Republic of the Philippines Supreme Court

Manila

THIRD DIVISION

PIONEER CONCRETE PHILIPPINES, INC., PIONEER PHILIPPINES HOLDINGS, and PHILIP J. KLEPZIG, Petitioners,

G.R. NO. 154830

Present:

YNARES-SANTIAGO, J., Chairperson, - versus AUSTRIA-MARTINEZ, CHICO-NAZARIO, and NACHURA, JJ.

ANTONIO D. TODARO, Respondent.

Promulgated: June 8, 2007

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DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari seeking to annul and set aside the Decision of the Court of Appeals (CA) dated October 31, 2000 in CA-G.R. SP No. 54155 and its Resolution of August 21, 2002 denying petitioners Motion for Reconsideration.

The factual and procedural antecedents of the case are as follows:

On January 16, 1998, herein respondent Antonio D. Todaro (Todaro) filed with the Regional Trial Court (RTC) of Makati City, a complaint for Sum of Money and Damages with Preliminary Attachment against Pioneer International Limited (PIL), Pioneer Concrete Philippines, Inc. (PCPI),

Pioneer Philippines Holdings, Inc. (PPHI), John G. McDonald (McDonald) and Philip J. Klepzig (Klepzig).

In his complaint, Todaro alleged that PIL is a corporation duly organized and existing under the laws of Australia and is principally engaged in the ready-mix concrete and concrete aggregates business; PPHI is the company established by PIL to own and hold the stocks of its operating company in the Philippines; PCPI is the company established by PIL to undertake its business of ready-mix concrete, concrete aggregates and quarrying operations in the Philippines; McDonald is the Chief Executive of the Hongkong office of PIL; and, Klepzig is the President and Managing Director of PPHI and PCPI; Todaro has been the managing director of Betonval Readyconcrete, Inc. (Betonval), a company engaged in pre-mixed concrete and concrete aggregate production; he resigned from Betonval in February 1996; in May 1996, PIL contacted Todaro and asked him if he was available to join them in connection with their intention to establish a readymix concrete plant and other related operations in the Philippines; Todaro informed PIL of his availability and interest to join them; subsequently, PIL and Todaro came to an agreement wherein the former consented to engage the services of the latter as a consultant for two to three months, after which, he would be employed as the manager of PIL's ready-mix concrete operations should the company decide to invest in the Philippines; subsequently, PIL started its operations in the Philippines; however, it refused to comply with its undertaking to employ Todaro on a permanent basis.

Instead of filing an Answer, PPHI, PCPI and Klepzig separately moved to dismiss the complaint on the grounds that the complaint states no cause of action, that the RTC has no jurisdiction over the subject matter of the complaint, as the same is within the jurisdiction of the NLRC, and that the complaint should be dismissed on the basis of the doctrine of forum non conveniens.

In its Order dated January 4, 1999, the RTC of Makati, Branch 147, denied herein petitioners' respective motions to dismiss. Herein petitioners, as defendants, filed an Urgent Omnibus Motion for the reconsideration of the trial court's Order of January 4, 1999 but the trial court denied it via its Order dated June 3, 1999.

On August 3, 1999, herein petitioners filed a Petition for Certiorari with the CA. On October 31, 2000, the CA rendered its presently assailed Decision denying herein petitioners' Petition for Certiorari. Petitioners filed a Motion for Reconsideration but the CA denied it in its Resolution dated August 21, 2002.

Hence, herein Petition for Review on Certiorari based on the following assignment of errors:
A. THE COURT OF APPEALS' CONCLUSION THAT THE COMPLAINT STATES A CAUSE OF ACTION AGAINST PETITIONERS IS

WITHOUT ANY LEGAL BASIS. THE ANNEXES TO THE COMPLAINT CLEARLY BELIE THE ALLEGATION OF EXISTENCE OF AN EMPLOYMENT CONTRACT BETWEEN PRIVATE RESPONDENT AND PETITIONERS. B. THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT UPHELD THE JURISDICTION OF THE TRIAL COURT DESPITE THE FACT THAT THE COMPLAINT INDUBITABLY SHOWS THAT IT IS AN ACTION FOR AN ALLEGED BREACH OF EMPLOYMENT CONTRACT, AND HENCE, FALLS WITHIN THE EXLCUSIVE JURISDICTION OF THE NATIONAL LABOR RELATIONS COMMISSION. C THE COURT OF APPEALS DISREGARDED AND FAILED TO CONSIDER THE PRINCIPLE OF FORUM NON CONVENIENS AS A VALID GROUND FOR DISMISSING A COMPLAINT.

In their first assigned error, petitioners contend that there was no perfected employment contract between PIL and herein respondent. Petitioners assert that the annexes to respondent's complaint show that PIL's offer was for respondent to be employed as the manager only of its premixed concrete operations and not as the company's managing director or CEO. Petitioners argue that when respondent reiterated his intention to become the manager of PIL's overall business venture in the Philippines, he, in effect did not accept PIL's offer of employment and instead made a counter-offer, which, however, was not accepted by PIL. Petitioners also contend that under Article 1318 of the Civil Code, one of the requisites for a

contract to be perfected is the consent of the contracting parties; that under Article 1319 of the same Code, consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract; that the offer must be certain and the acceptance absolute; that a qualified acceptance constitutes a counter-offer. Petitioners assert that since PIL did not accept respondent's counter-offer, there never was any employment contract that was perfected between them.

Petitioners further argue that respondent's claim for damages based on the provisions of Articles 19 and 21 of the Civil Code is baseless because it was shown that there was no perfected employment contract.

Assuming, for the sake of argument, that PIL may be held liable for breach of employment contract, petitioners contend that PCPI and PPHI, may not also be held liable because they are juridical entities with personalities which are separate and distinct from PIL, even if they are subsidiary corporations of the latter. Petitioners also aver that the annexes to respondent's complaint show that the negotiations on the alleged employment contract took place between respondent and PIL through its office in Hongkong. In other words, PCPI and PPHI were not privy to the negotiations between PIL and respondent for the possible employment of the latter; and under Article 1311 of the Civil Code, a contract is not binding upon and cannot be enforced against one who was not a party to it even if he be aware of such contract and has acted with knowledge thereof.

Petitioners further assert that petitioner Klepzig may not be held liable because he is simply acting in his capacity as president of PCPI and PPHI and settled is the rule that an officer of a corporation is not personally liable for acts done in the performance of his duties and within the bounds of the authority conferred on him. Furthermore, petitioners argue that even if PCPI and PPHI are held liable, respondent still has no cause of action against Klepzig because PCPI and PPHI have personalities which are separate and distinct from those acting in their behalf, such as Klepzig.

As to their second assigned error, petitioners contend that since herein respondent's claims for actual, moral and exemplary damages are solely premised on the alleged breach of employment contract, the present case should be considered as falling within the exclusive jurisdiction of the NLRC.

With respect to the third assigned error, petitioners assert that the principle of forum non conveniens dictates that even where exercise of jurisidiction is authorized by law, courts may refuse to entertain a case involving a foreign element where the matter can be better tried and decided elsewhere, either because the main aspects of the case transpired in a foreign jurisdiction or the material witnesses have their residence there and the plaintiff sought the forum merely to secure procedural advantage or to annoy or harass the defendant. Petitioners also argue that one of the factors in determining the most convenient forum for conflicts problem is the power of the court to enforce its decision. Petitioners contend that since the majority

of the defendants in the present case are not residents of the Philippines, they are not subject to compulsory processes of the Philippine court handling the case for purposes of requiring their attendance during trial. Even assuming that they can be summoned, their appearance would entail excessive costs. Petitioners further assert that there is no allegation in the complaint from which one can conclude that the evidence to be presented during the trial can be better obtained in the Philippines. Moreover, the events which led to the present controversy occurred outside the Philippines. Petitioners conclude that based on the foregoing factual circumstances, the case should be dismissed under the principle of forum non conveniens.

In his Comment, respondent extensively quoted the assailed CA Decision maintaining that the factual allegations in the complaint determine whether or not the complaint states a cause of action.

As to the question of jurisdiction, respondent contends that the complaint he filed was not based on a contract of employment. Rather, it was based on petitioners' unwarranted breach of their contractual obligation to employ respondent. This breach, respondent argues, gave rise to an action for damages which is cognizable by the regular courts.

Even assuming that there was an employment contract, respondent asserts that for the NLRC to acquire jurisdiction, the claim for damages must

have a reasonable causal connection with the employer-employee relationship of petitioners and respondent.

Respondent further argues that there is a perfected contract between him and petitioners as they both agreed that the latter shall employ him to manage and operate their ready-mix concrete operations in the Philippines. Even assuming that there was no perfected contract, respondent contends that his complaint alleges an alternative cause of action which is based on the provisions of Articles 19 and 21 of the Civil Code.

As to the applicability of the doctrine of forum non conveniens, respondent avers that the question of whether a suit should be entertained or dismissed on the basis of the principle of forum non conveniens depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial judge, who is in the best position to determine whether special circumstances require that the court desist from assuming jurisdiction over the suit.

The petition lacks merit.

Section 2, Rule 2 of the Rules of Court, as amended, defines a cause of action as the act or omission by which a party violates a right of another. A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or

is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and, (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages.

In Hongkong and Shanghai Banking Corporation Limited v. Catalan, this Court held:

The elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded. Stated otherwise, may the court render a valid judgment upon the facts alleged therein? The inquiry is into the sufficiency, not the veracity of the material allegations. If the allegations in the complaint furnish sufficient basis on which it can be maintained, it should not be dismissed regardless of the defense that may be presented by the defendants.

Moreover, the complaint does not have to establish or allege facts proving the existence of a cause of action at the outset; this will have to be done at the trial on the merits of the case. To sustain a motion to dismiss for lack of cause of action, the complaint must show that the claim for relief does not exist, rather than that a claim has been defectively stated, or is ambiguous, indefinite or uncertain.

Hence, in resolving whether or not the Complaint in the present case states a cause of action, the trial court correctly limited itself to examining the sufficiency of the allegations in the Complaint as well as the

annexes thereto. It is proscribed from inquiring into the truth of the allegations in the Complaint or the authenticity of any of the documents referred or attached to the Complaint, since these are deemed hypothetically admitted by the respondent.

This Court has reviewed respondents allegations in its Complaint. In a nutshell, respondent alleged that herein petitioners reneged on their contractual obligation to employ him on a permanent basis. This allegation is sufficient to constitute a cause of action for damages.

The issue as to whether or not there was a perfected contract between petitioners and respondent is a matter which is not ripe for determination in the present case; rather, this issue must be taken up during trial, considering that its resolution would necessarily entail an examination of the veracity of the allegations not only of herein respondent as plaintiff but also of petitioners as defendants.

The Court does not agree with petitioners' contention that they were not privy to the negotiations for respondent's possible employment. It is evident from paragraphs 24 to 28 of the Complaint that, on various occasions, Klepzig conducted negotiations with respondent regarding the latter's possible employment. In fact, Annex H of the complaint shows that it was Klepzig who informed respondent that his company was no longer interested in employing respondent. Hence, based on the allegations in the

Complaint and the annexes attached thereto, respondent has a cause of action against herein petitioners.

As to the question of jurisdiction, this Court has consistently held that where no employer-employee relationship exists between the parties and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional Trial Court that has jurisdiction. In the present case, no employer-employee relationship exists between petitioners and respondent. In fact, in his complaint, private respondent is not seeking any relief under the Labor Code, but seeks payment of damages on account of petitioners' alleged breach of their obligation under their agreement to employ him. It is settled that an action for breach of contractual obligation is intrinsically a civil dispute. In the alternative, respondent seeks redress on the basis of the provisions of Articles 19 and 21 of the Civil Code. Hence, it is clear that the present action is within the realm of civil law, and jurisdiction over it belongs to the regular courts.

With respect to the applicability of the principle of forum non conveniens in the present case, this Court's ruling in Bank of America NT & SA v. Court of Appeals is instructive, to wit:

The doctrine of forum non conveniens, literally meaning the forum is inconvenient, emerged in private international law to deter the practice of global forum shopping, that is to prevent non-resident litigants from

choosing the forum or place wherein to bring their suit for malicious reasons, such as to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue. Under this doctrine, a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most convenient or available forum and the parties are not precluded from seeking remedies elsewhere.

Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court. In the case of Communication Materials and Design, Inc. vs. Court of Appeals, this Court held that xxx [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its decision.

Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals, that the doctrine of forum non conveniens should not be used as a ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include said doctrine as a ground. This Court further ruled that while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the courts desistance; and that the propriety of dismissing a case based on this principle of forum non conveniens requires a factual determination, hence it is more properly considered a matter of defense. (emphasis supplied)

In the present case, the factual circumstances cited by petitioners which would allegedly justify the application of the doctrine of forum non conveniens are matters of defense, the merits of which should properly be threshed out during trial.

WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the Court of Appeals are AFFIRMED.

