Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 85419 March 9, 1993 DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner, vs. SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN INDUSTRIAL PLASTIC CORPORATION and PRODUCERS BANK OF THE PHILIPPINES, defendants-respondents. Yngson & Associates for petitioner. Henry A. Reyes & Associates for Samso Tung & Asian Industrial Plastic Corporation. Eduardo G. Castelo for Sima Wei. Monsod, Tamargo & Associates for Producers Bank. Rafael S. Santayana for Mary Cheng Uy.

CAMPOS, JR., J.: On July 6, 1986, the Development Bank of Rizal (petitioner Bank for brevity) filed a complaint for a sum of money against respondents Sima Wei and/or Lee Kian Huat, Mary Cheng Uy, Samson Tung, Asian Industrial Plastic Corporation (Plastic Corporation for short) and the Producers Bank of the Philippines, on two causes of action: (1) To enforce payment of the balance of P1,032,450.02 on a promissory note executed by respondent Sima Wei on June 9, 1983; and (2) To enforce payment of two checks executed by Sima Wei, payable to petitioner, and drawn against the China Banking Corporation, to pay the balance due on the promissory note. Except for Lee Kian Huat, defendants filed their separate Motions to Dismiss alleging a common ground that the complaint states no cause of action. The trial court granted the defendants' Motions to Dismiss. The Court of Appeals affirmed this decision, * to which the petitioner Bank, represented by its Legal Liquidator, filed this Petition for Review by Certiorari, assigning the following as the alleged errors of the Court of Appeals: 1 (1) THE COURT OF APPEALS ERRED IN HOLDING THAT THE PLAINTIFF-PETITIONER HAS NO CAUSE OF ACTION AGAINST DEFENDANTS-RESPONDENTS HEREIN. (2) THE COURT OF APPEALS ERRED IN HOLDING THAT SECTION 13, RULE 3 OF THE REVISED RULES OF COURT ON ALTERNATIVE DEFENDANTS IS NOT APPLICABLE TO HEREIN DEFENDANTS-RESPONDENTS. The antecedent facts of this case are as follows:

In consideration for a loan extended by petitioner Bank to respondent Sima Wei, the latter executed and delivered to the former a promissory note, engaging to pay the petitioner Bank or order the amount of P1,820,000.00 on or before June 24, 1983 with interest at 32% per annum. Sima Wei made partial payments on the note, leaving a balance of P1,032,450.02. On November 18, 1983, Sima Wei issued two crossed checks payable to petitioner Bank drawn against China Banking Corporation, bearing respectively the serial numbers 384934, for the amount of P550,000.00 and 384935, for the amount of P500,000.00. The said checks were allegedly issued in full settlement of the drawer's account evidenced by the promissory note. These two checks were not delivered to the petitioner-payee or to any of its authorized representatives. For reasons not shown, these checks came into the possession of respondent Lee Kian Huat, who deposited the checks without the petitioner-payee's indorsement (forged or otherwise) to the account of respondent Plastic Corporation, at the Balintawak branch, Caloocan City, of the Producers Bank. Cheng Uy, Branch Manager of the Balintawak branch of Producers Bank, relying on the assurance of respondent Samson Tung, President of Plastic Corporation, that the transaction was legal and regular, instructed the cashier of Producers Bank to accept the checks for deposit and to credit them to the account of said Plastic Corporation, inspite of the fact that the checks were crossed and payable to petitioner Bank and bore no indorsement of the latter. Hence, petitioner filed the complaint as aforestated. The main issue before Us is whether petitioner Bank has a cause of action against any or all of the defendants, in the alternative or otherwise. A cause of action is defined as an act or omission of one party in violation of the legal right or rights of another. The essential elements are: (1) legal right of the plaintiff; (2) correlative obligation of the defendant; and (3) an act or omission of the defendant in violation of said legal right. 2 The normal parties to a check are the drawer, the payee and the drawee bank. Courts have long recognized the business custom of using printed checks where blanks are provided for the date of issuance, the name of the payee, the amount payable and the drawer's signature. All the drawer has to do when he wishes to issue a check is to properly fill up the blanks and sign it. However, the mere fact that he has done these does not give rise to any liability on his part, until and unless the check is delivered to the payee or his representative. A negotiable instrument, of which a check is, is not only a written evidence of a contract right but is also a species of property. Just as a deed to a piece of land must be delivered in order to convey title to the grantee, so must a negotiable instrument be delivered to the payee in order to evidence its existence as a binding contract. Section 16 of the Negotiable Instruments Law, which governs checks, provides in part: Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. . . . Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him. 3Delivery of an instrument means transfer of possession, actual or constructive, from one person to another. 4Without the initial delivery of the instrument from the drawer to the payee, there can be no liability on the instrument. Moreover, such delivery must be intended to give effect to the instrument. The allegations of the petitioner in the original complaint show that the two (2) China Bank checks, numbered 384934 and 384935, were not delivered to the payee, the petitioner herein. Without the delivery of said checks to petitioner-payee, the former did not acquire any right or interest therein and cannot therefore assert any cause of action, founded on said checks, whether against the drawer Sima Wei or against the Producers Bank or any of the other respondents. In the original complaint, petitioner Bank, as plaintiff, sued respondent Sima Wei on the promissory note, and the alternative defendants, including Sima Wei, on the two checks. On appeal from the orders of dismissal of the Regional Trial Court, petitioner Bank alleged that its cause of action was not based on collecting the sum of money evidenced by the negotiable instruments stated but on quasi-delict a claim for damages on the ground of fraudulent acts and evident bad faith of the alternative respondents. This was clearly an attempt by the petitioner Bank to change not only the theory of its case but the basis of his cause of action. It is wellsettled that a party cannot change his theory on appeal, as this would in effect deprive the other party of his day in court. 5

