [MPMCC]. x x x;

13. Plaintiff thus caused to be sent a letter to defendant [MPMCC] x x x. The said
letter x x x sought an explanation on the fact that, as per the letter of defendant
Meridien, the delinquency of unit 1201 was already fully paid and settled,
contrary to the claim of defendant [MPMCC]. x x x;

14. Despite receipt of said letter on April 24, 2003, and to date however, no
explanation was given by defendant [MPMCC], to the damage and prejudice of
plaintiff who is again obviously being barred from voting/participating in the
election of members of the board of directors for the year 2003;
 15. Clearly, defendant [MPMCC] acted maliciously by insisting that plaintiff is a
delinquent member when in fact, defendant Meridien had already paid the said
delinquency, if any. The branding of plaintiff as delinquent member was willfully
and deceitfully employed so as to prevent plaintiff from exercising his right to vote
or be voted as director of the condominium corporation; 16. Defendant
[MPMCC]s ominous silence when confronted with claim of payment made by
defendant Meridien is tantamount to admission that indeed, plaintiff is not really a
delinquent member;

17. Accordingly, as a direct and proximate result of the said acts of defendant
[MPMCC], plaintiff experienced/suffered from mental anguish, moral shock, and
serious anxiety. Plaintiff, being a doctor of medicine and respected in the
community further suffered from social humiliation and besmirched reputation
thereby warranting the grant of moral damages in the amount of P500,000.00
and for which defendant [MPMCC] should be held liable;

18. By way of example or correction for the public good, and as a stern warning
to all similarly situated, defendant [MPMCC] should be ordered to pay plaintiff
exemplary damages in the amount of P200,000.00;

19. As a consequence, and so as to protect his rights and interests, plaintiff was
constrained to hire the services of counsel, for an acceptance fee of P100,000.00
plus P2,500.00 per every court hearing attended by counsel;

20. In the event that the claim of defendant [MPMCC] turned out to be true,
however, the herein defendant Meridien should be held liable instead, by
ordering the same to pay the said delinquency of condominium unit 1201 in the
amount of P145,567.42 as of November 30, 2002 as well as the above damages,
considering that the non-payment thereof would be the proximate cause of the
damages suffered by plaintiff;9

Petitioner and MLHI filed their separate motions to dismiss the complaint on the ground
of lack of jurisdiction.10MLHI claims that it is the Housing and Land Use Regulatory
Board (HLURB) which is vested with the exclusive jurisdiction to hear and decide the
case. Petitioner, on the other hand, raises the following specific grounds for the
dismissal of the complaint: (1) estoppel as respondent himself approved the
assessment when he was the president; (2) lack of jurisdiction as the case involves an
intra-corporate controversy; (3) prematurity for failure of respondent to exhaust all intra-
corporate remedies; and (4) the case is already moot and academic, the obligation
having been settled between petitioner and MLHI.11

On September 9, 2005, the RTC rendered a Decision granting petitioners and MLHIs
motions to dismiss and, consequently, dismissing respondents complaint.

The trial court agreed with MLHI that the action for specific performance filed by
respondent clearly falls within the exclusive jurisdiction of the HLURB.12 As to petitioner,
the court held that the complaint states no cause of action, considering that
respondents obligation had already been settled by MLHI. It, likewise, ruled that the
issues raised are intra-corporate between the corporation and member.13

On appeal, the CA reversed and set aside the trial courts decision and remanded the
case to the RTC for further proceedings. Contrary to the RTC conclusion, the CA held
that the controversy is an ordinary civil action for damages which falls within the
jurisdiction of regular courts.14 It explained that the case hinged on petitioners refusal to
confirm MLHIs claim that the subject obligation had already been settled as early as
1998 causing damage to respondent.15 Petitioners and MLHIs motions for
reconsideration had also been denied.16

Aggrieved, petitioner comes before the Court based on the following grounds:

I.

THE COURT A QUO HAS DECIDED A QUESTION OF SUBSTANCE, NOT

THERETOFORE DETERMINED BY THE SUPREME COURT, OR HAS DECIDED IT
IN A WAY NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF
THE SUPREME COURT WHEN IT DECLARED THE INSTANT CASE AN ORDINARY
ACTION FOR DAMAGES INSTEAD OF AN INTRA-CORPORATE CONTROVERSY
COGNIZABLE BY A SPECIAL COMMERCIAL COURT.

II.

THE COURT A QUO HAS DECIDED THE INSTANT CASE IN A WAY NOT IN
ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME
COURT WHEN IT TOOK COGNIZANCE OF THE APPEAL WHILE RAISING ONLY
PURE QUESTIONS OF LAW.17

The petition is meritorious.