Costs against petitioners.

SO ORDERED.
THIRD DIVISION

PERKIN ELMER SINGAPORE PTE LTD., Petitioner,

G.R. No. 172242

Present:

YNARES-SANTIAGO, J., Chairpers on, AUSTRIA-MARTINEZ, - versus CHICO-NAZARIO, and NACHURA, JJ.

Promulgated:

DAKILA TRADING CORPORATION,

Respondent.

August 14, 2007

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DECISION

CHICO-NAZARIO, J.:

The case before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the Decision, dated 4 April 2006, of the Court of Appeals in CA-G.R. SP No. 78981, which affirmed the Orders, dated 4 November 2002 and 20 June 2003, of the Mandaluyong City Regional Trial Court (RTC), Branch 212, in Civil Case No. MC99-605, which, in turn, denied the Motion to Dismiss and subsequent Motion for Reconsideration of herein petitioner Perkin Elmer Singapore Pte Ltd.

Petitioner is a corporation duly organized and existing under the laws of Singapore. It is not considered as a foreign corporation doing business in the Philippines. Herein respondent Dakila Trading Corporation is a corporation organized and existing under Philippine laws, and engaged in the business of selling and leasing out laboratory instrumentation and process control instrumentation, and trading of laboratory chemicals and supplies.

The antecedents of the present case are as follows:

Respondent entered into a Distribution Agreement on 1 June 1990 with Perkin-Elmer Instruments Asia Pte Ltd. (PEIA), a corporation duly organized and existing under the laws of Singapore and engaged in the business of manufacturing, producing, selling or distributing various laboratory/analytical instruments. By virtue of the said agreement, PEIA appointed the respondent as the sole distributor of its products in the Philippines. The respondent was likewise granted the right to purchase and sell the products of PEIA subject to the terms and conditions set forth in the Distribution Agreement. PEIA, on the other hand, shall give respondent a commission for the sale of its products in the Philippines.

Under the same Distribution Agreement, respondent shall order the products of PEIA, which it shall sell in the Philippines, either from PEIA

itself or from Perkin-Elmer Instruments (Philippines) Corporation (PEIP), an affiliate of PEIA. PEIP is a corporation duly organized and existing under Philippine laws, and involved in the business of wholesale trading of all kinds of scientific, biotechnological, and analytical instruments and appliances. PEIA allegedly owned 99% of the shares of PEIP.

On 2 August 1997, however, PEIA unilaterally terminated the Distribution Agreement, prompting respondent to file before the RTC of Mandaluyong City, Branch 212, a Complaint for Collection of Sum of Money and Damages with Prayer for Issuance of a Writ of Attachment against PEIA and PEIP, docketed as Civil Case No. MC99-605.

The RTC issued an Order, dated 26 March 1999, denying respondents prayer for the issuance of a writ of attachment. The respondent moved for the reconsideration of the said Order but it was denied in another Order, dated 11 January 2000.

Respondent then filed Ex-Parte Motions for Issuance of Summons and for Leave of Court to Deputize Respondents General Manager, Richard A. Tee, to Serve Summons Outside of the Philippines, which the RTC granted in its Order, dated 27 April 2000. Thus, an Alias Summons, dated 4 September 2000, was issued by the RTC to PEIA. But the said Alias Summons was served on 28 September 2000 and received by Perkinelmer

Asia, a Singaporean based sole proprietorship, owned by the petitioner and, allegedly, a separate and distinct entity from PEIA.

PEIP moved to dismiss the Complaint filed by respondent on the ground that it states no cause of action. Perkinelmer Asia, on the other hand, through its counsel, sent letters, dated 12 October 2000 and 15 November 2000, to the respondent and to the RTC, respectively, to inform them of the wrongful service of summons upon Perkinelmer Asia.

Accordingly, respondent filed an Ex-Parte Motion to Admit Amended Complaint, together with the Amended Complaint claiming that PEIA had become a sole proprietorship owned by the petitioner, and subsequently changed its name to Perkinelmer Asia. Being a sole proprietorship of the petitioner, a change in PEIAs name and juridical status did not detract from the fact that all its due and outstanding obligations to third parties were assumed by the petitioner. Hence, in its Amended Complaint respondent sought to change the name of PEIA to that of the petitioner. In an Order, dated 24 July 2001, the RTC admitted the Amended Complaint filed by the respondent. Respondent then filed another Motion for the Issuance of Summons and for Leave of Court to Deputize Respondents General Manager, Richard A. Tee, to Serve Summons Outside the Philippines. In another Order, dated 4 March 2002, the RTC deputized respondents General Manager to serve summons on petitioner in Singapore. The RTC thus issued summons to the petitioner. Acting on the said Order,

respondents General Manager went to Singapore and served summons on the petitioner.

Meanwhile, in an Order, dated 10 October 2001, the RTC denied the Motion to Dismiss filed by PEIP, compelling the latter to file its Answer to the Amended Complaint.

Petitioner subsequently filed with the RTC a Special Appearance and Motion to Dismiss respondents Amended Complaint on 30 May 2002 based on the following grounds: (1) the RTC did not acquire jurisdiction over the person of the petitioner; (2) the respondent failed to state a cause of action against the petitioner because it is not the real party-in-interest; (3) even assuming arguendo that the respondent correctly filed the case against the petitioner, the Distribution Agreement which was the basis of its claim grants PEIA the right to terminate the contract at any time; and (4) the venue was improperly laid. The RTC in its Order, dated 4 November 2002, denied petitioners Motion to Dismiss, ratiocinating as follows:

Prescinding from the above arguments of both parties, the [RTC] is inclined to DENY the Motion to Dismiss. A careful scrutiny on (sic) the allegation in the (Amended) Complaint would show that [herein respondent] alleges ownership by the [herein petitioner] of shares of stocks in the [PEIP]. Such allegation of ownership of shares of stocks by the [petitioner] would reveal that there is an allegation of personal property in the Philippines. Shares of stocks represent personal property of the shareholder. Thus, it follows that even

though the Amended Complaint is primarily for damages, it does relate to a property of the [petitioner], to which the latter has a claim interest (sic), or an actual or contingent lien, which will make it fall under one of the requisite (sic) for extraterritorial service under Section 15, Rule 14, of the Rules of Court. Thus, it could be gainfully said that the summons had been validly served for [RTC] to acquire jurisdiction over the [petitioner]. The [petitioner] hinges its dismissal on the failure of the [respondent] to state a cause of action. The [RTC] would like to emphasize that in a Motion to Dismiss, it hypothetically admits the truth of the facts alleged in a complaint. When the ground for dismissal is that the complaint states no cause of action, such fact can be determined only from the facts alleged in the complaint x x x and from no other x x x and the Court cannot consider other matters aliunde x x x. This implies that the issue must be passed upon on the basis of the allegations and declare them to be false, otherwise it would be a procedural error and a denial of due process to the [respondent] x x x. The three (3) essential elements of a cause of action are the following: a) The plaintiffs legal rights; b) A correlative obligation of the defendant; c) The omission of the defendant in violation of the legal rights. A cursory reading of the Amended Complaint would reveal that all of the essential elements of a cause of action are attendant in the Amended Complaint. As for the contention that venue was improperly laid, x x x, the [RTC] in its ultimate desire that the ends of justice could be served in its fullest, cannot rule that venue was improperly laid. xxxx The stipulation as to the venue of a prospective action does not preclude the filing of the suit in the residence of the [respondent] under Section 2, Rule 4, Rules of Court, especially where the venue stipulation was imposed by the [petitioner] for its own benefits. xxxx

The [RTC] further believes that it is imperative that in order to ferret out the truth, a full-blown trial is necessary for parties to be able to prove or disprove their allegations.

Petitioner moved for the reconsideration of the aforesaid Order but, it was denied by the RTC in its Order, dated 20 June 2003.

Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the 1997 Revised Rules of Civil Procedure with application for temporary restraining order and/or preliminary injunction before the Court of Appeals alleging that the RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction in refusing to dismiss the Amended Complaint. The Court of Appeals never issued any temporary restraining order or writ of injunction. On 4 April 2006, the Court of Appeals rendered a Decision affirming the RTC Orders of 4 November 2002 and 20 June 2003.

This brings us to the present Petition before this Court wherein petitioner raised the following issues.

I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT RULING THAT THE SERVICE OF SUMMONS ON PETITIONER WAS DEFECTIVE AND THAT THE

TRIAL COURT THUS FAILED TO ACQUIRE JURISDICTION OVER THE PERSON OF THE PETITIONER. II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT THE SOLE ISSUE IN THE PETITION FOR CERTIORARI FILED BEFORE IT IS THE QUESTION OF WHETHER THE TRIAL COURT ACQUIRED JURISDICTION OVER THE PERSON OF THE PETITIONER THROUGH THE EXTRATERRITORIAL SERVICE OF SUMMONS. A. WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVE GRANTED THE PETITION FOR CERTIORARI AND REVERSED THE RTC ORDERS ON THE GROUND THAT THE AMENDED COMPLAINT FAILED TO STATE A CAUSE OF ACTION AGAINST PETITIONER. 1. BASED ON THE ALLEGATIONS IN THE EXPARTE MOTION TO ADMIT AMENDED COMPLAINT, AMENDED COMPLAINT, AND ALL DOCUMENTS ATTACHED AND/OR RELATED THERETO, PETITIONER IS NOT THE REAL PARTY-ININTEREST DEFENDANT IN THE CASE BELOW. 2. ASSUMING ARGUENDO THAT RESPONDENT DAKILA FILED THIS CASE AGAINST THE CORRECT [PARTY], INASMUCH AS THE DISTRIBUTION AGREEMENT DATED 1 JUNE 1990 GRANTS [PEIA] THE RIGHT TO TERMINATE THE CONTRACT AT ANY TIME, RESPONDENT DAKILA FAILS TO STATE A CAUSE OF ACTION IN THE CASE BELOW. B. WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVE GRANTED THE PETITION FOR CERTIORARI AND REVERSED THE RTC ORDERS ON THE GROUND OF IMPROPER VENUE. III.

WHETHER OR NOT PETITIONER IS ENTITLED TO A TEMPORARY RESTRAINING ORDER AND/OR WRIT OF INJUNCTION.

The foregoing issues raised by petitioner essentially requires this Court to make a determination of the (1) proper service of summons and acquisition of jurisdiction by the RTC over the person of the petitioner; (2) existence of a cause of action against petitioner in respondents Amended Complaint; and (3) proper venue for respondents civil case against petitioner.

Petitioner contends that Civil Case No. MC99-605 involves an action for collection of sum of money and damages arising from the alleged breach of the Distribution Agreement. The action is one in personam, or an action against a person based on his personal liability; and for the court a quo to acquire jurisdiction over the person of the petitioner, personal service of summons, and not extraterritorial service of summons, must be made within the state even if the petitioner is a non-resident. Petitioner avers that extraterritorial service of summons stated under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, is only proper in in rem and quasi in rem cases; thus, resort to an extraterritorial service of summons in the case at bar was erroneous. Petitioner asseverates that the allegations in the respondents Amended Complaint that the petitioner has personal properties within the Philippines does not make the present case one that relates to, or the subject of which is, property within the Philippines warranting the extraterritorial service of summons under Section 15, Rule 14 of the 1997

Revised Rules of Civil Procedure. Petitioner states that for an action to be considered as one that relates to, or the subject of which is, property within the Philippines, the main subject matter of the action must be the property within the Philippines itself, and such was not the situation in this case. Likewise, the prayer in respondents Amended Complaint for the issuance of a writ of attachment over the personal property of PEIP, which is 99% owned by petitioner (as the supposed successor of PEIA), did not convert the action from one in personam to one that is quasi in rem. Also, the petitioner points out that since the respondents prayer for the issuance of a writ of attachment was denied by the RTC in its Order, dated 26 March 1999, then the nature of Civil Case No. MC99-605 remains in personam, contrary to the ruling of the Court of Appeals that by the attachment of the petitioners interest in PEIP the action in personam was converted to an action quasi in rem. Resultantly, the extraterritorial service of summons on the petitioner was not validly effected, and did not give the RTC jurisdiction over the petitioner.

Petitioner further argues that the appellate court should have granted its Petition for Certiorari on the ground that the RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction in refusing to dismiss respondents Amended Complaint for failure to state a cause of action against petitioner which was not the real party-in-interest in Civil Case No. MC99-605. Petitioner claims that it had never used the name PEIA as its corporate name, and neither did it change its name from that of PEIA. Petitioner stresses that PEIA is an entirely different corporate entity that is not connected in whatever manner to the petitioner. Even assuming

arguendo that petitioner is the real party-in-interest in Civil Case No. MC99605 or that petitioner and PEIA are one and the same entity, petitioner still avows that the respondent failed to state a cause of action against it because the Distribution Agreement expressly grants PEIA the right to terminate the said contract at any time.

