G.R. No. 175914 - Ruby Shelter Builders and Realty Development Corporation vs. Formaran III

Case Summary (G.R. No. 175914)

Factual Background

Petitioner obtained a loan in the total amount of P95,700,620.00 from respondents Romeo Y. Tan and Roberto L. Obiedo, secured by real estate mortgages over five parcels in Triangulo, Naga City, covered by TCT Nos. 38376, 29918, 38374, 39232 and 39225. Petitioner defaulted, and the parties executed a Memorandum of Agreement dated 17 March 2005 extending the payment period until 31 December 2005 and condoning interests, penalties and surcharges which the Memorandum computed as P74,678,647.00.

Memorandum of Agreement and Deeds of Absolute Sale

The Memorandum required petitioner to execute simultaneous Deeds of Absolute Sale by way of dacion en pago covering the same parcels and set specific purchase and redemption prices for each TCT. The Deeds were prepared with a uniform date and were notarized by Atty. Tomas A. Reyes. The Memorandum provided that petitioner could redeem properties within an agreed period, and that failure to redeem would permit respondents to register titles in their names. The Memorandum also stipulated liquidated damages of P10,000,000.00 and personal assumption of monetary obligations by petitioner’s president, Mr. Ruben Sia.

Events Leading to Litigation

Petitioner alleged that it sought to pay the loan and requested meetings on 3 and 4 January 2006 to compute the final amount due, but that respondents had already, in bad faith, had the pre-executed Deeds notarized on 3 January 2006 and later presented them to the Register of Deeds, obtaining new TCTs in respondents’ names on 8 March 2006. Petitioner further alleged falsified acknowledgments, forcible physical takeover of the parcels on 18 January 2006 with armed men, demolition of improvements beginning 3 March 2006, and claimed at least P300,000.00 in actual damages.

Complaint and Causes of Action

On 16 March 2006 petitioner filed a Complaint in the RTC docketed as Civil Case No. 2006-0030 for declaration of nullity of deeds of sale and damages with a prayer for a TRO and preliminary injunction, alleging fraud, falsified acknowledgments, pactum commissorium, and forcible dispossession; reliefs sought included annulment of the Deeds of Sale, permanent injunction, actual and exemplary damages, attorney’s fees and costs.

Procedural History in the Trial Court

Upon filing, petitioner paid P13,644.25 for docket and other legal fees, assessed by the Clerk of Court under the view that the action was incapable of pecuniary estimation and the fee computation should follow Section 7(b)(1), Rule 141, as amended. Only respondent Tan filed an Answer and counterclaim. Respondent Tan later moved that the docket fees be recomputed under Section 7(a), Rule 141, arguing that the complaint involved real property and that the RTC lacked jurisdiction until the correct fees were paid. The RTC issued Orders on 24 March 2006 and 29 March 2006 directing petitioner to pay additional filing fees computed under Section 7(a). The Clerk later computed additional fees of P720,392.60.

Positions of the Parties

Petitioner maintained that its action was principally for annulment or rescission of contract and thus incapable of pecuniary estimation, invoking Spouses De Leon v. Court of Appeals. Respondent Tan contended that the case was a real action affecting title and possession because respondents had already registered titles and taken possession, and therefore Section 7(a), Rule 141 applied; Tan also sought dismissal or, in the alternative, judgment on his counterclaim.

Trial Court's Ruling on Docket Fees

The RTC concluded that the complaint involved real property and that actions for quieting of title and similar suits are governed by paragraph (a) of Section 7; because respondent Tan asserted a counterclaim, he too must pay fees under Section 7(a). The RTC therefore ordered both parties to pay docket and filing fees computed under Section 7(a), giving petitioner fifteen days to pay the additional fees.

Court of Appeals' Ruling

The Court of Appeals, in its Decision dated 22 November 2006, affirmed the RTC. The appellate court held that petitioner’s objectives—to cancel the deeds and ultimately to recover possession of the properties—made the complaint a real action. The Court of Appeals found no grave abuse of discretion by the trial court in requiring payment under Section 7(a) and denied the petition for certiorari filed by petitioner in CA-G.R. SP No. 94800.

Issues Presented to the Supreme Court

Petitioner brought a Petition for Review on Certiorari under Rule 45 before the Supreme Court, assigning one error: that the Court of Appeals erred in affirming the RTC Orders by applying Section 7(a), Rule 141, in contravention of Spouses De Leon and that the assessed additional docket fees would cause grave injustice.