It is a settled rule that jurisdiction over the subject matter is determined by the
allegations in the complaint. It is not affected by the pleas or the theories set up by the
defendant in an answer or a motion to dismiss. Otherwise, jurisdiction would become
dependent almost entirely upon the whims of the defendant. 18 Also illuminating is the
Courts pronouncement in Go v. Distinction Properties Development and Construction,
Inc.:19

Basic as a hornbook principle is that jurisdiction over the subject matter of a case is
conferred by law and determined by the allegations in the complaint which comprise a
concise statement of the ultimate facts constituting the plaintiffs cause of action. The
nature of an action, as well as which court or body has jurisdiction over it, is determined
based on the allegations contained in the complaint of the plaintiff, irrespective of
whether or not the plaintiff is entitled to recover upon all or some of the claims asserted
therein. The averments in the complaint and the character of the relief sought are the
ones to be consulted. Once vested by the allegations in the complaint, jurisdiction also
remains vested irrespective of whether or not the plaintiff is entitled to recover upon all
or some of the claims asserted therein. x x x20

Based on the allegations made by respondent in his complaint, does the controversy
involve intra-corporate issues as would fall within the jurisdiction of the RTC sitting as a
special commercial court or an ordinary action for damages within the jurisdiction of
regular courts?

In determining whether a dispute constitutes an intra-corporate controversy, the Court

uses two tests, namely, the relationship test and the nature of the controversy test. 21

An intra-corporate controversy is one which pertains to any of the following

relationships: (1) between the corporation, partnership or association and the public; (2)
between the corporation, partnership or association and the State insofar as its
franchise, permit or license to operate is concerned; (3) between the corporation,
partnership or association and its stockholders, partners, members or officers; and (4)
among the stockholders, partners or associates themselves.22 Thus, under the
relationship test, the existence of any of the above intra-corporate relations makes the
case intra-corporate.23

Under the nature of the controversy test, "the controversy must not only be rooted in the
existence of an intra-corporate relationship, but must as well pertain to the enforcement
of the parties correlative rights and obligations under the Corporation Code and the
internal and intra-corporate regulatory rules of the corporation."24 In other words,
jurisdiction should be determined by considering both the relationship of the parties as
well as the nature of the question involved.25

Applying the two tests, we find and so hold that the case involves intra-corporate
controversy. It obviously arose from the intra-corporate relations between the parties,
and the questions involved pertain to their rights and obligations under the Corporation
Code and matters relating to the regulation of the corporation.26

Admittedly, petitioner is a condominium corporation duly organized and existing under

Philippine laws, charged with the management of the Medical Plaza Makati.
Respondent, on the other hand, is the registered owner of Unit No. 1201 and is thus a
stockholder/member of the condominium corporation. Clearly, there is an intra-
corporate relationship between the corporation and a stockholder/member.

The nature of the action is determined by the body rather than the title of the
complaint.1wphi1 Though denominated as an action for damages, an examination of
the allegations made by respondent in his complaint shows that the case principally
dwells on the propriety of the assessment made by petitioner against respondent as
well as the validity of petitioners act in preventing respondent from participating in the
election of the corporations Board of Directors. Respondent contested the alleged
unpaid dues and assessments demanded by petitioner.
The issue is not novel. The nature of an action involving any dispute as to the validity of
the assessment of association dues has been settled by the Court in Chateau de Baie
Condominium Corporation v. Moreno.27 In that case, respondents therein filed a
complaint for intra-corporate dispute against the petitioner therein to question how it
calculated the dues assessed against them, and to ask an accounting of association
dues. Petitioner, however, moved for the dismissal of the case on the ground of lack of
jurisdiction alleging that since the complaint was against the owner/developer of a
condominium whose condominium project was registered with and licensed by the
HLURB, the latter has the exclusive jurisdiction. In sustaining the denial of the motion to
dismiss, the Court held that the dispute as to the validity of the assessments is purely
an intra-corporate matter between petitioner and respondent and is thus within the
exclusive jurisdiction of the RTC sitting as a special commercial court. More so in this
case as respondent repeatedly questioned his characterization as a delinquent member
and, consequently, petitioners decision to bar him from exercising his rights to vote and
be voted for. These issues are clearly corporate and the demand for damages is just
incidental. Being corporate in nature, the issues should be threshed out before the RTC
sitting as a special commercial court. The issues on damages can still be resolved in
the same special commercial court just like a regular RTC which is still competent to
tackle civil law issues incidental to intra-corporate disputes filed before it.28

