Case Summary (G.R. No. 175914)
Petitioner
Ruby Shelter Builders and Realty Development Corporation sought judicial annulment of five Deeds of Absolute Sale (dated January 3, 2006) and damages, asserting that the deeds were simulated or otherwise invalid, that acknowledgments were falsified, and that the transfers constituted an unlawful dacion en pago or pactum commissorium. Petitioner paid an initial docket fee of P13,644.25 when filing its complaint.
Respondents
Romeo Y. Tan and Roberto L. Obiedo loaned petitioner P95,700,620.00, took mortgages on the five parcels, agreed to a Memorandum of Agreement (MOA) condoning certain interest and permitting execution of Deeds of Absolute Sale as dacion en pago with redemption options, and later obtained TCTs in their names after the Deeds were notarized and presented to the Register of Deeds. Attorney Tomas A. Reyes notarized the MOA and Deeds.
Key Dates and Procedural Milestones
- Memorandum of Agreement: March 17, 2005 (extended maturity and condonation terms).
- Deeds of Absolute Sale: dated on records as January 3, 2006 (some documents showed January 2, 2006 in the MOA).
- Deeds presented to Register of Deeds: March 8, 2006 (resulting in issuance of TCTs to Tan and Obiedo).
- Complaint filed in RTC (nullity of deeds, damages, TRO/TRO request): March 16, 2006.
- RTC Orders on docket fees: March 24 and March 29, 2006.
- Court of Appeals Decision affirming RTC: November 22, 2006.
- Supreme Court disposition: petition for review denied (decision rendered per caption).
Applicable Law and Legal Framework
Primary legal authorities considered: the 1987 Philippine Constitution (applicable given the decision date), the Rules of Court (Rule 45 for review on certiorari; Rule 141 governing clerks of court and docket/filing fees), A.M. No. 04-2-04-SC (revision to Rule 141 effective 16 August 2004), and Supreme Court Amended Administrative Circular No. 35-2004 (fee allocation guidelines). Controlling jurisprudence cited: Manchester Development Corp. (filing fee jurisdictional rule), Sun Insurance Office, Ltd. v. Asuncion (allowing reasonable time to pay fees), Gochan v. Gochan, Siapno v. Manalo, Serrano v. Delica, Spouses De Leon v. Court of Appeals, and related precedents addressing when an action for annulment/rescission of sale is a real action.
Factual Background and Contractual Terms
Petitioner obtained a large loan (P95,700,620.00) secured by mortgages on the five parcels. When petitioner defaulted, the parties executed a Memorandum of Agreement (MOA) providing, among other things: extension to settle indebtedness until 31 December 2005; condonation of specified interest, surcharges and penalties (figures in the MOA vary but total condoned amounts were stated in the record); contemporaneous execution of Deeds of Absolute Sale as dacion en pago to Tan and Obiedo with stated purchase prices and specified redemption prices (allowing petitioner to redeem individual or all parcels by paying specified sums); liquidated damages of P10,000,000.00 for any contest against the MOA/Deeds; and a personal joint-and-several monetary assumption by Ruben Sia in case of contest. The MOA and the Deeds were notarized by respondent Atty. Reyes. Petitioner alleges falsified acknowledgments and that respondents, with armed men, took physical possession and began demolition of improvements.
Reliefs Sought in the Complaint and Initial Filing
Petitioner filed a civil complaint seeking: an ex parte 72-hour TRO; preliminary injunction after notice and hearing; declaration of nullity of the MOA provision requiring deeds as dacion en pago as pactum commissorium; annulment of the five Deeds of Absolute Sale (dated January 3, 2006); actual, exemplary and other damages; attorney’s fees and costs. The action was docketed as Civil Case No. 2006-0030. The Clerk initially treated the complaint as an action “incapable of pecuniary estimation” and computed fees under Section 7(b)(1) of Rule 141 as amended.
Respondents’ Answer and Counterclaim
Only respondent Tan filed an answer admitting pre-filing meetings, denying falsification, asserting that the Deeds were the agreed consideration for extinguishing the indebtedness (with redemption option), and that petitioner failed to redeem. Tan alleged that Sia had confirmed his signature before the notary and counterclaimed for liquidated damages (P10,000,000.00) and other reliefs or, alternatively, for the loan balance and incidental expenses should the Deeds be invalidated.
Motion Regarding Proper Docket Fees
Respondent Tan filed an Omnibus Motion asserting that the complaint involves real property and therefore the docket fees must be computed under Section 7(a) (fees based on the fair market value of real property) rather than the flat rate under Section 7(b)(1) for actions incapable of pecuniary estimation. Tan argued that petitioner’s failure to pay the correct fee meant the RTC did not acquire jurisdiction.
RTC Orders Requiring Additional Fees and Computation
The RTC granted the motion and ordered petitioner (and Tan, with respect to his counterclaim) to pay additional fees computed under Section 7(a), Rule 141, as amended. The RTC adopted the reasoning that the action was akin to a quieting of title and therefore required fees under paragraph (a). The Clerk of Court later computed the additional fee due from petitioner (after crediting the initial payment) as P720,392.60. The RTC denied petitioner’s motion for partial reconsideration.