Lastly, it is the contention of the petitioner that the appellate court should have granted its Petition for Certiorari because the RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction in refusing to dismiss Civil Case No. MC99-605 for having been filed in an improper venue. Petitioner asserts that in the Distribution Agreement entered into between the respondent and PEIA, both had mutually agreed to the exclusive jurisdiction of the courts of Singapore or of the Philippines as elected by PEIA. Absent any waiver by PEIA of its right to choose the venue of the dispute, the Complaint filed by the respondent before the RTC in the Philippines should have been dismissed on the ground of improper venue.

The Petition is meritorious.

Jurisdiction is the power with which courts are invested for administering justice; that is, for hearing and deciding cases. In order for the

court to have authority to dispose of the case on the merits, it must acquire jurisdiction over the subject matter and the parties.

Jurisdiction of the court over the subject matter is conferred only by the Constitution or by law. It is determinable on the basis of allegations in the complaint.

Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, while jurisdiction over the defendants in a civil case is acquired either through the service of summons upon them in the manner required by law or through their voluntary appearance in court and their submission to its authority. If the defendants have not been summoned, unless they voluntarily appear in court, the court acquires no jurisdiction over their persons and a judgment rendered against them is null and void. To be bound by a decision, a party should first be subjected to the courts jurisdiction.

Thus, one of the modes of acquiring jurisdiction over the person of the defendant or respondent in a civil case is through service of summons. It is intended to give notice to the defendant or respondent that a civil action has been commenced against him. The defendant or respondent is thus put on guard as to the demands of the plaintiff or the petitioner.

The proper service of summons differs depending on the nature of the civil case instituted by the plaintiff or petitioner: whether it is in personam, in rem, or quasi in rem. Actions in personam, are those actions brought against a person on the basis of his personal liability; actions in rem are actions against the thing itself instead of against the person; and actions are quasi in rem, where an individual is named as defendant and the purpose of the proceeding is to subject his or her interest in a property to the obligation or loan burdening the property.

Under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, there are only four instances wherein a defendant who is a nonresident and is not found in the country may be served with summons by extraterritorial service, to wit: (1) when the action affects the personal status of the plaintiff; (2) when the action relates to, or the subject of which is property, within the Philippines, in which the defendant claims a lien or an interest, actual or contingent; (3) when the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; and (4) when the defendant nonresidents property has been attached within the Philippines. In these instances, service of summons may be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the court may deem sufficient.

Undoubtedly, extraterritorial service of summons applies only where the action is in rem or quasi in rem, but not if an action is in personam.

When the case instituted is an action in rem or quasi in rem, Philippine courts already have jurisdiction to hear and decide the case because, in actions in rem and quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court, provided that the court acquires jurisdiction over the res. Thus, in such instance, extraterritorial service of summons can be made upon the defendant. The said extraterritorial service of summons is not for the purpose of vesting the court with jurisdiction, but for complying with the requirements of fair play or due process, so that the defendant will be informed of the pendency of the action against him and the possibility that property in the Philippines belonging to him or in which he has an interest may be subjected to a judgment in favor of the plaintiff, and he can thereby take steps to protect his interest if he is so minded. On the other hand, when the defendant or respondent does not reside and is not found in the Philippines, and the action involved is in personam, Philippine courts cannot try any case against him because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court.

In the case at bar, this Court sustains the contention of the petitioner that there can never be a valid extraterritorial service of summons upon it, because the case before the court a quo involving collection of a sum of

money and damages is, indeed, an action in personam, as it deals with the personal liability of the petitioner to the respondent by reason of the alleged unilateral termination by the former of the Distribution Agreement. Even the Court of Appeals, in its Decision dated 4 April 2004, upheld the nature of the instant case as an action in personam. In the said Decision the appellate court ruled that:

In the instant petition, [respondents] cause of action in Civil Case No. MC99-605 is anchored on the claim that petitioner unilaterally terminated the Distribution Agreement. Thus, [respondent] prays in its [C]omplaint that Upon the filing of the Complaint, issue an Order fixing the amount of the bond and issue a writ of attachment requiring the sheriff to attach the properties of [Perkin-Elmer Philippines], which are not exempt from execution, and as much as may be sufficient to satisfy [respondents] demands. The action instituted by [respondent] affects the parties alone, not the whole world. Hence, it is an action in personam, i.e., any judgment therein is binding only upon the parties properly impleaded. xxxx The objective sought in [respondents] [C]omplaint was to establish a claim against petitioner for its alleged unilateral termination of [D]istribution [A]greement. Hence, to repeat, Civil Case No. MC99-605 is an action in personam because it is an action against persons, namely, herein petitioner, on the basis of its personal liability. As such, personal service of summons upon the [petitioner] is essential in order for the court to acquire of (sic) jurisdiction over [its person]. (Emphasis supplied.)

Thus, being an action in personam, personal service of summons within the Philippines is necessary in order for the RTC to validly acquire jurisdiction over the person of the petitioner, and this is not possible in the present case because the petitioner is a non-resident and is not found within the

Philippines. Respondents allegation in its Amended Complaint that petitioner had personal property within the Philippines in the form of shares of stock in PEIP did not make Civil Case No. MC99-605 fall under any of the four instances mentioned in Section 15, Rule 14 of the Rules of Court, as to convert the action in personam to an action in rem or quasi in rem and, subsequently, make the extraterritorial service of summons upon the petitioner valid.

It is incorrect for the RTC to have ruled that the allegations made by the respondent in its Amended Complaint, which is primarily for collection of a sum of money and damages, that the petitioner owns shares of stock within the Philippines to which the petitioner claims interest, or an actual or contingent lien, would make the case fall under one of the aforesaid instances wherein extraterritorial service of summons under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, would be valid. The RTC in arriving at such conclusions relied on the second instance, mentioned under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure (i.e., when the action relates to, or the subject of which is property, within the Philippines, in which the defendant claims a lien or interest, actual or contingent), where extraterritorial service of summons can be properly made. However, the aforesaid second instance has no application in the case before this Court. Primarily, the Amended Complaint filed by the respondent against the petitioner was for the collection of sum of money and damages. The said case was neither related nor connected to any property of the petitioner to which it claims a lien or interest. The action for collection of a sum of money and damages was purely based on the personal liability

of the petitioner towards the respondent. The petitioner is correct in saying that mere allegations of personal property within the Philippines does not necessarily make the action as one that relates to or the subject of which is, property within the Philippines as to warrant the extraterritorial service of summons. For the action to be considered one that relates to, or the subject of which, is the property within the Philippines, the main subject matter of the action must be the property itself of the petitioner in the Philippines. By analogy, an action involving title to or possession of real or personal property -- such as the foreclosure of real estate or chattel mortgage where the mortgagor does not reside or is not found in the Philippines -- can be considered as an action which relates to, or the subject of which is, property within the Philippines, in which the defendant claims a lien or interest, actual or contingent; and in such instance, judgment will be limited to the res.

Moreover, the allegations made by the respondent that the petitioner has property within the Philippines were in support of its application for the issuance of a writ of attachment, which was denied by the RTC. Hence, it is clear from the foregoing that the Complaint filed by the respondent against the petitioner does not really relate to, or the subject of which is, property within the Philippines of the petitioner.

This Court also finds error in the Decision of the Court of Appeals. It is provided for in the said Decision, thus:

However, let it be emphasized that in the [C]omplaint filed before the trial court, [respondent] prayed that Upon the filing of the Complaint, issue an Order fixing the amount of the bond and issue a writ of attachment requiring the sheriff to attach the properties of [Perkin-Elmer Philippines], which are not exempt from execution, and as much as may be sufficient to satisfy [respondents] demands.

In other words, although the [C]omplaint before the trial court does not involve the personal status of the [respondent], nevertheless, the case involves property within the Philippines in which the [petitioner] has or claim an interest, or which the [respondent] has attached, which is one of the instances where extraterritorial service of summons is proper. xxxx Hence, it is submitted that one of the instances when exterritorial service of summons under Section 15, Rule 14 of the Rules of Court is proper may be considered to have been met. This is because the [C]omplaint for collection of sum of money which is an action in personam was converted into an action quasi in rem by the attachment of [petitioners] interest in [Perkin-Elmer Philippines]. (Emphasis supplied.)

Respondents allegation in its Amended Complaint that petitioner had personal property within the Philippines in the form of shares of stock in PEIP does not convert Civil Case No. MC99-605 from an action in personam to one quasi in rem, so as to qualify said case under the fourth instance mentioned in Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure (i.e., when the non-resident defendants property has been attached within the Philippines), wherein extraterritorial service of summons upon the petitioner would have been valid. It is worthy to note that what is required under the aforesaid provision of the Revised Rules of Civil Procedure is not a mere allegation of the existence of personal property

belonging to the non-resident defendant within the Philippines but, more precisely, that the non-resident defendants personal property located within the Philippines must have been actually attached. This Court in the case of Venturanza v. Court of Appeals ruled that when the attachment was void from the beginning, the action in personam which required personal service of summons was never converted into an action in rem where service by publication would have been valid. Hence, the appellate court erred in declaring that the present case, which is an action in personam, was converted to an action quasi in rem because of respondents allegations in its Amended Complaint that petitioner had personal property within the Philippines.

Glaringly, respondents prayer in its Amended Complaint for the issuance of a writ of attachment over petitioners purported shares of stock in PEIP located within the Philippines was denied by the court a quo in its Order dated 26 March 1999. Respondents Motion for Reconsideration of the said Order was likewise denied by the RTC in its subsequent Order, dated 11 January 2000. Evidently, petitioners alleged personal property within the Philippines, in the form of shares of stock in PEIP, had not been attached; hence, Civil Case No. MC99-605, for collection of sum of money and damages, remains an action in personam. As a result, the extraterritorial service of summons was not validly effected by the RTC against the petitioner, and the RTC thus failed to acquire jurisdiction over the person of the petitioner. The RTC is therefore bereft of any authority to act upon the Complaint filed before it by the respondent insofar as the petitioner is concerned.

If there was no valid summons served upon petitioner, could RTC have acquired jurisdiction over the person of the petitioner by the latters voluntary appearance? As a rule, even if the service of summons upon the defendant or respondent in a civil case is defective, the court can still acquire jurisdiction over his person when he voluntary appears in court or submits himself to its authority. Nonetheless, voluntary appearance, as a mode of acquiring jurisdiction over the person of the defendant, is likewise inapplicable in this case.

It is settled that a party who makes a special appearance in court for the purpose of challenging the jurisdiction of said court, based on the invalidity of the service of summons, cannot be considered to have voluntarily submitted himself to the jurisdiction of the court. In the present case, petitioner has been consistent in all its pleadings in assailing the service of summons upon it and the jurisdiction of the RTC over its person. Thus, the petitioner cannot be declared in estoppel when it filed an Answer ad cautelam with compulsory counterclaim before the RTC while the instant Petition was still pending before this Court. The petitioner was in a situation wherein it had no other choice but to file an Answer; otherwise, the RTC would have already declared that petitioner had waived its right to file responsive pleadings. Neither can the compulsory counterclaim contained in petitioners Answer ad cautelam be considered as voluntary appearance of petitioner before the RTC. Petitioner seeks to recover damages and attorneys fees as a consequence of the unfounded suit filed by respondent

against it. Thus, petitioners compulsory counterclaim is only consistent with its position that the respondent wrongfully filed a case against it and the RTC erroneously exercised jurisdiction over its person.

Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of the RTC over respondents complaint and over petitioners counterclaim -- while it may have no jurisdiction over the former, it may exercise jurisdiction over the latter. The compulsory counterclaim attached to petitioners Answer ad cautelam can be treated as a separate action, wherein petitioner is the plaintiff while respondent is the defendant. Petitioner could have instituted a separate action for the very same claims but, for the sake of expediency and to avoid multiplicity of suits, it chose to demand the same in Civil Case No. MC99-605. Jurisdiction of the RTC over the subject matter and the parties in the counterclaim must thus be determined separately and independently from the jurisdiction of the same court in the same case over the subject matter and the parties in respondents complaint.

Moreover, even though the petitioner raised other grounds in its Motion to Dismiss aside from lack of jurisdiction over its person, the same is not tantamount to its voluntary appearance or submission to the authority of the court a quo. While in De Midgely v. Ferandos, it was held that, in a Motion to Dismiss, the allegation of grounds other than lack of jurisdiction over the person of the defendant, including a prayer "for such other reliefs

as" may be deemed "appropriate and proper" amounted to voluntary appearance, such ruling must be deemed superseded by the declaration of this Court in La Naval Drug Corporation v. Court of Appeals that estoppel by jurisdiction must be unequivocal and intentional. It would be absurd to hold that petitioner unequivocally and intentionally submitted itself to the jurisdiction of the court by seeking other reliefs to which it might be entitled when the only relief that it could properly ask from the trial court is the dismissal of the complaint against it. Thus, the allegation of grounds other than lack of jurisdiction with a prayer for such other reliefs as may be deemed appropriate and proper cannot be considered as unequivocal and intentional estoppel. Most telling is Section 20, Rule 14 of the Rules of Court, which expressly provides:

SEC. 20. Voluntary appearance. - The defendants voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance. (Emphasis supplied.)