Moreover, Presidential Decree No. 902-A enumerates the cases over which the
Securities and Exchange Commission (SEC) exercises exclusive jurisdiction:

xxxx

b) Controversies arising out of intra-corporate or partnership relations, between

and among stockholders, members or associates; between any or all of them
and the corporation, partnership or association of which they are stockholders,
members, or associates, respectively; and between such corporation, partnership
or association and the State insofar as it concerns their individual franchise or
right to exist as such entity; and

c) Controversies in the election or appointment of directors, trustees, officers, or

managers of such corporations, partnerships, or associations.29

To be sure, this action partakes of the nature of an intra-corporate controversy, the

jurisdiction over which pertains to the SEC. Pursuant to Section 5.2 of Republic Act No.
8799, otherwise known as the Securities Regulation Code, the jurisdiction of the SEC
over all cases enumerated under Section 5 of Presidential Decree No. 902-A has been
transferred to RTCs designated by this Court as Special Commercial Courts. 30 While
the CA may be correct that the RTC has jurisdiction, the case should have been filed
not with the regular court but with the branch of the RTC designated as a special
commercial court. Considering that the RTC of Makati City, Branch 58 was not
designated as a special commercial court, it was not vested with jurisdiction over cases
previously cognizable by the SEC.31The CA, therefore, gravely erred in remanding the
case to the RTC for further proceedings.
Indeed, Republic Act (RA) No. 9904, or the Magna Carta for Homeowners and
Homeowners Associations, approved on January 7, 2010 and became effective on July
10, 2010, empowers the HLURB to hear and decide inter-association and/or intra-
association controversies or conflicts concerning homeowners associations. However,
we cannot apply the same in the present case as it involves a controversy between a
condominium unit owner and a condominium corporation. While the term association as
defined in the law covers homeowners associations of other residential real property
which is broad enough to cover a condominium corporation, it does not seem to be the
legislative intent. A thorough review of the deliberations of the bicameral conference
committee would show that the lawmakers did not intend to extend the coverage of the
law to such kind of association. We quote hereunder the pertinent portion of the
Bicameral Conference Committees deliberation, to wit:

THE CHAIRMAN (SEN. ZUBIRI). Lets go back, Mr. Chair, very quickly on
homeowners.

THE ACTING CHAIRMAN (REP. ZIALCITA). Ang sa akin lang, I think our views are
similar, Your Honor, Senator Zubiri, the entry of the condominium units might just
complicate the whole matters. So wed like to put it on record that were very much
concerned about the plight of the Condominium Unit Homeowners Association. But this
could very well be addressed on a separate bill that Im willing to co-sponsor with the
distinguished Senator Zubiri, to address in the Condominium Act of the Philippines,
rather than address it here because it might just create a red herring into the entire thing
and it will just complicate matters, hindi ba?

THE CHAIRMAN (SEN. ZUBIRI). I also agree with you although I sympathize with
them---although we sympathize with them and we feel that many times their rights have
been also violated by abusive condominium corporations. However, there are certain
things that we have to reconcile. There are certain issues that we have to reconcile with
this version.

In the Condominium Code, for example, they just raised a very peculiar situation under
the Condominium Code --- Condominium Corporation Act. Its five years the proxy,
whereas here, its three years. So there would already be violation or there will be
already a problem with their version and our version. Sino ang matutupad doon? Will it
be our version or their version?

So I agree that has to be studied further. And because they have a law pertaining to the
condominium housing units, I personally feel that it would complicate matters if we
include them. Although I agree that they should be looked after and their problems be
looked into.

Probably we can ask our staff, Your Honor, to come up already with the bill although we
have no more time. Hopefully we can tackle this again on the 15th Congress. But I
agree with the sentiments and the inputs of the Honorable Chair of the House panel.
May we ask our resource persons to also probably give comments?

Atty. Dayrit.

MR. DAYRIT.

Yes I agree with you. There are many, I think, practices in their provisions in the
Condominium Law that may be conflicting with this version of ours.

For instance, in the case of, lets say, the condominium, the so-called common areas
and/or maybe so called open spaces that they may have, especially common areas,
they are usually owned by the condominium corporation. Unlike a subdivision where the
open spaces and/or the common areas are not necessarily owned by the association.
Because sometimes --- generally these are donated to the municipality or to the city.
And it is only when the city or municipality gives the approval or the conformity that this
is donated to the homeowners association. But generally, under PD [Presidential
Decree] 957, its donated. In the Condominium Corporation, hindi. Lahat ng mga open
spaces and common areas like corridors, the function rooms and everything, are owned
by the corporation. So thats one main issue that can be conflicting.

THE CHAIRMAN (SEN. ZUBIRI). Ill just ask for a one-minute suspension so we can
talk.

THE ACTING CHAIRMAN (REP. ZIALCITA). Unless you want to put a catchall phrase
like what we did in the Senior Citizens Act. Something like, to the extent --- paano ba
iyon? To the extent that it is practicable and applicable, the rights and benefits of the
homeowners, are hereby extended to the --- mayroon kaming ginamit na phrase eh...to
the extent that it be practicable and applicable to the unit homeoweners, is hereby
extended, something like that. Its a catchall phrase. But then again, it might create a...