Supreme Court's Legal Analysis

The Supreme Court reviewed the character of the action to determine the correct fee classification. It reiterated the jurisdictional rule that a court acquires jurisdiction only upon payment of the prescribed docket fee, as stated in Manchester Development Corporation v. Court of Appeals, and cited the guidelines in Sun Insurance Office, Ltd. v. Asuncion permitting courts to allow payment within a reasonable time under particular circumstances. The Court emphasized that the nature of an action is normally determined by the pleadings, but it deemed it necessary to consider material facts disclosed in preliminary proceedings that petitioner omitted from the Complaint.

Application of Precedents and Rule Amendments

The Court distinguished Spouses De Leon, observing that Spouses De Leon involved an action solely for annulment or rescission without transfer of title or possession. The Court aligned the present case with Serrano v. Delica, Gochan v. Gochan, and Siapno v. Manalo, where complaints styled otherwise were treated as real actions because their prime objective was recovery of real property. The Court noted the amendment to Section 7, Rule 141 by A.M. No. 04-2-04-SC and the Supreme Court Amended Administrative Circular No. 35-2004, which changed the basis of valuation in real actions to the fair market value as stated in the current tax declaration or BIR zonal valuation, whichever is higher, or, if none, the stated

Case Syllabus (G.R. No. 175914)

Parties and Procedural Posture

Ruby Shelter Builders and Realty Development Corporation was the petitioner before the Supreme Court seeking review under Rule 45, Rules of Court of a decision of the Court of Appeals dated 22 November 2006 in CA-G.R. SP No. 94800.
The respondents in the underlying litigation included Romeo Y. Tan, Roberto L. Obiedo, and Atty. Tomas A. Reyes, and the RTC pairing judge Hon. Pablo C. Formaran III was named in his official capacity.
The Court of Appeals affirmed the Regional Trial Court, Branch 22, Naga City in ordering the petitioner to pay additional docket/filing fees computed under Section 7(a), Rule 141 of the Rules of Court, as amended.
The petitioner filed the present petition after the Court of Appeals denied relief, assigning a single error premised on alleged conflict with Spouses De Leon v. Court of Appeals.

Key Factual Allegations

Petitioner obtained a loan of PHP 95,700,620.00 from respondents Tan and Obiedo secured by mortgages over five parcels of land covered by TCT Nos. 38376, 29918, 38374, 39232, and 39225, all in Triangulo, Naga City.
The parties executed a Memorandum of Agreement dated 17 March 2005 in which respondents extended time to 31 December 2005 and condoned interests and penalties allegedly amounting to PHP 74,678,647.00.
The Memorandum required petitioner to execute simultaneous Deeds of Absolute Sale as dacion en pago dated uniformly 2 or 3 January 2006, with stipulated purchase and redemption prices for each parcel.
The Deeds of Absolute Sale were notarized by Atty. Tomas A. Reyes, presented to the Register of Deeds on 8 March 2006, and respondents obtained new TCTs in their names and allegedly took possession of the properties.
Petitioner alleged the deeds were executed as mere security, constituted pactum commissorium, and contained falsified acknowledgments, and further alleged forcible entry and demolition by respondents with damages claimed at not less than PHP 300,000.00.
Petitioner filed a Complaint on 16 March 2006 in Civil Case No. RTC-2006-0030 for declaration of nullity of deeds and damages with a prayer for TRO/preliminary injunction and paid initial docket and legal fees of PHP 13,644.25.

Issues Presented

Whether the complaint filed by petitioner was a real action affecting title or possession of real property or an action incapable of pecuniary estimation for purposes of computing docket fees.
Whether the docket and filing fees for Civil Case No. RTC-2006-0030 should be computed under Section 7(a) or Section 7(b)(1), Rule 141 as amended by A.M. No. 04-2-04-SC and Supreme Court Amended Administrative Circular No. 35-2004.
Whether the trial court acted with grave abuse of discretion or lacked jurisdiction by ordering payment of additional docket fees after initial filing.

Contentions of the Parties

Petitioner contended that its Complaint was solely for annulment or rescission of deeds of sale and thus was an action incapable of pecuniary estimation under Spouses De Leon v. Court of Appeals, making Section 7(b)(1) applicable.
Respondent Romeo Y. Tan maintained that the action was essentially for recovery of title and possession and that he had a counterclaim, so docket fees should be computed under Section 7(a) as a real action.
The RTC and the Court of Appeals held that facts disclosed in preliminary proceedings including issuance of TCTs to respondents and respondents’ possession converted the case into a real action for purposes of docket fee assessment.
Petitioner refused to pay the additional amou