Court of Appeals Ruling
The Court of Appeals affirmed the RTC’s orders. It held that petitioner’s complaints sought not only annulment of the deeds but also ultimate recovery of the real properties (including cancellation of titles and recovery of possession), making the case a real action. Consequently, assessment and payment of fees under Section 7(a) were proper. The CA found no grave abuse of discretion by the RTC and rejected petitioner’s contention that the RTC’s application of Section 7(a) contradicted Spouses De Leon.
Legal Issue on Appeal to the Supreme Court
The sole assignment of error was that the Court of Appeals erred in affirming RTC orders requiring payment of additional docket fees under Section 7(a), Rule 141, contrary to the doctrine in Spouses De Leon that an action for annulment or rescission of a contract of sale of real property is incapable of pecuniary estimation.
Supreme Court’s Analytical Framework
The Supreme Court reaffirmed the settled rule that the nature of an action is determined by the allegations in the complaint but that, for accurate characterization, courts may consider pertinent facts disclosed in preliminary proceedings. The Court emphasized that where the relief sought, or the circumstances presented, manifest a plaintiff’s primary objective to recover title or possession of real property, the action is a real action, and Section 7(a) governs fee computation. The Court reviewed the record facts: the MOA was registered on the TCTs, the Deeds had been notarized and presented to the Register of Deeds resulting in issuance of titles to respondents, and respondents had taken possession and demolished improvements—facts petitioner failed to disclose in its complaint or to amend its pleading to reflect. Those facts supported classification as a real action.
Precedential Distinctions: Serrano, Gochan, Siapno, and Spouses De Leon
The Court applied and distinguished controlling precedents. In Gochan and Siapno, the Court held that actions seeking conveyance/transfer or revocation of title are real actions and require fee computation based on the property’s value; in Serrano the Court dismissed a complaint for failure to allege assessed/estimated value where cancellation and recovery of titles were sought. Spouses De Leon was distinguished because the complaint there sought solely annulment/rescission without transfer of title or possession to the adverse party and thus was truly incapable of pecuniary estimation. In contrast, the present case included transfer of titles and possession to respondents, aligning it with Serrano and the line requiring fees under the real-action metric.
Effect of Amendments to Rule 141 on Valuation
The Court noted that A.M. No. 04-2-04-SC amended Section 7 of Rule 141 by removing the specific paragraph that previously required the claimant to allege assessed or estimated value in the complaint; the amended provision prescribes using the fair market value of the real property as stated in the current tax declaration or current zonal valuation of the BIR (whichever is higher), or, if none, the stated value in litigation
Case Syllabus (G.R. No. 175914)
Procedural Posture
- Petition for Review on Certiorari under Rule 45 seeking reversal of the Court of Appeals Decision dated 22 November 2006 in CA-G.R. SP No. 94800.
- Court of Appeals had affirmed the Regional Trial Court (RTC), Branch 22, Naga City Order dated 24 March 2006 in Civil Case No. RTC-2006-0030 ordering petitioner to pay additional docket/filing fees computed under Section 7(a) of Rule 141 of the Rules of Court, as amended.
- RTC Orders of 24 March 2006 and 29 March 2006 were the subject of review; Judge Novelita Villegas-Llaguno authored RTC orders; Judge Pablo C. Formaran III named respondent in CA in his capacity as Pairing Judge for RTC Branch 22.
- Petitioner filed the underlying Complaint on 16 March 2006 (docketed Civil Case No. 2006-0030); initial docket and legal fees of P13,644.25 were paid on filing.
- After RTC computation, additional docket fees assessed at P720,392.60 (excluding prior payment).
- Petitioner elevated the matter to the Court of Appeals (CA-G.R. SP No. 94800); the CA denied relief on 22 November 2006.
- Petitioner filed the present Petition for Review on Certiorari to the Supreme Court; decision of the Supreme Court dated 10 February 2009 (opinion by Justice Chico-Nazario).
- Final disposition: Petition denied; Court of Appeals Decision affirmed; costs against petitioner; opinion lists concurrence by Ynares‑Santiago (Chairperson), Austria‑Martinez, Nachura, and Peralta, JJ.
Core Facts: Loan, Mortgages, and Parties
- Petitioner Ruby Shelter Builders and Realty Development Corporation obtained a loan in the total amount of P95,700,620.00 from respondents Romeo Y. Tan and Roberto L. Obiedo.
- The loan was secured by real estate mortgages over five parcels of land in Triangulo, Naga City, covered by Transfer Certificates of Title (TCTs) Nos. 38376, 29918, 38374, 39232, and 39225, issued in the name of petitioner.
- The record does not disclose other details regarding the loan — i.e., when it was obtained, whether reduced to writing, or the exact date it became due and demandable (per record note).
Memorandum of Agreement (17 March 2005): Key Terms
- Respondents Tan and Obiedo executed a Memorandum of Agreement dated 17 March 2005 granting petitioner until 31 December 2005 to settle indebtedness and condoning interests, penalties and surcharges accruing from 1 October 2004 to 31 December 2005.