MR. JALANDONI. It will become complicated. There will be a lot of conflict of laws
between the two laws.

THE ACTING CHAIRMAN (REP. ZIALCITA). Kaya nga eh. At saka, I dont know. I think
the --- mayroon naman silang protection sa ano eh, di ba? Buyers decree doon sa
Condominium Act. Im sure there are provisions there eh. Huwag na lang, huwag na
lang.

MR. JALANDONI. Mr. Chairman, I think it would be best if your previous comments that
youd be supporting an amendment.1wphi1 I think that would be --- Well, that would be
the best course of action with all due respect.

THE ACTING CHAIRMAN (REP. ZIALCITA). Yeah. Okay. Thank you. So iyon na lang
final proposal naming yung catchall phrase, "With respect to the..." 32

xxxx
THE CHAIRMAN (SEN. ZUBIRI). xxx And so, what is their final decision on the
definition of homeowners?

THE ACTING CHAIRMAN (REP. ZIALCITA).

We stick to the original, Mr. Chairman. Well just open up a whole can of worms and a
whole new ball game will come into play. Besides, I am not authorized, neither are you,
by our counterparts to include the condominium owners.

THE CHAIRMAN (SEN. ZUBIRI).

Basically that is correct. We are not authorized by the Senate nor because we have
discussed this lengthily on the floor, actually, several months on the floor. And we dont
have the authority as well for other Bicam members to add a provision to include a
separate entity that has already their legal or their established Republic Act tackling on
that particular issue. But we just like to put on record, we sympathize with the plight of
our friends in the condominium associations and we will just guarantee them that we will
work on an amendment to the Condominium Corporation Code. So with that we
skipped, that is correct, we have to go back to homeowners association definition, Your
Honor, because we had skipped it altogether. So just quickly going back to Page 7
because there are amendments to the definition of homeowners. If it is alright with the
House Panel, adopt the opening phrase of Subsection 7 of the Senate version as
opening phrase of Subsection 10 of the reconciled version.

x x x x33

To be sure, RA 4726 or the Condominium Act was enacted to specifically govern a

condominium. Said law sanctions the creation of the condominium corporation which is
especially formed for the purpose of holding title to the common area, in which the
holders of separate interests shall automatically be members or shareholders, to the
exclusion of others, in proportion to the appurtenant interest of their respective
units.34 The rights and obligations of the condominium unit owners and the
condominium corporation are set forth in the above Act.

Clearly, condominium corporations are not covered by the amendment. Thus, the intra-
corporate dispute between petitioner and respondent is still within the jurisdiction of the
RTC sitting as a special commercial court and not the HLURB. The doctrine laid down
by the Court in Chateau de Baie Condominium Corporation v. Moreno 35 which in turn
cited Wack Wack Condominium Corporation, et al v. CA36 is still a good law.

WHEREFORE, we hereby GRANT the petition and REVERSE the Court of Appeals
Decision dated July 10, 2007 and Resolution dated January 25, 2008 in CA-G.R. CV
No. 86614. The Complaint before the Regional Trial Court of Makati City, Branch 58,
which is not a special commercial court, docketed as Civil Case No. 03-1018 is ordered
DISMISSED for lack of jurisdiction. Let the case be REMANDED to the Executive Judge
of the Regional Trial Court of Makati City for re-raffle purposes among the designated
special commercial courts.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:
LUCIA BARRAMEDA VDA. DE G.R. No. 176260
BALLESTEROS,
Petitioner, Present:

CARPIO, J., Chairperson,

NACHURA,
- versus - PERALTA,
ABAD, and
MENDOZA, JJ.
RURAL BANK OF CANAMAN
INC., represented by its Liquidator,
THE PHILIPPINE DEPOSIT
INSURANCE CORPORATION, Promulgated:
Respondent.
November 24, 2010

X -------------------------------------------------------------------------------------- X

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Civil
Procedure assailing the August 15, 2006 Decision[1] of the Court of Appeals (CA) in CA-G.R.
No. 82711, modifying the decision of the Regional Trial Court of Iriga City, Branch 36 (RTC-
Iriga), in Civil Case No. IR-3128, by ordering the consolidation of the said civil case with
Special Proceeding Case No. M-5290 (liquidation case) before
the Regional Trial Court of Makati City, Branch 59 (RTC-Makati).