In sum, this Court finds that the petitioner did not submit itself voluntarily to the authority of the court a quo; and in the absence of valid service of summons, the RTC utterly failed to acquire jurisdiction over the person of the petitioner.

Anent the existence of a cause of action against petitioner and the proper venue of the case, this Court upholds the findings of the RTC on these issues.

Dismissal of a Complaint for failure to state a cause of action is provided for by the Rules of Court. When a Motion to Dismiss is grounded on the failure to state a cause of action, a ruling thereon should be based only on the facts alleged in the complaint. The court must pass upon this issue based solely on such allegations, assuming them to be true. For it to do otherwise would be a procedural error and a denial of plaintiffs right to due process. While, truly, there are well-recognized exceptions to the rule that the allegations are hypothetically admitted as true and inquiry is confined to the face of the complaint, none of the exceptions apply in this case. Hence, the general rule applies. The defense of the petitioner that it is not the real party-in-interest is evidentiary in nature which must be proven in trial. The appellate court, then, cannot be faulted for not granting petitioners Motion to Dismiss on the ground of failure to state a cause of action.

In the same way, the appellate court did not err in denying petitioners Motion to Dismiss Civil Case No. MC99-605 on the ground of improper venue. In arriving at such conclusion, this Court quotes with approval the following ratiocination of the RTC:

As for the contention that venue was improperly laid, x x x, the [trial court] in its ultimate desire that the ends of justice could be served in its fullest, cannot rule that venue was improperly laid. xxxx The stipulation as to the venue of a prospective action does not preclude the filing of the suit in the residence of the [respondent] under Section 2, Rule 4, Rules of Court, especially where the venue stipulation was imposed by the [petitioner] for its own benefits. (Emphasis supplied.)

Despite the venue stipulation found in the Distribution Agreement stipulating that the exclusive jurisdiction over disputes arising from the same shall lie in the courts of Singapore or of the Territory (referring to the Philippines), whichever is elected by PEIA (or petitioner, as PEIAs alleged successor), the RTC of the Philippines cannot be considered as an improper venue. Truly, the venue stipulation used the word exclusive, however, a closer look on the Distribution Agreement would reveal that the venue stipulation was really in the alternative i.e., courts of Singapore or of the Territory, meaning, the Philippines; thus, the court a quo is not an improper venue for the present case.

Nonetheless, it bears to emphasize that despite our findings that based on the allegations in respondents Complaint in Civil Case No. MC99-605, respondent appears to have a cause of action against the petitioner and that the RTC is the proper venue for the said case, Civil Case No. MC99-605 is still dismissible, for the RTC never acquired jurisdiction over the person of the petitioner. The extraterritorial service of summons upon the petitioner

produces no effect because it can only be done if the action is in rem or quasi in rem. The case for collection of sum of money and damages filed by the respondent against the petitioner being an action in personam, then personal service of summons upon the petitioner within the Philippines is essential for the RTC to validly acquire jurisdiction over the person of the petitioner. Having failed to do so, the RTC can never subject petitioner to its jurisdiction. The mere allegation made by the respondent that the petitioner had shares of stock within the Philippines was not enough to convert the action from one in personam to one that was quasi in rem, for petitioners purported personal property was never attached; thus, the extraterritorial service of summons upon the petitioner remains invalid. In light of the foregoing findings, this Court concludes that the RTC has no power to hear and decide the case against the petitioner, because the extraterritorial service of summons was not validly effected upon the petitioner and the RTC never acquired jurisdiction over its person.

Finally, as regards the petitioners counterclaim, which is purely for damages and attorneys fees by reason of the unfounded suit filed by the respondent against it, it has long been settled that the same truly falls under the classification of compulsory counterclaim and it must be pleaded in the same action, otherwise, it is barred. In the case at bar, this Court orders the dismissal of the Complaint filed by the respondent against the petitioner because the court a quo failed to acquire jurisdiction over the person of the latter. Since the Complaint of the respondent was dismissed, what will happen then to the counterclaim of the petitioner? Does the dismissal of the complaint carry with it the dismissal of the counterclaim?

In the cases of Metal Engineering Resources Corp. v. Court of Appeals, International Container Terminal Services, Inc. v. Court of Appeals, and BA Finance Corporation v. Co., the Court ruled that if the court does not have jurisdiction to entertain the main action of the case and dismisses the same, then the compulsory counterclaim, being ancillary to the principal controversy, must likewise be dismissed since no jurisdiction remained for any grant of relief under the counterclaim. If we follow the aforesaid pronouncement of the Court in the cases mentioned above, the counterclaim of the herein petitioner being compulsory in nature must also be dismissed together with the Complaint. However, in the case of Pinga vs. Heirs of German Santiago, the Court explicitly expressed that:

Similarly, Justice Feria notes that the present rule reaffirms the right of the defendant to move for the dismissal of the complaint and to prosecute his counterclaim, as stated in the separate opinion [of Justice Regalado in BA Finance]. Retired Court of Appeals Justice Hererra pronounces that the amendment to Section 3, Rule 17 [of the 1997 Revised Rules of Civil Procedure] settles that nagging question whether the dismissal of the complaint carries with it the dismissal of the counterclaim, and opines that by reason of the amendments, the rulings in Metals Engineering, International Container, and BA Finance may be deemed abandoned. x x x. x x x, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended Rule 17, those previous jural doctrines that were inconsistent with the new rules incorporated in the 1997 Rules of Civil Procedure were implicitly abandoned insofar as incidents arising after the effectivity of the new procedural rules on 1 July 1997. BA Finance, or even the doctrine that a counterclaim may be necessarily dismissed along with the complaint, clearly conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA Finance as doctrine extends as far back as 1997, when the Court adopted the new Rules of Civil Procedure. If, since then, abandonment has not been affirmed in

jurisprudence, it is only because no proper case has arisen that would warrant express confirmation of the new rule. That opportunity is here and now, and we thus rule that the dismissal of a complaint due to fault of the plaintiff is without prejudice to the right of the defendant to prosecute any pending counterclaims of whatever nature in the same or separate action. We confirm that BA Finance and all previous rulings of the Court that are inconsistent with this present holding are now abandoned. [Emphasis supplied].

It is true that the aforesaid declaration of the Court refers to instances covered by Section 3, Rule 17 of the 1997 Revised Rules of Civil Procedure on dismissal of the complaint due to the fault of the plaintiff. Nonetheless, it does not also preclude the application of the same to the instant case just because the dismissal of respondents Complaint was upon the instance of the petitioner who correctly argued lack of jurisdiction over its person.

Also in the case of Pinga v. Heirs of German Santiago, the Court discussed the situation wherein the very filing of the complaint by the plaintiff against the defendant caused the violation of the latters rights. As to whether the dismissal of such a complaint should also include the dismissal of the counterclaim, the Court acknowledged that said matter is still debatable, viz:

Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint; namely a cause (or causes) of action constituting an act or omission by which a party violates the right of another. The main difference lies in that the cause of action in the counterclaim is maintained by the defendant against the plaintiff, while the

converse holds true with the complaint. Yet, as with a complaint, a counterclaim without a cause of action cannot survive. x x x if the dismissal of the complaint somehow eliminates the cause(s) of the counterclaim, then the counterclaim cannot survive. Yet that hardly is the case, especially as a general rule. More often than not, the allegations that form the counterclaim are rooted in an act or omission of the plaintiff other than the plaintiffs very act of filing the complaint. Moreover, such acts or omissions imputed to the plaintiff are often claimed to have occurred prior to the filing of the complaint itself. The only apparent exception to this circumstance is if it is alleged in the counterclaim that the very act of the plaintiff in filing the complaint precisely causes the violation of the defendants rights. Yet even in such an instance, it remains debatable whether the dismissal or withdrawal of the complaint is sufficient to obviate the pending cause of action maintained by the defendant against the plaintiff.

Based on the aforequoted ruling of the Court, if the dismissal of the complaint somehow eliminates the cause of the counterclaim, then the counterclaim cannot survive. Conversely, if the counterclaim itself states sufficient cause of action then it should stand independently of and survive the dismissal of the complaint. Now, having been directly confronted with the problem of whether the compulsory counterclaim by reason of the unfounded suit may prosper even if the main complaint had been dismissed, we rule in the affirmative.

It bears to emphasize that petitioners counterclaim against respondent is for damages and attorneys fees arising from the unfounded suit. While respondents Complaint against petitioner is already dismissed, petitioner may have very well already incurred damages and litigation expenses such as attorneys fees since it was forced to engage legal representation in the

Philippines to protect its rights and to assert lack of jurisdiction of the courts over its person by virtue of the improper service of summons upon it. Hence, the cause of action of petitioners counterclaim is not eliminated by the mere dismissal of respondents complaint.

It may also do well to remember that it is this Court which mandated that claims for damages and attorneys fees based on unfounded suit constitute compulsory counterclaim which must be pleaded in the same action or, otherwise, it shall be barred. It will then be iniquitous and the height of injustice to require the petitioner to make the counterclaim in the present action, under threat of losing his right to claim the same ever again in any other court, yet make his right totally dependent on the fate of the respondents complaint.

If indeed the Court dismisses petitioners counterclaim solely on the basis of the dismissal of respondents Complaint, then what remedy is left for the petitioner? It can be said that he can still file a separate action to recover the damages and attorneys fees based on the unfounded suit for he cannot be barred from doing so since he did file the compulsory counterclaim in the present action, only that it was dismissed when respondents Complaint was dismissed. However, this reasoning is highly flawed and irrational considering that petitioner, already burdened by the damages and attorneys fees it may have incurred in the present case, must

again incur more damages and attorneys fees in pursuing a separate action, when, in the first place, it should not have been involved in any case at all.

Since petitioners counterclaim is compulsory in nature and its cause of action survives that of the dismissal of respondents complaint, then it should be resolved based on its own merits and evidentiary support.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision of the Court of Appeals, dated 4 April 2006, in CA-G.R. SP No. 78981, affirming the Orders, dated 4 November 2002 and 20 June 2003, of the Regional Trial Court of Mandaluyong City, Branch 212, in Civil Case No. MC99-605, is hereby REVERSED AND SET ASIDE. Respondents Amended Complaint in Civil Case No. MC99-605 as against the petitioner is hereby ordered DISMISSED, and all the proceedings against petitioner in the court a quo by virtue thereof are hereby DECLARED NULL AND VOID. The Regional Trial Court of Mandaluyong City, Branch 212, is DIRECTED to proceed without further delay with the resolution of respondents Complaint in Civil Case No. MC99-605 as to defendant PEIP, as well as petitioners counterclaim. No costs.

SO ORDERED.

SECOND DIVISION

FLORDELIZA MENDOZA, Petitioner,

G.R. No. 164012

Present:

QUISUMBING, J., Chairperson, - versus CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ. MUTYA SORIANO and Minor JULIE ANN SORIANO duly represented by her natural mother and guardian ad litem MUTYA SORIANO, Respondents.

Promulgated:

June 8, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.:

In this petition for review under Rule 45 of the Rules of Court, petitioner asks this Court to reverse and set aside the Decision dated November 17, 2003 and the Resolution dated May 24, 2004 of the Court of Appeals in CA-G.R. CV No. 69037. The appellate court found petitioner, as employer of Lomer Macasasa, liable for damages. The facts are as follows: At around 1:00 a.m., July 14, 1997, Sonny Soriano, while crossing Commonwealth Avenue near Luzon Avenue in Quezon City, was hit by a speeding Tamaraw FX driven by Lomer Macasasa. Soriano was thrown five meters away, while the vehicle only stopped some 25 meters from the point of impact. Gerard Villaspin, one of Sorianos companions, asked Macasasa to bring Soriano to the hospital, but after checking out the scene of the incident, Macasasa returned to the FX, only to flee. A school bus brought Soriano to East Avenue Medical Center where he later died. Subsequently, the Quezon City Prosecutor recommended the filing of a criminal case for reckless imprudence resulting to homicide against Macasasa. On August 20, 1997, respondents Mutya Soriano and Julie Ann Soriano, Sorianos wife and daughter, respectively, filed a complaint for damages against Macasasa and petitioner Flordeliza Mendoza, the registered owner of the vehicle. The complaint was docketed as Civil Case No. C-18038 in the Regional Trial Court of Caloocan City, Branch 121. Respondents prayed that Macasasa and petitioner be ordered to pay them: P200,000 moral damages; P500,000 for lost income; P22,250 for funeral services; P45,000 for burial lot; P15,150 for interment and lapida; P8,066 for hospitalization, other medical and transportation expenses; P28,540 for food and drinks during the wake; P50,000

exemplary damages; P60,000 indemnity for Sorianos death; and P25,000 for attorneys fees plus P500 per court appearance. In her answer, petitioner Mendoza maintained that she was not liable since as owner of the vehicle, she had exercised the diligence of a good father of a family over her employee, Macasasa. Upon respondents motion, the complaint for damages against Macasasa was dismissed. After trial, the trial court also dismissed the complaint against petitioner. It found Soriano negligent for crossing Commonwealth Avenue by using a small gap in the islands fencing rather than the pedestrian overpass. The lower court also ruled that petitioner was not negligent in the selection and supervision of Macasasa since complainants presented no evidence to support their allegation of petitioners negligence. Respondents appealed. The Court of Appeals reversed the trial court. The dispositive portion of the appellate courts decision reads:
WHEREFORE, the judgment appealed from is REVERSED, and another one is hereby rendered ordering [petitioner] Flordeliza Mendoza to pay [respondents] Mutya Soriano and Julie Ann Soriano the following amounts: 1. Hospital and Burial Expenses 2. Loss of earning capacity 3. Moral Damages 4. Indemnity for the death of Sonny Soriano P80,926.25 P77,000.00 P20,000.00 P50,000.00

Actual payment of the aforementioned amounts should, however, be reduced by twenty (20%) per cent due to the presence of contributory negligence by the victim as provided for in Article 2179 of the Civil Code.

