Title
Lapitan vs. Scandia, Inc.
Case
G.R. No. L-24668
Decision Date
Jul 31, 1968
A buyer sought rescission and damages after a defective diesel engine caused losses. The Supreme Court ruled rescission actions are not pecuniary, falling under Court of First Instance jurisdiction, remanding the case.
rescission
damages
defective engine
A

Case Summary (G.R. No. L-24668)

Factual Background

On April 17, 1963, Andres Lapitan purchased from Scandia, Inc., through its Cebu subdealer General Engineering Co., an ABC diesel engine of sixteen horsepower for P3,735, paid in cash, for use in a rice and corn mill at Ormoc City, Leyte. The sellers warranted that spare parts were kept in stock and that any part that might break within twelve months would be replaced. On June 28, 1963 the cam rocker arm allegedly broke from faulty material and workmanship and the engine stopped functioning. The sellers were unable to send a replacement until August 29, 1963. Six days after the replacement was installed the new part allegedly fractured again. Thereafter Lapitan notified the sellers, demanded rescission of the contract, return of the purchase price, and damages, but the sellers did not comply.

Trial Court Proceedings

After answers disclaiming liability were filed, Scandia, Inc. moved to dismiss for lack of jurisdiction, asserting that the total amount claimed amounted to only P8,735 and thus fell within the municipal courts' exclusive jurisdiction under Republic Act 3828. The Court of First Instance of Cebu dismissed the complaint for lack of jurisdiction, invoking Cruz v. Judge B. Tan, 87 Phil. 627. Lapitan’s motion for reconsideration was denied and he appealed directly to the Supreme Court.

The Parties’ Contentions

Andres Lapitan contended that a suit for rescission is not capable of pecuniary estimation and therefore belonged to the exclusive cognizance of the courts of first instance; alternatively, he argued that the aggregate of the price, P4,000 actual damages, attorneys’ fees of P1,000, and moral and exemplary damages put the value of his claim beyond municipal jurisdiction. The defendants maintained that jurisdiction was to be determined by the monetary amount claimed and that the pleaded sums brought the case within the municipal court limit under Republic Act 3828.

Issue

Whether an action for rescission of a contract is capable of pecuniary estimation for purposes of statutory allocation of jurisdiction and whether the Court of First Instance erred in dismissing the action for lack of jurisdiction.

Ruling of the Court

The Court ruled that the subject matter of actions for rescission of contracts is not capable of pecuniary estimation. The appealed order of dismissal was reversed and set aside, and the case was remanded to the court of origin for further proceedings. Costs were imposed against the appellees.

Legal Basis and Reasoning

The Court applied the settled criterion that jurisdictional allocation depends on the nature of the principal action or remedy sought. When the action is primarily for the recovery of a sum of money the claim is capable of pecuniary estimation and municipal or first instance jurisdiction depends on the amount. By contrast, where the basic issue is something other than the right to recover money — for example in actions for specific performance, support, annulment of judgment, or foreclosure — the subject of litigation is not susceptible of monetary estimation and is exclusively cognizable by courts of first instance. The Court observed that rescission is the counterpart of specific performance because both remedies require factfinding on whether the remedy is justified. The grant of damages in a rescission action presupposes a prior inquiry into the grounds for setting aside the contract; damages are incidental to the primary relief and must be adjudicated within the same action to avoid splitting causes of action. The Court distinguished instances where a money claim is pleaded as an alternative to specific performance, in which case an equivalence allows jurisdiction to be allocated by the monetary amount as in Cruz v. Tan, 87 Phil. 627. Here, however, the monetary award would arise only if rescission were first granted; no such equivalence existed. The Court cited prior authorities treating actions other than pure money claims as beyond pecuniary estimation, including De Jesus v. Judge Garcia, Manufacturers' Distributors, Inc. v. Yu Siu Liong

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