It appears from the records that on March 17, 2000, petitioner Lucia Barrameda Vda. De
Ballesteros (Lucia) filed a complaint for Annulment of Deed of Extrajudicial Partition, Deed of
Mortgage and Damages with prayer for Preliminary Injunction against her children, Roy, Rito,
Amy, Arabel, Rico, Abe, Ponce Rex and Adden, all surnamed Ballesteros, and the Rural Bank of
Canaman, Inc., Baao Branch (RBCI) before the RTC-Iriga. The case was docketed as Civil Case
No. IR-3128.

In her complaint, Lucia alleged that her deceased husband, Eugenio, left two (2) parcels of land
located in San Nicolas, Baao, Camarines Sur, each with an area of 357 square meters; that on
March 6, 1995, without her knowledge and consent, her children executed a deed of extrajudicial
partition and waiver of the estate of her husband wherein all the heirs, including Lucia, agreed to
allot the two parcels to Rico Ballesteros (Rico); that, still, without her knowledge and consent,
Rico mortgaged Parcel B of the estate in favor of RBCI which mortgage was being foreclosed
for failure to settle the loan secured by the lot; and that Lucia was occupying Parcel B and had no
other place to live. She prayed that the deed of extrajudicial partition and waiver, and the
subsequent mortgage in favor of RBCI be declared null and void having been executed without
her knowledge and consent. She also prayed for damages.

In its Answer, RBCI claimed that in 1979, Lucia sold one of the two parcels to Rico which
represented her share in the estate of her husband. The extrajudicial partition, waiver and
mortgage were all executed with the knowledge and consent of Lucia although she was not able
to sign the document. RBCI further claimed that Parcel B had already been foreclosed way back
in 1999 which fact was known to Lucia through the auctioning notary public. Attorneys fees
were pleaded as counterclaim.

The case was then set for pre-trial conference. During the pre-trial, RBCIs counsel filed a motion
to withdraw after being informed that Philippine Deposit Insurance Corporation (PDIC) would
handle the case as RBCI had already been closed and placed under the receivership of the
PDIC. Consequently, on February 4, 2002, the lawyers of PDIC took over the case of RBCI.

On May 9, 2003, RBCI, through PDIC, filed a motion to dismiss on the ground that the RTC-
Iriga has no jurisdiction over the subject matter of the action. RBCI stated that pursuant to
Section 30, Republic Act No. 7653 (RA No. 7653), otherwise known as the New Central Bank
Act, the RTC-Makati, already constituted itself, per its Order dated August 10, 2001, as the
liquidation court to assist PDIC in undertaking the liquidation of RBCI. Thus, the subject matter
of Civil Case No. IR-3128 fell within the exclusive jurisdiction of such liquidation court. Lucia
opposed the motion.

On July 29, 2003, the RTC-Iriga issued an order[2] granting the Motion to Dismiss, to wit:

This resolves the Motion to Dismiss filed by the defendant Rural

Bank of Canaman, Inc., premised on the ground that this court has no
jurisdiction over the subject matter of the action. This issue of jurisdiction
was raised in view of the pronouncement of the Supreme Court in Ong v.
C.A. 253 SCRA 105 and in the case of Hernandez v. Rural Bank of Lucena,
Inc., G.R. No. L-29791 dated January 10, 1978, wherein it was held that
the liquidation court shall have jurisdiction to adjudicate all claims against
the bank whether they be against assets of the insolvent bank, for Specific
Performance, Breach of Contract, Damages or whatever.

It is in view of this jurisprudential pronouncement made by no less

than the Supreme Court, that this case is, as far as defendant Rural Bank
of Canaman Inc., is concerned, hereby ordered DISMISSED without
prejudice on the part of the plaintiff to ventilate their claim before
the Liquidation Court now, RTC Branch 59, Makati City.

SO ORDERED.
Not in conformity, Lucia appealed the RTC ruling to the CA on the ground that the RTC-Iriga
erred in dismissing the case because it had jurisdiction over Civil Case No. IR-3128 under the
rule on adherence of jurisdiction.

On August 15, 2006, the CA rendered the questioned decision ordering the consolidation of Civil
Case No. IR-3128 and the liquidation case pending before RTC-Makati. The appellate court
ratiocinated thus:

The consolidation is desirable in order to prevent confusion, to avoid

multiplicity of suits and to save unnecessary cost and expense. Needless to
add, this procedure is well in accord with the principle that the rules of
procedure shall be liberally construed in order to promote their object and
to assist the parties in obtaining just, speedy and inexpensive
determination of every action and proceeding (Vallacar Transit, Inc. v.
Yap, 126 SCRA 500 [1983]; Suntay v. Aguiluz, 209 SCRA 500 [1992]
citing Ramos v. Ebarle, 182 SCRA 245 [1990]). It would be more in
keeping with the demands of equity if the cases are simply ordered
consolidated. Pursuant to Section 2, Rule 1, Revised Rules of Court, the
rules on consolidation should be liberally construed to achieve the object
of the parties in obtaining just, speedy and inexpensive determination of
their cases (Allied Banking Corporation v. Court of Appeals, 259 SCRA
371 [1996]).