SO ORDERED.

While the appellate court agreed that Soriano was negligent, it also found Macasasa negligent for speeding, such that he was unable to avoid hitting the victim. It observed that Sorianos own negligence did not preclude recovery of damages from Macasasas negligence. It further held that since petitioner failed to present evidence to the contrary, and conformably with Article 2180 of the Civil Code, the presumption of negligence of the employer in the selection and supervision of employees stood. Petitioners motion for reconsideration was denied by the appellate court in a Resolution dated May 24, 2004. Hence, this appeal where petitioner alleges that:
I. THE TOTAL AMOUNT PRAYED FOR IN THE COMPLAINT IS NOT WITHIN THE JURISDICTION OF THE REGIONAL TRIAL COURT. II. [COROLLARILY], THE AWARD OF DAMAGES IN FAVOR OF THE RESPONDENTS [HAS] NO BASIS IN LAW.

The issues are simple: (1) Did the Regional Trial Court have jurisdiction to try the case? and (2) Was there sufficient legal basis to award damages? Petitioner argues that the amount claimed by respondents is within the jurisdiction of the Metropolitan Trial Court. She posits that to determine the jurisdictional amount, what should only be considered are the following: P22,250 for funeral services; P45,000 for burial lot; P15,150 for interment and lapida; P8,066 for hospitalization and transportation; P28,540 for food and drinks during the wake; and P60,000 indemnity for Sorianos death.

She maintains that the sum of these amounts, P179,006, is below the jurisdictional amount of the Regional Trial Court. She states that under Section 19(8) of the Judiciary Reorganization Act of 1980, the following claims of respondents must be excluded: P200,000 moral damages, P500,000 for lost income; P50,000 exemplary damages; P25,000 attorneys fees plus P500 per court appearance. Petitioner thus prays that the decision of the Court of Appeals be reversed, and the dismissal of the case by the trial court be affirmed on the ground of lack of jurisdiction. Section 19(8) of Batas Pambansa Blg. 129, as amended by Republic Act No. 7691, states the pertinent law.
SEC. 19. Jurisdiction in civil cases.Regional Trial Courts shall exercise exclusive original jurisdiction: xxxx (8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the abovementioned items exceeds Two hundred thousand pesos (P200,000.00).

But relatedly, Administrative Circular No. 09-94 expressly states:

xxxx 2. The exclusion of the term damages of whatever kind in determining the jurisdictional amount under Section 19(8) and Section 33(1) of BP Blg. 129, as amended by RA No. 7691, applies to cases where the damages are merely incidental to or a consequence of the main cause of action. However, in cases where the claim for damages is the main cause of action, or one of the causes of action, the amount of such claim shall be considered in determining the jurisdiction of the court. (Underscoring supplied.)

Actions for damages based on quasi-delicts, as in this case, are primarily and effectively actions for the recovery of a sum of money for the damages for

tortious acts. In this case, respondents claim of P929,006 in damages and P25,000 attorneys fees plus P500 per court appearance represents the monetary equivalent for compensation of the alleged injury. These money claims are the principal reliefs sought by respondents in their complaint for damages. Consequently then, we hold that the Regional Trial Court of Caloocan City possessed and properly exercised jurisdiction over the case. Petitioner further argues that since respondents caused the dismissal of the complaint against Macasasa, there is no longer any basis to find her liable. She claims that no iota of evidence was presented in this case to prove Macasasas negligence, and besides, respondents can recover damages in the criminal case against him. Respondents counter that as Macasasas employer, petitioner was presumed negligent in selecting and supervising Macasasa after he was found negligent by the Court of Appeals. The records show that Macasasa violated two traffic rules under the Land Transportation and Traffic Code. First, he failed to maintain a safe speed to avoid endangering lives. Both the trial and the appellate courts found Macasasa overspeeding. The records show also that Soriano was thrown five meters away after he was hit. Moreover, the vehicle stopped only some 25 meters from the point of impact. Both circumstances support the conclusion that the FX vehicle driven by Macasasa was overspeeding. Second, Macasasa, the vehicle driver, did not aid Soriano, the accident victim, in violation of Section 55, Article V of the Land Transportation and Traffic Code. While Macasasa at first agreed to

bring Soriano to the hospital, he fled the scene in a hurry. Contrary to petitioners claim, there is no showing of any factual basis that Macasasa fled for fear of the peoples wrath. What remains undisputed is that he did not report the accident to a police officer, nor did he summon a doctor. Under Article 2185 of the Civil Code, a person driving a motor vehicle is presumed negligent if at the time of the mishap, he was violating traffic regulations. While respondents could recover damages from Macasasa in a criminal case and petitioner could become subsidiarily liable, still petitioner, as owner and employer, is directly and separately civilly liable for her failure to exercise due diligence in supervising Macasasa. We must emphasize that this damage suit is for the quasi-delict of petitioner, as owner and employer, and not for the delict of Macasasa, as driver and employee. Under Article 2180 of the Civil Code, employers are liable for the damages caused by their employees acting within the scope of their assigned tasks. The liability arises due to the presumed negligence of the employers in supervising their employees unless they prove that they observed all the diligence of a good father of a family to prevent the damage. In this case, we hold petitioner primarily and solidarily liable for the damages caused by Macasasa. Respondents could recover directly from petitioner since petitioner failed to prove that she exercised the diligence of a good father of a family in supervising Macasasa. Indeed, it is unfortunate that petitioner harbored the notion that the Regional Trial Court did not have jurisdiction over the case and opted not to present her evidence on this point.

Lastly, we agree that the Court of Appeals did not err in ruling that Soriano was guilty of contributory negligence for not using the pedestrian overpass while crossing Commonwealth Avenue. We even note that the respondents now admit this point, and concede that the appellate court had properly reduced by 20% the amount of damages it awarded. Hence, we affirm the reduction of the amount earlier awarded, based on Article 2179 of the Civil Code which reads:
When the plaintiff's own negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant's lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.

WHEREFORE, we DENY the petition for lack of merit and hereby AFFIRM the Decision dated November 17, 2003 and the Resolution dated May 24, 2004 of the Court of Appeals in CA-G.R. CV No. 69037. Costs against petitioner. SO ORDERED.

FIRST DIVISION

UNIVERSAL CORPORATION,

ROBINA Petitioner,

G.R. No. 154338

Present:

PUNO, C.J., Chairperson, -versusSANDOVAL-GUTIERREZ, CORONA, AZCUNA, and GARCIA, JJ.

ALBERT LIM, doing business under the name and style New H-R Grocery, Respondent. Promulgated:

October 5, 2007 x-----------------------------------------------------------------------------------------x

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Resolutions dated January 16, 2002 and July 1, 2002 of the Court of Appeals in CA-G.R. SP No. 67368.

The present controversy stemmed from a contract of sale between Universal Robina Corporation, petitioner, and Albert Lim, respondent. Pursuant to the contract, petitioner sold to respondent grocery products in

the total amount of P808,059.88. After tendering partial payments, respondent refused to settle his obligation despite petitioners repeated demands.

Thus, on May 31, 1999, petitioner filed with the Regional Trial Court, Branch 227, Quezon City, a complaint against respondent for a sum of money, docketed as Civil Case No. Q-99-37791.

On June 22, 1999, the trial court issued an Order dismissing the complaint motu proprio on grounds of lack of jurisdiction and improper venue, thus:

The case is misplaced with respect to jurisdiction and venue. There is not even a remote connection by the parties to Quezon City, where this Regional Trial Court sits, the plaintiff corporation has principal office at Pasig City and the defendant is, as provided in the complaint, from Laoag City. Wherefore, premises considered, this case is hereby DISMISSED without prejudice for improper venue and for lack of jurisdiction.

Accordingly, petitioner filed a motion for reconsideration together with an amended complaint alleging that the parties agreed that the proper venue for any dispute relative to the transaction is Quezon City.

In an Order dated October 11, 1999, the trial court granted the motion and admitted petitioners amended complaint.

On December 6, 1999, summons was served upon respondent. For his failure to file an answer seasonably and upon motion of petitioner, the trial court issued an Order dated September 12, 2000 declaring him in default and allowing petitioner to present its evidence ex parte.

However, on April 17, 2001, the trial court, still unsure whether venue was properly laid, issued an Order directing petitioner to file a memorandum of authorities on whether it can file a complaint in Quezon City. Subsequently, on May 11, 2001, the trial court again issued an Order dismissing the complaint on the ground of improper venue, thus:

It appears that there is no connection whatsoever between Quezon City and the parties. Plaintiffs official place of business is in Pasig whereas the defendants residence is stated to be in Laoag City both stipulated in the Complaint. The filing is based on the stipulation at the back of the delivery receipt that venue shall be in Quezon City --- which is not even stated in the Complaint nor admitted to have been signed by the defendant. WHEREFORE, premises considered, venue is hereby declared to have been improperly laid. This case is hereby dismissed without prejudice to filing in the proper venue.

Petitioner filed a motion for reconsideration but it was denied by the trial court in its Resolution dated August 15, 2001.

Petitioner then filed with the Court of Appeals a petition for review. But it was dismissed due to petitioners failure to attach thereto an explanation why copies of the petition were not served by personal service but by registered mail, in violation of Section 11, Rule 14 of the 1997 Rules of Civil Procedure, as amended. Resolution dated July 1, 2002, thus: Petitioner filed a motion for reconsideration but it was likewise denied by the appellate court in a

After a careful assessment of the petitioners motion for reconsideration of the Resolution dated March 21, 2002 dismissing the instant case for failure to comply with Section 11, Rule 14, this Court finds the reasons therein alleged to be not well-taken. Moreover, Supreme Court Circular No. 1-88 and Administrative Circular No. 3-96, provide that subsequent compliance with the requirements of a petition for review/certiorari shall not warrant reconsideration of the order of dismissal unless the court is fully satisfied that the non-compliance with the said requirements was not in any way attributable to the party, despite due negligence on his part, and that there are highly justifiable and compelling reasons for the court to make such other disposition as it may deem just and equitable. We find such reasons wanting in the present case. Besides, after a restudy of the facts, law and jurisprudence, as well as the dispositions already contained in the assailed Resolutions of public respondent, we find the present petition for certiorari to be patently without merit, and the questions raised therein are too unsubstantial to require consideration. WHEREFORE, the motion for reconsideration is hereby DENIED for utter lack of merit.

Hence, this petition.

The fundamental issue being raised is whether the trial court may dismiss motu proprio petitioners complaint on the ground of improper venue.

Sections 2 and 4, Rule 4 of the same Rules provide:

Sec. 2. Venue of personal actions. All other actions may be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a non-resident defendant where he may be found, at the election of the plaintiff. Sec. 4. When Rule not applicable. This Rule shall not apply (a) In those cases where a specific rule or law provides otherwise; or (b) Where the parties have validly agreed in writing before the filing of the action on the exclusive venue thereof.

Clearly, in personal actions, the plaintiff may commence an action either in the place of his or her residence or the place where the defendant resides. However, the parties may agree to a specific venue which could be in a place where neither of them resides.

Corollarily, Section 1, Rule 9 of the same Rules provides for the instances when the trial court may motu proprio dismiss a claim, thus:
Section 1. Defenses and objections not pleaded. Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.

Implicit from the above provision is that improper venue not impleaded in the motion to dismiss or in the answer is deemed waived. Thus, a court may not dismiss an action motu proprio on the ground of improper venue as it is not one of the grounds wherein the court may dismiss an action motu proprio on the basis of the pleadings.