- The Memorandum condoned a stated amount of interest, penalties and surcharges reflected as P74,678,647.00 in paragraph 2; a later paragraph (para. 7) refers to P55,167,000.00, creating a discrepancy in the document (recorded in the source).
- The Memorandum required petitioner to execute, simultaneously, Deeds of Absolute Sale "by way of dacion en pago" covering the five mortgaged parcels; the Deeds were to be uniformly dated 2 January 2006 (per the Memorandum).
- The Memorandum allowed petitioner the option to pay off indebtedness with any or all of the five parcels, or to redeem properties by paying specified redemption prices inclusive of interest and penalties.
- The Memorandum authorized respondents, should petitioner fail to redeem within the agreed period, to present the Deeds of Absolute Sale to the Register of Deeds to acquire TCTs in their names.
- A penalty clause: should petitioner contest the Memorandum or the Deeds (judicially or otherwise), petitioner agreed to pay respondents P10,000,000.00 as liquidated damages inclusive of costs and attorney's fees; petitioner would also pay the condoned interests, surcharges and penalties.
- Mr. Ruben Sia, President of petitioner corporation, personally assumed, jointly and severally with petitioner, the monetary obligations in the event of a contest arising from the Memorandum.
Deeds of Absolute Sale: Prices, Redemption, Execution and Notarization
- Memorandum specified purchase prices (as consideration) for each parcel (Deeds of Absolute Sale to be in favor of Tan and Obiedo):
- TCT No. 38376 — Purchase Price P9,340,000.00
- TCT No. 29918 — Purchase Price P28,000,000.00
- TCT No. 38374 — Purchase Price P12,000,000.00
- TCT No. 39232 — Purchase Price P1,600,000.00
- TCT No. 39225 — Purchase Price P1,600,000.00
- Memorandum specified redemption prices inclusive of interest and penalties for each parcel:
- TCT No. 38376 — Redemption Price P25,328,939.00
- TCT No. 29918 — Redemption Price P35,660,800.00
- TCT No. 38374 — Redemption Price P28,477,600.00
- TCT No. 39232 — Redemption Price P6,233,381.00
- TCT No. 39225 — Redemption Price P6,233,381.00
- Petitioner, represented by Mr. Sia, executed separate Deeds of Absolute Sale over the five parcels in favor of Tan and Obiedo; blank spaces in those Deeds were filled with the date "3rd of January 2006."
- Respondent Atty. Tomas A. Reyes notarized the Memorandum (17 March 2005) and the Deeds of Absolute Sale; the Deeds were notarized by Atty. Reyes on 3 January 2006.
- Respondents Tan and Obiedo presented the Deeds of Absolute Sale dated 3 January 2006 to the Register of Deeds for Naga City on 8 March 2006, resulting in the issuance of TCTs over the five parcels in their names.
Parcel Descriptions and Areas (as recorded)
- TCT No. 38376 — area 4,343 square meters.
- TCT No. 29918 — area 17,183 square meters.
- TCT No. 38374 — area 8,203 square meters.
- TCT No. 39232 — area 1,043 square meters.
- TCT No. 39225 — area 616 square meters.
Petitioner's Complaint (filed 16 March 2006): Causes of Action and Reliefs Sought
- Complaint docketed Civil Case No. 2006-0030; petitioner sought: declaration of nullity of deeds of sale and damages, with prayer for issuance of writ of preliminary injunction and/or temporary restraining order (TRO).
- First cause of action:
- Alleged that petitioner attempted to pay and requested meetings; letters and meetings occurred (27 December 2005; meetings of 3 and 4 January 2006) to compute final amount due.
- Petitioner alleged respondents, in bad faith, notarized pre-executed Deeds of Absolute Sale on 3 January 2006; alleged Atty. Reyes falsified acknowledgments making it appear Mr. Sia ratified the Deeds.
- Contended the Deeds were executed merely as security and that the Deeds as executed constituted pactum commissorium (thus null and void).
- Alleged risk of deprivation of mortgaged properties without foreclosure and asserted petitioner was willing to pay its obligation.
- Second cause of action:
- Alleged that on 18 January 2006 respondents forcibly took possession of the five parcels with armed men and fenced the properties with barbed wire.
- Beginning 3 March 2006 respondents allegedly demolished some commercial spaces rented out by petitioner and threatened to tear down a principal improvement (a steel-and-concrete motor vehicle terminal).
- Claimed actual damages of at least P300,000.00 from physical invasion and loss.
- Specific prayers in the Complaint:
- Ex parte 72-hour TRO restraining respondents and their agents from alienating the mortgaged properties and restraining Register of Deeds from processing title changes.
- After notice and hearing, issuance of writ of preliminary injunction imposing same restraints.
- After trial, judgment: make injunction permanent; declare clause requiring execution of deeds as dacion en pago in Memorandum as pactum commissorium; annul Deeds of Sale dated January 3, 2006 for TCT Nos. 29918,