The dispositive portion of the decision reads:

IN VIEW OF ALL THE FOREGOING, the appealed decision is

hereby MODIFIED, in such a way that the dismissal of this case (Civil
Case No. IR-3128) is set aside and in lieu thereof another one is entered
ordering the consolidation of said case with the liquidation case
docketed as Special Proceeding No. M-5290 before Branch 59 of
the Regional Trial Court of Makati City, entitled In Re: Assistance in the
Judicial Liquidation of Rural Bank of Canaman, Camarines Sur, Inc.,
Philippine Deposit Corporation, Petitioner. No pronouncement as to cost.

SO ORDERED.[3]

Lucia filed a motion for reconsideration[4] but it was denied by the CA in its Resolution
dated December 14, 2006.[5]
Hence, the present petition for review on certiorari anchored on the following

GROUNDS

(I)

THE COURT OF APPEALS ERRED IN NOT FINDING THAT

THE REGIONAL TRIAL COURT OF IRIGA CITY, BRANCH 36 IS
 VESTED WITH JURISDICTION TO CONTINUE TRYING AND
ULTIMATELY DECIDE CIVIL CASE NO. IR-3128.

(II)

THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS

DISCRETION IN ORDERING THE CONSOLIDATION OF CIVIL CASE
NO. IR-3128 WITH THE LIQUIDATION CASE DOCKETED AS
SPECIAL PROCEEDINGS NO. M-5290 BEFORE BRANCH 59 OF
THE REGIONAL TRIAL COURT OF MAKATICITY.[6]

Given the foregoing arguments, the Court finds that the core issue to be resolved in this petition
involves a determination of whether a liquidation court can take cognizance of a case wherein
the main cause of action is not a simple money claim against a bank ordered closed, placed under
receivership of the PDIC, and undergoing a liquidation proceeding.

Lucia contends that the RTC-Iriga is vested with jurisdiction over Civil Case No. 3128,
the constitution of the liquidation court notwithstanding. According to her, the case was filed
before the RTC-Iriga on March 17, 2000 at the time RBCI was still doing business or before the
defendant bank was placed under receivership of PDIC in January 2001.

She further argues that the consolidation of the two cases is improper. Her case, which is
for annulment of deed of partition and waiver, deed of mortgage and damages, cannot be legally
brought before the RTC-Makati with the liquidation case considering that her cause of action
against RBCI is not a simple claim arising out of a creditor-debtor relationship, but one which
involves her rights and interest over a certain property irregularly acquired by RBCI. Neither is
she a creditor of the bank, as only the creditors of the insolvent bank are allowed to file and
ventilate claims before the liquidator, pursuant to the August 10, 2001 Order of the RTC-Makati
which granted the petition for assistance in the liquidation of RBCI.

In its Comment,[7] PDIC, as liquidator of RBCI, counters that the consolidation of Civil
Case No. 3128 with the liquidation proceeding is proper. It posits that the liquidation court of
RBCI, having been established, shall have exclusive jurisdiction over all claims against the said
bank.

After due consideration, the Court finds the petition devoid of merit.

Lucias argument, that the RTC-Iriga is vested with jurisdiction to continue trying Civil
Case No. IR-3128 until its final disposition, evidently falls out from a strained interpretation of
the law and jurisprudence. She contends that:

Since the RTC-Iriga has already obtained jurisdiction over the case
it should continue exercising such jurisdiction until the final termination
of the case. The jurisdiction of a court once attached cannot be ousted by
subsequent happenings or events, although of a character which would
have prevented jurisdiction from attaching in the first instance, and the
 Court retains jurisdiction until it finally disposes of the case (Aruego Jr. v.
Court of Appeals, 254 SCRA 711).

When a court has already obtained and is exercising jurisdiction

over a controversy, its jurisdiction to proceed to final determination of the
case is not affected by a new legislation transferring jurisdiction over such
proceedings to another tribunal. (Alindao v. Joson, 264 SCRA 211). Once
jurisdiction is vested, the same is retained up to the end of the litigation
(Bernate v. Court of Appeals, 263 SCRA 323).[8]

The afore-quoted cases, cited by Lucia to bolster the plea for the continuance of her case,
find no application in the case at bench.