In Dacoycoy v. Intermediate Appellate Court, this Court held that a trial court may not motu proprio dismiss a complaint on the ground of improper venue, thus:

Dismissing the complaint on the ground of improper venue is certainly not the appropriate course of action at this stage of the proceedings, particularly as venue, in inferior courts as well as in the courts of first instance (now RTC), may be waived expressly or impliedly. Where the defendant fails to challenge timely the venue in a motion to dismiss as provided by Section 4 of Rule 4 of the Rules of Court, and allows the trial to be held and a decision to be rendered, he cannot on

appeal or in a special action be permitted to belatedly challenge the wrong venue, which is deemed waived. Indeed, it was grossly erroneous for the trial court to have taken a procedural short-cut by dismissing motu proprio the complaint on the ground of improper venue without first allowing the procedure outlined in the rules of court to take its proper course. Although we are for the speedy and expeditious resolution of cases, justice and fairness take primary importance. The ends of justice require that respondent trial court faithfully adhere to the rules of procedure to afford not only the defendant, but the plaintiff as well, the right to be heard on his cause.

In Rudolf Lietz Holdings Inc. v. Registry of Deeds of Paraaque, the Court likewise held that a trial court may not motu proprio dismiss a complaint on the ground of improper venue, thus:

Rule 9, Section 1 of the 1997 Rules of Civil Procedure states that defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. The court may only dismiss an action motu proprio in case of lack of jurisdiction over the subject matter, litis pendentia, res judicata and prescription. Therefore, the trial court in this case erred when it dismissed the petition motu proprio. It should have waited for a motion to dismiss or a responsive pleading from respondent, raising the objection or affirmative defense of improper venue, before dismissing the petition.

In the instant case, respondent, despite proper service of summons, failed to file an answer and was thus declared in default by the trial court. Verily, having been declared in default, he lost his standing in court and his right to adduce evidence and present his defense, including his right to question the propriety of the venue of the action.

WHEREFORE, the Petition for Review is GRANTED. The assailed Resolutions of the Court of Appeals in CA-G.R. SP No. 67368 are REVERSED. The Regional Trial Court, Branch 227, Quezon City is ordered to REINSTATE Civil Case No. Q-99-37791 and conduct an ex parte hearing for the reception of petitioners evidence and dispose of the case with dispatch. SO ORDERED.

SECOND DIVISION G.R. No. 171456 August 9, 2007

UNIWIDE HOLDINGS, INC., petitioner, vs. ALEXANDER M. CRUZ, respondent. DECISION CARPIO MORALES, J.: Petitioner, Uniwide Holdings, Inc. (UHI), whose principal office is located in Paraaque City, entered into a Franchise Agreement1 (the agreement) granting respondent, Alexander M. Cruz (Cruz), a five-year franchise to adopt and use the "Uniwide Family Store System" for the establishment and operation of a "Uniwide Family Store" along Marcos Highway, Sta. Cruz, Cogeo, Marikina City. Article 10.22 of the agreement called for Cruz as franchisee to pay UHI a monthly service fee of P50,000 or three percent of gross monthly purchases, whichever is higher, payable within five days after the end of each month without need of formal billing or demand from UHI. In case of any delay in the payment of the monthly service fee, Cruz would, under Article 10.33 of the agreement, be liable to pay an interest charge of three percent per month. It appears that Cruz had purchased goods from UHIs affiliated companies First Paragon Corporation (FPC) and Uniwide Sales Warehouse Club, Inc. (USWCI).

In August 2002, FPC and USWCI executed Deeds of Assignment4 in favor of UHI assigning all their rights and interests over Cruzs accounts payable to them. As of August 13, 2002, Cruz had outstanding obligations with UHI, FPC, and USWCI in the total amount of P1,358,531.89, drawing UHI to send him a letter of even date for the settlement thereof in five days. His receipt of the letter notwithstanding, Cruzs accounts remained unsettled. Thus UHI filed a complaint5 for collection of sum of money before the Regional Trial Court (RTC) of Paraaque docketed as Civil Case No. 04-0278 against Cruz on the following causes of action: First Cause of Action 10. Being entitled to the payment of monthly service fee pursuant to the FA, which defendant failed to pay despite demand, plaintiff suffered actual damages in the amount of Phil. Peso: One Million Three Hundred Twenty Seven Thousand Six Hundred Sixty Nine & 83/100 (P1,327,669.83), computed as of 05 April 2004, for which defendant should be held liable together with legal interest thereon from the date of filing of this Complaint, until fully paid. Second Cause of Action 11. Being the assignee of the receivable of FPC, which receivable defendant failed to pay despite demand, plaintiff suffered actual damages in the amount of Phil. Peso: Sixty Four Thousand One Hundred Sixty Five & 96/100 (P64,165.96) for which defendant should be held liable together with the legal interest thereon computed from date of receipt of plaintiffs demand letter, or on August 16, 2002 to be exact, until fully paid. Third Cause of Action 12. Being the assignee of the receivable of USWCI, which receivable defendant failed to pay despite demand, plaintiff suffered actual damages in the total amount of Phil. Peso: One Million Five Hundred Seventy Nine Thousand Sixty One & 36/100 (P1,579,061.36), computed as of 05 April 2004, inclusive of the two and a half percent (2.5%) monthly interest, as and by way of penalty, and the three (3%) annual interest on the unpaid amount, for which defendant should be held liable, with legal interest thereon from the date of filing of this Complaint, until fully paid. Fourth Cause of Action 13. By reason of defendants obstinate refusal or failure to pay his indebtedness, plaintiff was constrained to file this Complaint and in the process incur expenses by way of attorneys fees, which could be reasonably estimated to reach at least

Phil. Peso: Two Hundred Fifty Thousand (P250,000.00) and for which defendant should be held answerable for.6 (Emphasis and underscoring supplied) To the complaint Cruz filed a motion to dismiss7 on the ground of improper venue, he invoking Article 27.5 of the agreement which reads: 27.5 Venue Stipulation The Franchisee consents to the exclusive jurisdiction of the courts of Quezon City, the Franchisee waiving any other venue.8 (Emphasis supplied) Branch 258 of the Paraaque RTC, by Order9 of December 12, 2005, granted Cruzs motion to dismiss. Hence, the present petition before this Court, raising the sole legal issue of: WHETHER A CASE BASED ON SEVERAL CAUSES OF ACTION IS DISMISSIBLE ON THE GROUND OF IMPROPER VENUE WHERE ONLY ONE OF THE CAUSES OF ACTION ARISES FROM A CONTRACT WITH EXCLUSIVE VENUE STIPULATION.10 (Underscoring supplied) Petitioner contends that nowhere in the agreement is there a mention of FPC and USWCI, and neither are the two parties thereto, hence, they cannot be bound to the stipulation on "exclusive venue." The petition is impressed with merit. The general rule on venue of personal actions, as in petitioners complaint for collection of sum of money, is embodied in Section 2, Rule 4 of the Rules of Court which provides: Sec. 2. Venue of personal actions. All other actions may be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a nonresident defendant, where he may be found, at the election of the plaintiff. (Emphasis and underscoring supplied) The afore-quoted provision is, however, qualified by Section 4 of the same rule which allows parties, before the filing of the action, to validly agree in writing on an exclusive venue.11 The forging of a written agreement on an exclusive venue of an action does not, however, preclude parties from bringing a case to other venues. Where there is a joinder of causes of action between the same parties one of which does not arise out of the contract where the exclusive venue was stipulated upon, the complaint, as in the one at bar, may be brought before other venues provided that such other cause of action falls within the jurisdiction of the court and the venue lies therein.12

Based on the allegations in petitioners complaint, the second and third causes of action are based on the deeds of assignment executed in its favor by FPC and USWCI. The deeds bear no exclusive venue stipulation with respect to the causes of action thereunder. Hence, the general rule on venue applies that the complaint may be filed in the place where the plaintiff or defendant resides.13 It bears emphasis that the causes of action on the assigned accounts are not based on a breach of the agreement between UHI and Cruz. They are based on separate, distinct and independent contracts-deeds of assignment in which UHI is the assignee of Cruzs obligations to the assignors FPC and USWCI. Thus, any action arising from the deeds of assignment cannot be subjected to the exclusive venue stipulation embodied in the agreement. So San Miguel Corporation v. Monasterio14 enlightens: Exclusive venue stipulation embodied in a contract restricts or confines parties thereto when the suit relates to breach of said contract. But where the exclusivity clause does not make it necessarily encompassing, such that even those not related to the enforcement of the contract should be subject to the exclusive venue, the stipulation designating exclusive venues should be strictly confined to the specific undertaking or agreement. Otherwise, the basic principles of freedom to contract might work to the great disadvantage of a weak party-suitor who ought to be allowed free access to courts of justice.15 (Emphasis and underscoring supplied) In fine, since the other causes of action in petitioners complaint do not relate to a breach of the agreement it forged with Cruz embodying the exclusive venue stipulation, they should not be subjected thereto. As San Miguel further enlightens: Restrictive stipulations are in derogation of the general policy of making it more convenient for the parties to institute actions arising from or in relation to their agreements. Thus, the restriction should be strictly construed as relating solely to the agreement for which the exclusive venue stipulation is embodied. Expanding the scope of such limitation on a contracting party will create unwarranted restrictions which the parties might find unintended or worse, arbitrary and oppressive.16 (Underscoring supplied) WHEREFORE, the petition is GRANTED. The December 12, 2005 Order of Regional Trial Court of Paraaque City, Branch 258 in Civil Case No. 04-0278 is SET ASIDE. The case is REMANDED to said court which is directed to reinstate the case to its docket and conduct further proceedings thereon with dispatch. SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

VICTORINO QUINAGORAN, Petitioner,

G.R. NO. 155179

Present:

YNARES-SANTIAGO, J., Chairperson, - versus AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ.

COURT OF APPEALS and THE HEIRS OF JUAN DE LA

CRUZ, Respondents.

Promulgated: August 24, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision of the Court Appeals (CA) in CA-GR SP No. 60443 dated May 27, 2002 and its Resolution dated August 28, 2002, which denied petitioner's Motion for Reconsideration.

The factual antecedents.

The heirs of Juan dela Cruz, represented by Senen dela Cruz (respondents), filed on October 27, 1994 a Complaint for Recovery of Portion of Registered Land with Compensation and Damages against Victorino Quinagoran (petitioner) before the Regional Trial Court (RTC)

Branch XI of Tuao, Cagayan, docketed as Civil Case No. 240-T. They alleged that they are the co-owners of a a parcel of land containing 13,100 sq m located at Centro, Piat, Cagayan, which they inherited from the late Juan dela Cruz; that in the mid-70s, petitioner started occupying a house on the north-west portion of the property, covering 400 sq m, by tolerance of respondents; that in 1993, they asked petitioner to remove the house as they planned to construct a commercial building on the property; that petitioner refused, claiming ownership over the lot; and that they suffered damages for their failure to use the same. Respondents prayed for the reconveyance and surrender of the disputed 400 sq m, more or less, and to be paid the amount of P5,000.00 monthly until the property is vacated, attorney's fees in the amount of P20,000.00, costs of suit and other reliefs and remedies just and equitable.

Petitioner filed a Motion to Dismiss claiming that the RTC has no jurisdiction over the case under Republic Act (R.A.) No. 7691, which expanded the exclusive original jurisdiction of the Municipal Trial Court (MTC) to include all civil actions which involve title to, or possession of, real property, or any interest therein which does not exceed P20,000.00. He argued that since the 346 sq m lot which he owns adjacent to the contested property has an assessed value of P1,730.00, the assessed value of the lot under controversy would not be more than the said amount.

The RTC denied petitioner's Motion to Dismiss in an Order dated November 11, 1999, thus:

The Court finds the said motion to be without merit. The present action on the basis of the allegation of the complaint partakes of the nature of action publicciana (sic) and jurisdiction over said action lies with the Regional Trial Court, regardless of the value of the property. This is so because in paragraph 8 of the complaint, it is alleged that the plaintiff demanded from the defendant the removal of the house occupied by the defendant and the possession of which is Only due to Tolerance (sic) of herein plaintiffs. WHEREFORE, for lack of merit, the motion to dismiss is hereby denied.

Petitioner's Motion for Reconsideration was also denied by the RTC.

Petitioner then went to the CA on a Petition for Certiorari and Prohibition seeking the annulment of the Orders of the RTC.