Indeed, the Court recognizes the doctrine on adherence of jurisdiction. Lucia, however,
must be reminded that such principle is not without exceptions. It is well to quote the ruling of
the CA on this matter, thus:
This Court is not unmindful nor unaware of the doctrine on the
adherence of jurisdiction. However, the rule on adherence of jurisdiction is
not absolute and has exceptions. One of the exceptions is that when the
change in jurisdiction is curative in character (Garcia v. Martinez, 90
SCRA 331 [1979]; Calderon, Sr. v. Court of Appeals, 100 SCRA 459
[1980]; Atlas Fertilizer Corporation v. Navarro, 149 SCRA 432
[1987]; Abad v. RTC of Manila, Br. Lll, 154 SCRA 664 [1987]).

For sure, Section 30, R.A. 7653 is curative in character when it

declared that the liquidation court shall have jurisdiction in the same
proceedings to assist in the adjudication of the disputed claims against the
Bank. The interpretation of this Section (formerly Section 29, R.A. 265)
becomes more obvious in the light of its intent. In Manalo v. Court of
Appeals (366 SCRA 752, [2001]), the Supreme Court says:

xxx The requirement that all claims against the bank

be pursued in the liquidation proceedings filed by the
Central Bank is intended to prevent multiplicity of actions
against the insolvent bank and designed to establish due
process and orderliness in the liquidation of the bank, to
obviate the proliferation of litigations and to avoid injustice
and arbitrariness (citing Ong v. CA, 253 SCRA 105
[1996]). The lawmaking body contemplated that for
convenience, only one court, if possible, should pass upon
the claims against the insolvent bank and that the liquidation
court should assist the Superintendents of Banks and
regulate his operations (citing Central Bank of the
Philippines, et al. v. CA, et al., 163 SCRA 482 [1988]).[9]

As regards Lucias contention that jurisdiction already attached when Civil Case No. IR-3128 was
filed with, and jurisdiction obtained by, the RTC-Iriga prior to the filing of the liquidation case
before the RTC-Makati, her stance fails to persuade this Court. In refuting this assertion,
respondent PDIC cited the case of Lipana v. Development Bank of Rizal[10] where it was held that
the time of the filing of the complaint is immaterial, viz:
It is the contention of petitioners, however, that the placing under
receivership of Respondent Bank long after the filing of the complaint
removed it from the doctrine in the said Morfe Case.

This contention is untenable. The time of the filing of the complaint

is immaterial. It is the execution that will obviously prejudice the other
depositors and creditors. Moreover, as stated in the said Morfe case, the
effect of the judgment is only to fix the amount of the debt, and not to give
priority over other depositors and creditors.

The cited Morfe case[11] held that after the Monetary Board has declared that a bank is
insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for
the equal benefit of all the creditors, including depositors. The assets of the insolvent banking
institution are held in trust for the equal benefit of all creditors, and after its insolvency, one
cannot obtain an advantage or a preference over another by an attachment, execution or
otherwise.

Thus, to allow Lucias case to proceed independently of the liquidation case, a possibility
of favorable judgment and execution thereof against the assets of RBCI would not only prejudice
the other creditors and depositors but would defeat the very purpose for which a liquidation court
was constituted as well.

Anent the second issue, Lucia faults the CA in directing the consolidation of Civil Case
No. IR-3128 with Special Proceedings No. M-5290. The CA committed no error. Lucias
complaint involving annulment of deed of mortgage and damages falls within the purview of a
disputed claim in contemplation of Section 30 of R.A. 7653 (The New Central Bank Act). The
jurisdiction should be lodged with the liquidation court. Section 30 provides:
Sec. 30. Proceedings in Receivership and Liquidation. - Whenever,
upon report of the head of the supervising or examining department, the
Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary
course of business: Provided, That this shall not include inability to pay
caused by extraordinary demands induced by financial panic in the
banking community;
(b) has insufficient realizable assets, as determined by the Bangko
Sentral, to meet its liabilities; or
(c) cannot continue in business without involving probable losses to
its depositors or creditors; or
(d) has wilfully violated a cease and desist order under Section 37
that has become final, involving acts or transactions which amount to
fraud or a dissipation of the assets of the institution; in which cases, the
Monetary Board may summarily and without need for prior hearing forbid
the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking
institution.
For a quasi-bank, any person of recognized competence in banking
or finance may be designated as receiver.
The receiver shall immediately gather and take charge of all the
assets and liabilities of the institution, administer the same for the benefit
of its creditors, and exercise the general powers of a receiver under the
Revised Rules of Court but shall not, with the exception of administrative
expenditures, pay or commit any act that will involve the transfer or
disposition of any asset of the institution: Provided, That the receiver may
deposit or place the funds of the institution in non-speculative
investments. The receiver shall determine as soon as possible, but not later
than ninety (90) days from take over, whether the institution may be
rehabilitated or otherwise placed in such a condition that it may be
permitted to resume business with safety to its depositors and creditors
and the general public: Provided, That any determination for the
resumption of business of the institution shall be subject to prior approval
of the Monetary Board.
If the receiver determines that the institution cannot be
rehabilitated or permitted to resume business in accordance with the next
preceding paragraph, the Monetary Board shall notify in writing the board
of directors of its findings and direct the receiver to proceed with the
liquidation of the institution. The receiver shall:
(1) file ex parte with the proper regional trial court, and without
requirement of prior notice or any other action, a petition for assistance in
the liquidation of the institution pursuant to a liquidation plan adopted by
the Philippine Deposit Insurance Corporation for general application to all
closed banks. In case of quasi-banks, the liquidation plan shall be adopted
by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon
motion by the receiver after due notice, adjudicate disputed claims against
the institution, assist the enforcement of individual liabilities of the
stockholders, directors and officers, and decide on other issues as may be
material to implement the liquidation plan adopted. The receiver shall pay
the cost of the proceedings from the assets of the institution.
(2) convert the assets of the institution to money, dispose of the
same to creditors and other parties, for the purpose of paying the debts of
such institution in accordance with the rules on concurrence and
preference of credit under the Civil Code of the Philippines and he may, in
the name of the institution, and with the assistance of counsel as he may
retain, institute such actions as may be necessary to collect and recover
accounts and assets of, or defend any action against, the institution. The
assets of an institution under receivership or liquidation shall be deemed
 in custodia legis in the hands of the receiver and shall, from the moment
the institution was placed under such receivership or liquidation, be
exempt from any order of garnishment, levy, attachment, or execution.
[Emphasis supplied]
xxx

Disputed claims refers to all claims, whether they be against the assets of the insolvent
bank, for specific performance, breach of contract, damages, or whatever.[12] Lucias action being
a claim against RBCI can properly be consolidated with the liquidation proceedings before the
RTC-Makati. A liquidation proceeding has been explained in the case of In Re: Petition For
Assistance in the Liquidation of the Rural Bank of BOKOD (Benguet), Inc. v. Bureau of Internal
Revenue[13] as follows:

A liquidation proceeding is a single proceeding which consists of a

number of cases properly classified as "claims." It is basically a two-
phased proceeding. The first phase is concerned with the approval and
disapproval of claims. Upon the approval of the petition seeking the
assistance of the proper court in the liquidation of a closed entity, all
money claims against the bank are required to be filed with the
liquidation court. This phase may end with the declaration by the
liquidation court that the claim is not proper or without basis. On the
other hand, it may also end with the liquidation court allowing the claim.
In the latter case, the claim shall be classified whether it is ordinary or
preferred, and thereafter included Liquidator. In either case, the order
allowing or disallowing a particular claim is final order, and may be
appealed by the party aggrieved thereby.

The second phase involves the approval by the Court of the

distribution plan prepared by the duly appointed liquidator. The
distribution plan specifies in detail the total amount available for
distribution to creditors whose claim were earlier allowed. The Order
finally disposes of the issue of how much property is available for
disposal. Moreover, it ushers in the final phase of the liquidation
proceeding - payment of all allowed claims in accordance with the order
of legal priority and the approved distribution plan.

xxx

A liquidation proceeding is commenced by the filing of a single

petition by the Solicitor General with a court of competent jurisdiction
entitled, "Petition for Assistance in the Liquidation of e.g., Pacific
Banking Corporation. All claims against the insolvent are required to be
filed with the liquidation court. Although the claims are litigated in the
same proceeding, the treatment is individual. Each claim is heard
separately. And the Order issued relative to a particular claim applies only
to said claim, leaving the other claims unaffected, as each claim is
 considered separate and distinct from the others. x x x [Emphasis
supplied.]

It is clear, therefore, that the liquidation court has jurisdiction over all claims, including
that of Lucia against the insolvent bank. As declared in Miranda v. Philippine Deposit Insurance
Corporation,[14] regular courts do not have jurisdiction over actions filed by claimants against an
insolvent bank, unless there is a clear showing that the action taken by the BSP, through the
Monetary Board, in the closure of financial institutions was in excess of jurisdiction, or with
grave abuse of discretion. The same is not obtaining in this present case.

The power and authority of the Monetary Board to close banks and liquidate them
thereafter when public interest so requires is an exercise of the police power of the State. Police
power, however, is subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably
and could be set aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or is
tantamount to a denial of due process and equal protection clauses of the Constitution.[15]

In sum, this Court holds that the consolidation is proper considering that the liquidation
court has jurisdiction over Lucias action. It would be more in keeping with law and equity if
Lucias case is consolidated with the liquidation case in order to expeditiously determine whether
she is entitled to recover the property subject of mortgage from RBCI and, if so, how much she is
entitled to receive from the remaining assets of the bank.

WHEREFORE, the petition is DENIED.

SO ORDERED.

JOSE CATRAL MENDOZA Associate Justice