On May 27, 2002, the CA rendered the herein assailed Decision dismissing petitioner's action and affirming in toto the RTC. Pertinent portions of said Decision, read:

At the onset, we find that the complaint filed by the Heirs of Juan dela Cruz, represented by Senen dela Cruz adequately set forth the jurisdictional requirements for a case to be cognizable by the Regional Trial Court. The Complaint is captioned recovery of portion of registered land and it contains the following allegations:

7. That since plaintiffs and defendant were neighbors, the latter being the admitted owner of the adjoining lot, the former's occupancy of said house by defendant was only due to the tolerance of herein plaintiffs; 8. That plaintiffs, in the latter period of 1993, then demanded the removal of the subject house for the purpose of constructing a commercial building and which herein defendant refused and in fact now claims ownership of the portion in which said house stands; 9. That repeated demands relative to the removal of the subject house were hence made but which landed on deaf ears; 10. That a survey of the property as owned by herein plaintiffs clearly establishes that the subject house is occupying Four Hundred (400) square meters thereof at the north-west portion thereof, as per the approved survey plan in the records of the Bureau of Lands. xxxx It is settled that when the complaint fails to aver facts constitutive of forcible entry or unlawful detainer, as where it does not state how entry was effected or how and when dispossession started, the remedy should either be an accion publiciana or an accion reinvindicatoria in the proper regional trial court. In the latter instances, jurisdiction pertains to the Regional Trial Court. As another legal recourse from a simple ejectment case governed by the Revised Rules of Summary Procedure, an accion publiciana is the plenary action to recover the right of possession when dispossession has lasted more than one year or when dispossession was effected by means other than those mentioned in Rule 70 of the Rules of Court. Where there is no allegation that there was denial of possession through any of the methods stated in Section 1, Rule 70 of the Rules of Court, or where there is no lease contract between the parties, the proper remedy is the plenary action of recovery of possession. Necessarily, the action falls within the jurisdiction of the Regional Trial Court. Thus, we find that the private respondents [heirs of dela Cruz] availed of the proper remedy when they filed the action before the court a quo.

Undoubtedly, the respondent court therefore did not act with grave abuse of discretion amounting to or in excess of jurisdiction in denying Quinagoran's Motion to Dismiss and the Motion for Reconsideration, thereof, because it has jurisdiction to hear and decide the instant case. xxxx It would not be amiss to point out that the nature of the action and jurisdiction of courts are determined by the allegations in the complaint. As correctly held by the Regional Trial Court, the present action on the basis of the allegation of the complaint partakes of the nature of action publiciana and jurisdiction over said action lies with the Regional Trial Court regardless of the value of the property. Therefore, we completely agree with the court a quo's conclusion that the complaint filed by the Heirs of Juan dela Cruz, represented by Senen dela Cruz, is in the nature of an accion publiciana and hence it is the Regional Trial Court which has jurisdiction over the action, regardless of the assessed value of the property subject of present controversy.

Petitioner's Motion for Reconsideration was denied on August 28, 2002 for lack of merit.

Petitioner now comes before this Court on a petition for review claiming that under R.A. No. 7691 the jurisdiction of the MTC, Metropolitan Trial Court (MeTC), and Municipal Trial Court in Cities (MTCC) was expanded to include exclusive original jurisdiction over civil actions when the assessed value of the property does not exceed P20,000.00 outside Metro Manila and P50,000.00 within Metro Manila. He likewise avers that it is an indispensable requirement that the complaint should allege the assessed value of the property involved. In this case, the complaint does not allege that the assessed value of the land in question is more than

P20,000.00. There was also no tax declaration attached to the complaint to show the assessed value of the property. Respondents therefore failed to allege that the RTC has jurisdiction over the instant case. The tax declaration covering Lot No. 1807 owned by respondents and where the herein disputed property is purportedly part -- a copy of which petitioner submitted to the CA -- also shows that the value of the property is only P551.00. Petitioner then prays that the CA Decision and Resolution be annulled and set aside and that the complaint of herein respondents before the trial court be dismissed for lack of jurisdiction.

Respondents contend that: the petition is without factual and legal bases, and the contested decision of the CA is entirely in accordance with law; nowhere in the body of their complaint before the RTC does it state that the assessed value of the property is below P20,000.00; the contention of petitioner in his Motion to Dismiss before the RTC that the assessed value of the disputed lot is below P20,000.00 is based on the assessed value of an adjacent property and no documentary proof was shown to support the said allegation; the tax declaration which petitioner presented, together with his Supplemental Reply before the CA, and on the basis of which he claims that the disputed property's assessed value is only P551.00, should also not be given credence as the said tax declaration reflects the amount of P56,100.00 for the entire property.

The question posed in the present petition is not complicated, i.e., does the RTC have jurisdiction over all cases of recovery of possession regardless of the value of the property involved?

The answer is no. The doctrine on which the RTC anchored its denial of petitioner's Motion to Dismiss, as affirmed by the CA -- that all cases of recovery of possession or accion publiciana lies with the regional trial courts regardless of the value of the property -- no longer holds true. As things now stand, a distinction must be made between those properties the assessed value of which is below P20,000.00, if outside Metro Manila; and P50,000.00, if within.

Republic Act No. 7691 which amended Batas Pambansa Blg. 129 and which was already in effect when respondents filed their complaint with the RTC on October 27, 1994, expressly provides:

SEC. 19. Jurisdiction in civil cases Regional Trial Courts shall exercise exclusive original jurisdiction: xxxx (2) In all civil actions which involve the title to or possession of, real property, or any interest therein, where the assessed value of the property involved exceeds Twenty thousand pesos (P20,000.00) or, for civil actions in Metro Manila, where such value exceeds Fifty thousand pesos (P50,000.00) except for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts.

xxxx SEC. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases. --- Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise: xxxx (3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of , real property, or any interest therein where the assessed value of the property or interest therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00) exclusive of interest, damages or whatever kind, attorney's fees, litigation expenses and costs: Provided That in cases of land not declared for taxation purposes, the value of such property shall be determined by the assessed value of the adjacent lots.(Emphasis supplied)

The Court has also declared that all cases involving title to or possession of real property with an assessed value of less than P20,000.00 if outside Metro Manila, falls under the original jurisdiction of the municipal trial court.

In Atuel v. Valdez the Court likewise expressly stated that:

Jurisdiction over an accion publiciana is vested in a court of general jurisdiction. Specifically, the regional trial court exercises exclusive original jurisdiction in all civil actions which involve x x x possession of real property. However, if the assessed value of the real property involved does not exceed P50,000.00 in Metro Manila, and P20,000.00 outside of Metro Manila, the municipal trial court exercises jurisdiction over actions to recover possession of real property.

That settled, the next point of contention is whether the complaint must allege the assessed value of the property involved. Petitioner maintains that there should be such an allegation, while respondents claim the opposite.

In no uncertain terms, the Court has already held that a complaint must allege the assessed value of the real property subject of the complaint or the interest thereon to determine which court has jurisdiction over the action. This is because the nature of the action and which court has original and exclusive jurisdiction over the same is determined by the material allegations of the complaint, the type of relief prayed for by the plaintiff and the law in effect when the action is filed, irrespective of whether the plaintiffs are entitled to some or all of the claims asserted therein.

In this case, the complaint denominated as Recovery of Portion of Registered Land with Compensation and Damages, reads:

1. That plaintiffs are the only direct and legitimate heirs of the late Juan dela Cruz, who died intestate on February 3, 1977, and are all residents of Centro, Piat, Cagayan; xxxx 4. That plaintiffs inherited from x x x Juan dela Cruz x x x a certain parcel of land x x x containing an area of 13,111 square meters. 5. That sometime in the mid-1960's, a house was erected on the north-west portion of the aforedescribed lot x x x. xxxx

7. That since plaintiffs and defendant were neighbors, the latter being the admitted owner of the adjoining lot, the former's occupancy of said house by defendant was only due to the tolerance of herein plaintiffs; 8. That plaintiffs, in the latter period of 1993, then demanded the removal of the subject house for the purpose of constructing a commercial building and which herein defendant refused and in fact now claims ownership of the portion in which said house stands; 9. That repeated demands relative to the removal of the subject house were hence made but which landed on deaf ears; 10. That a survey of the property as owned by herein plaintiffs clearly establishes that the subject house is occupying Four Hundred (400) square meters thereof at the north-west portion thereof, as per the approved survey plan in the records of the Bureau of Lands.

Nowhere in said complaint was the assessed value of the subject property ever mentioned. There is therefore no showing on the face of the complaint that the RTC has exclusive jurisdiction over the action of the respondents. Indeed, absent any allegation in the complaint of the assessed value of the property, it cannot be determined whether the RTC or the MTC has original and exclusive jurisdiction over the petitioner's action. The courts cannot take judicial notice of the assessed or market value of the land.

Jurisdiction of the court does not depend upon the answer of the defendant or even upon agreement, waiver or acquiescence of the parties. Indeed, the jurisdiction of the court over the nature of the action and the subject matter thereof cannot be made to depend upon the defenses set up in

the court or upon a motion to dismiss for, otherwise, the question of jurisdiction would depend almost entirely on the defendant.

Considering that the respondents failed to allege in their complaint the assessed value of the subject property, the RTC seriously erred in denying the motion to dismiss. Consequently, all proceedings in the RTC are null and void, and the CA erred in affirming the RTC.

WHEREFORE, the petition is GRANTED. The Court of Appeals's Decision in CA-GR SP No. 60443 dated May 27, 2002 and its Resolution dated August 28, 2002, are REVERSED and SET ASIDE. The Regional Trial Courts Orders dated November 11, 1999 and May 11, 2000, and all proceedings therein are declared NULL and VOID. The complaint in Civil Case No. 240-T is dismissed without prejudice.

No costs.

SO ORDERED.

FIRST DIVISION [G.R. No. 139561. June 10, 2003]

SPOUSES FEDERICO ATUEL and SARAH ATUEL and SPOUSES GEORGE GALDIANO and ELIADA GALDIANO, petitioners, vs. SPOUSES BERNABE VALDEZ and CONCHITA VALDEZ, respondents. DECISION CARPIO, J.: The Case Before us is a petition for review on certiorari seeking to reverse the Decision of the Court of Appeals dated 20 May 1999 in CA-G.R. SP No. 48682 as well as the Resolution dated 14 July 1999 denying the Motion for Reconsideration. The Court of Appeals in its assailed decision affirmed the Decision of the Department of Agrarian Reform Adjudication Board (DARAB) which reversed the Decision of the Municipal Agrarian Reform Office (MARO) in Malaybalay, Bukidnon. The MARO of Bukidnon ordered the Department of Agrarian Reform (DAR), Agusan del Sur, to segregate 2,000 square meters from the land of the Spouses Bernabe and Conchita Valdez. The MARO of Bukidnon also awarded the same segregated land to the Spouses Federico and Sarah Atuel and the Spouses George and Eliada Galdiano. The Facts The present controversy springs from a battle of possession over a portion of a property in Poblacion (formerly Sibagat Nuevo), Sibagat, Agusan del Sur. Atty. Manuel D. Cab (Cab) is the registered owner of two parcels of land in Poblacion, Sibagat, Agusan del Sur with an area of 125,804 square meters (Cab Property). The Cab Property is covered by OCT No. P-5638 issued pursuant to Free Patent No. 1318. The Cab Property is traversed by the Butuan to Davao Road and adjacent to the municipal building of Sibagat. From the Cab Property, Cab donated the lot occupied by the municipal building. In 1964, Cab appointed Federico Atuel (Atuel) as administrator of the Cab Property. Sometime in 1977, Bernabe Valdez (Valdez) arrived in Sibagat from Baogo Bontoc, Southern Leyte. Valdez is the nephew of Atuel, who recommended to Cab to lease a portion of the Cab Property to Valdez. On 9 October 1978, Cab and Valdez entered into a Lease of Improved Agricultural Land under which Valdez leased a 1.25-hectare portion of the Cab Property for P300.00 per year for two years. In 1982, Cab allowed the Spouses Federico and Sarah Atuel (Spouses Atuel) and the Spouses George and Eliada Galdiano (Spouses Galdiano) to occupy a 2,000-square meter portion of the Cab Property. The Spouses Atuel and the Spouses Galdiano constructed their respective houses on this 2,000-square meter lot (Subject Lot).

On 27 September 1985, the Sangguniang Bayan of Sibagat, Agusan del Sur, approved the town plan of the Municipality of Sibagat which classified the Cab Property as residential, subject to the approval of the Ministry of Human Settlements Regulatory Commission. On 25 June 1988, Cab informed Valdez that their lease contract had already expired, and demanded that Valdez stop cultivating the 1.25-hectare portion of the Cab Property and vacate the same. On 2 October 1988, responding to Cabs letter, the MARO of Sibagat, Agusan del Sur informed Cab that Valdez was properly identified as a tenant, and thus deemed to be the owner of the land he cultivated. The MARO added that on 14 September 1988, pursuant to Presidential Decree No. 27, Emancipation Patent No. A-159969 was issued to Valdez for a 2.3231-hectare portion (PD 27 Land) of the Cab Property. The PD 27 Land included the 2,000-square meter Subject Lot occupied by the houses of the Spouses Atuel and the Spouses Galdiano. On 11 May 1989, Cab filed with the DAR in Manila a petition for cancellation of Valdezs emancipation patent. Cab claimed that his property is not planted to rice and corn and that Valdez is a civil law lessee, not a tenant. Consequently, the DAR ordered the Regional Director of Cagayan de Oro City to conduct an investigation regarding the petition. On 17 September 1989, the Housing and Land Use Regulatory Board (HLURB) approved the Town Plan and Zoning Ordinance of fifty-eight municipalities, including that of Sibagat. The HLURB classified the Cab Property as 90 percent residential, and the remaining portion as institutional and park or open space. On 27 September 1991, the Spouses Bernabe and Conchita Valdez (Spouses Valdez) filed a complaint for Recovery of Possession with Damages with the DARAB in Malaybalay, Bukidnon against the Spouses Atuel and the Spouses Galdiano. In their complaint, the Spouses Valdez alleged that the Spouses Atuel and the Spouses Galdiano stealthily and through fraud entered and occupied a portion of the above-described property with an area of 2,000 sq. m. more or less. The Spouses Valdez claimed that the Spouses Atuel and the Spouses Galdiano, despite repeated demands, refused to restore possession of the said portion of land to the Spouses Valdez. The Spouses Valdez prayed that the Spouses Atuel and the Spouses Galdiano be ordered to vacate and restore to the Spouses Valdez possession of the Subject Lot. The Spouses Valdez also prayed for payment of litigation expenses, as well as unearned income from the Subject Lot and moral damages. In their answer, the Spouses Atuel and the Spouses Galdiano asserted that the Spouses Valdez had no cause of action against them because Cab is the owner of the Subject Lot while Atuel is the administrator of the Cab Property. The Spouses Atuel and the Spouses Galdiano claimed that upon Cabs instruction and consent, they had been occupying the Cab Property since 1964, long before the Spouses Valdez leased a portion of the Cab Property in 1978. The Spouses Atuel and the Spouses Galdiano also pointed out that the

Spouses Valdez never set foot on the Subject Lot nor cultivated the same, thus, there is no dispossession to speak of. Moreover, the Spouses Atuel and the Spouses Galdiano alleged that the emancipation patent issued to Valdez is null and void. The Spouses Atuel and the Spouses Galdiano maintained that the entire Cab Property, which is covered by the Free Patent issued to Cab, has already been classified as residential, hence, no longer covered by PD No. 27. On 4 March 1993, the DARAB Provincial Adjudicator, after hearing the case, issued a decision which disposed of as follows: WHEREFORE, premises above considered, the DAR Agusan del Sur is hereby ordered to segregate the TWO THOUSAND (2,000) SQ. METERS, more or less, from the land of the complainants, Transfer Certificate of Title No. 1261 covered by Emancipation Patent No. A-159969, and award the same to the respondents; and hereby ordered this case dismissed. SO ORDERED. Dissatisfied with the decision, the Spouses Atuel and the Spouses Galdiano appealed to the DARAB Central Office. The DARAB Central Office reversed the decision of the DARAB Provincial Adjudicator, thus: WHEREFORE, premises considered, the appealed decision is hereby REVERSED. Judgment is hereby rendered as follows: (1) Enjoining the respondents-appellants from committing acts of intrusion and maintain the possessory rights of the complainants over the EP (Emancipation Patent) covered land; and Ordering the MARO (Municipal Agrarian Reform Officer) or PARO (Provincial Agrarian Reform Officer) concerned to assist the parties in determining the amount to be reimbursed in favor of the respondents for whatever improvements made on the 2,000 square meter portion to be paid by the complainants.

(2)

SO ORDERED. Aggrieved by the decision, the Spouses Atuel and the Spouses Galdiano filed a petition for review with the Court of Appeals. On 20 May 1999, the Court of Appeals affirmed the decision of the DARAB Central Office and dismissed the petition for lack of merit. The Spouses Atuel and the Spouses Galdiano filed a Motion for Reconsideration which the Court of Appeals denied. On 14 January 1998, while the case was pending in the Court of Appeals, the Spouses Valdez sold 5,000 square meters out of the PD 27 Land to the Municipality of Sibagat.

Hence, the instant petition. The Ruling of the Court of Appeals In affirming the decision of the DARAB, the Court of Appeals ruled that the DARAB has primary and exclusive jurisdiction over cases involving the issuance, correction and cancellation of emancipation patents. The Court of Appeals held that the DARABs decision should be respected because it enjoys the presumption of regularity. The Court of Appeals also ruled that the DARAB correctly relied on Pagtalunan v. Tamayo where this Court held that upon issuance of an emancipation patent, a holder acquires a vested right of absolute ownership in the land. The Court of Appeals further held that the doctrine laid down in Teodoro v. Macaraeg is applicable. In Teodoro, this Court ruled that a landowner has full liberty to enter into a civil lease contract covering his property. However, once a landowner enters into a contract of lease whereby his land is to be devoted to agricultural production and said landholding is susceptible of personal cultivation by the lessee, solely or with the help of labor coming from his immediate farm household, then such contract is of the very essence of a leasehold agreement. Otherwise, the Court added, it would be easy to subvert, under the guise of the liberty to contract, the intendment of the law of protecting the underprivileged and ordinarily credulous farmer from the unscrupulous schemes and pernicious practices of the landed gentry. The Issue After a review of the issues raised, the question boils down to whether the Spouses Valdez are entitled to seek redress from the DARAB in recovering possession of the 2,000-square meter Subject Lot from the Spouses Atuel and the Spouses Galdiano. The Courts Ruling We grant the petition based not on the arguments of the Spouses Atuel and the Spouses Galdiano but on an entirely different ground. We reverse the decision of the Court of Appeals because of the DARABs lack of jurisdiction to take cognizance of the present controversy. The DARAB has no jurisdiction to take cognizance of the Spouses Valdezs complaint for recovery of possession of the Subject Lot. Though the parties do not challenge the jurisdiction of the DARAB, the Court may motu proprio consider the issue of jurisdiction. The Court has discretion to determine whether the DARAB validly acquired jurisdiction over the case. Jurisdiction over the subject matter is conferred only by law. It may not be conferred on the court by consent or waiver of the parties where the court otherwise would have no jurisdiction over the subject matter of the action.

In their complaint for recovery of possession, the Spouses Valdez alleged, among others, that they are farmers and beneficiaries of an emancipation patent. The Spouses Valdez also alleged that the Spouses Atuel and the Spouses Galdiano stealthily and fraudulently occupied the 2,000-square meter Subject Lot. The Spouses Valdez claimed that despite repeated demands, the Spouses Atuel and the Spouses Galdiano refused to vacate and restore possession of the Subject Lot to the Spouses Valdez. The Spouses Valdez prayed that the Spouses Atuel and the Spouses Galdiano be ordered to vacate and restore possession of the Subject Lot to the Spouses Valdez. The Spouses Valdez did not allege the existence of tenancy relations, if any, between them and the Spouses Atuel and the Spouses Galdiano. In Morta, Sr. v. Occidental, this Court ruled: It is axiomatic that what determines the nature of an action as well as which court has jurisdiction over it, are the allegations in the complaint and the character of the relief sought. Jurisdiction over the subject matter is determined upon the allegations made in the complaint. In the instant case, the allegations in the complaint, which are contained in the decision of the MARO, indicate that the nature and subject matter of the instant case is for recovery of possession or accion publiciana. The issue to be resolved is who between the Spouses Valdez on one hand, and the Spouses Atuel and the Spouses Galdiano on the other, have a better right to possession of the 2,000-square meter Subject Lot forming part of the PD 27 Land. The Spouses Atuel and the Spouses Galdiano likewise raise the issue of ownership by insisting that Cab is the real and lawful owner of the Subject Lot. In Cruz v. Torres, this Court had occasion to discuss the nature of an action to recover possession or accion publiciana, thus: xxx This is an action for recovery of the right to posses and is a plenary action in an ordinary civil proceeding in a regional trial court to determine the better right of possession of realty independently of the title. Accion publiciana or plenaria de posesion is also used to refer to an ejectment suit filed after the expiration of one year from the accrual of the cause of action or from the unlawful withholding of possession of the realty. In such case, the regional trial court has jurisdiction. xxx For the DARAB to acquire jurisdiction over the case, there must exist a tenancy relations between the parties. This Court held in Morta, that in order for a tenancy agreement to take hold over a dispute, it is essential to establish all its indispensable elements, to wit: xxx 1) that the parties are the landowner and the tenant or agricultural lessee; 2) that the subject matter of the relationship is an agricultural land; 3) that there is consent between the parties to the relationship; 4) that the purpose of the relationship is to bring about agricultural production; 5) that there is personal cultivation on the part of the tenant or agricultural lessee; and 6) that the harvest is shared between the landowner and the tenant or agricultural lessee.

xxx (Emphasis supplied) Emphasizing the DARABs jurisdiction, this Court held in Hon. Antonio M. Nuesa, et al. v. Hon. Court of Appeals, et al., that: xxx the DAR is vested with the primary jurisdiction to determine and adjudicate agrarian reform matters and shall have the exclusive jurisdiction over all matters involving the implementation of the agrarian reform program. The DARAB has primary, original and appellate jurisdiction to determine and adjudicate all agrarian disputes, cases, controversies, and matters or incidents involving the implementation of the Comprehensive Agrarian Reform Program under R.A. 6657, E.O. Nos. 229, 228 and 129-A, R.A. 3844 as amended by R.A. 6389, P.D. No. 27 and other agrarian laws and their implementing rules and regulations. (Emphasis supplied) Under Section 3(d) of Republic Act No. 6657, otherwise known as the CARP Law, an agrarian dispute is defined as follows: (d) xxx any controversy relating to tenurial arrangements, whether leasehold, tenancy, stewardship or otherwise, over lands devoted to agriculture, including disputes concerning farmworkers' associations or representation of persons in negotiating, fixing, maintaining, changing, or seeking to arrange terms or conditions of such tenurial arrangements. It includes any controversy relating to compensation of lands acquired under this Act and other terms and conditions of transfer of ownership from landowners to farmworkers, tenants and other agrarian reform beneficiaries, whether the disputants stand in the proximate relation of farm operator and beneficiary, landowner and tenant, or lessor and lessee. In the instant case, the Spouses Atuel and the Spouses Galdiano are not and do not claim to be the owners of the 2,000-square meter Subject Lot where their houses are constructed. They also do not claim ownership to any other portion of the PD 27 Land. They and the Spouses Valdez have no tenurial, leasehold, or any agrarian relations whatsoever that will bring this controversy within Section 3(d) of RA No. 6657. The instant case is similar to Chico v. CA, where this Court ruled that the DARAB had no jurisdiction over a case which did not involve any tenurial or agrarian relations between the parties. Since the DARAB has no jurisdiction over the present controversy, it should not have taken cognizance of the Spouses Valdezs complaint for recovery of possession. Jurisdiction over an accion publiciana is vested in a court of general jurisdiction. Specifically, the regional trial court exercises exclusive original jurisdiction in all civil actions which involve x x x possession of real property. However, if the assessed value of the real property involved does not exceed P50,000.00 in Metro Manila, and P20,000.00 outside of Metro Manila, the municipal trial court exercises jurisdiction over actions to recover possession of real property. Moreover, the municipal trial court exercises jurisdiction over all cases of forcible entry and unlawful detainer.

The Court of Appeals correctly stated that the DARAB has exclusive original jurisdiction over cases involving the issuance, correction and cancellation of registered emancipation patents. However, the Spouses Valdezs complaint for recovery of possession does not involve or seek the cancellation of any emancipation patent. It was the Spouses Atuel and the Spouses Galdiano who attacked the validity of the emancipation patent as part of their affirmative defenses in their answer to the complaint. The rule is well settled that the jurisdiction of the court (or agency in this case) cannot be made to depend on the defenses made by the defendant in his answer or motion to dismiss. If such were the rule, the question of jurisdiction would depend almost entirely on the defendant. Jurisdiction over the subject matter cannot be acquired through, or waived by, any act or omission of the parties. The active participation of the parties in the proceedings before the DARAB does not vest jurisdiction on the DARAB, as jurisdiction is conferred only by law. The courts or the parties cannot disregard the rule of non-waiver of jurisdiction. Likewise, estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause of action. The failure of the parties to challenge the jurisdiction of the DARAB does not prevent this Court from addressing the issue, as the DARABs lack of jurisdiction is apparent on the face of the complaint. Issues of jurisdiction are not subject to the whims of the parties. In a long line of decisions, this Court has consistently held that an order or decision rendered by a tribunal or agency without jurisdiction is a total nullity. Accordingly, we rule that the decision of the DARAB in the instant case is null and void. Consequently, the decision of the Court of Appeals affirming the decision of the DARAB is likewise invalid. This Court finds no compelling reason to rule on the other issues raised by the Spouses Atuel and the Spouses Galdiano. WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated 20 May 1999 and the Resolution dated 14 July 1999 in CA-G.R. SP No. 48682 are REVERSED and SET ASIDE. The MAROs Decision dated 4 March 1993, and the DARABs Decision dated 17 June 1998, are declared NULL and VOID for lack of jurisdiction. No costs. SO ORDERED.