Notwithstanding the above, it does not necessarily follow that the drawer Sima Wei is freed from liability to petitioner Bank under the loan evidenced by the promissory note agreed to by her. Her allegation that she has paid the balance of her loan with the two checks payable to petitioner Bank has no merit for, as We have earlier explained, these checks were never delivered to petitioner Bank. And even granting, without admitting, that there was delivery to petitioner Bank, the delivery of checks in payment of an obligation does not constitute payment unless they are cashed or their value is impaired through the fault of the creditor. 6 None of these exceptions were alleged by respondent Sima Wei. Therefore, unless respondent Sima Wei proves that she has been relieved from liability on the promissory note by some other cause, petitioner Bank has a right of action against her for the balance due thereon. However, insofar as the other respondents are concerned, petitioner Bank has no privity with them. Since petitioner Bank never received the checks on which it based its action against said respondents, it never owned them (the checks) nor did it acquire any interest therein. Thus, anything which the respondents may have done with respect to said checks could not have prejudiced petitioner Bank. It had no right or interest in the checks which could have been violated by said respondents. Petitioner Bank has therefore no cause of action against said respondents, in the alternative or otherwise. If at all, it is Sima Wei, the drawer, who would have a cause of action against her co-respondents, if the allegations in the complaint are found to be true. With respect to the second assignment of error raised by petitioner Bank regarding the applicability of Section 13, Rule 3 of the Rules of Court, We find it unnecessary to discuss the same in view of Our finding that the petitioner Bank did not acquire any right or interest in the checks due to lack of delivery. It therefore has no cause of action against the respondents, in the alternative or otherwise. In the light of the foregoing, the judgment of the Court of Appeals dismissing the petitioner's complaint is AFFIRMED insofar as the second cause of action is concerned. On the first cause of action, the case is REMANDED to the trial court for a trial on the merits, consistent with this decision, in order to determine whether respondent Sima Wei is liable to the Development Bank of Rizal for any amount under the promissory note allegedly signed by her. SO ORDERED. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 74938-39 January 17, 1990 ANGELINA J. MALABANAN, petitioner, vs. GAW CHING and THE INTERMEDIATE APPELLATE COURT, respondents. G.R. No. L-75524-25 January 17, 1990 LEONIDA CHY SENOLOS, LEONARD CHAN and LEONSO CHY CHAN, petitioners, vs. INTERMEDIATE APPELLATE COURT and GAW CHING, respondents. Puruganan, Chato, Chato, Chato & Tan and Romero, Lagman, Torres, Arrieta & Evangelista for petitioners in 75524-25.

Quiason, Makalintal, Barot & Torres for petitioners in 74938-39. Limqueco & Macaraeg Law Office and Herminio T. Sugay for respondent Gaw Ching. RESOLUTION

FELICIANO, J.: The two (2) Petitions before us G.R. Nos. 74938-39 and 75524-25 assail the decision of the then Intermediate Appellate Court in A.C.-G.R. CV Nos. 05136-05137 dated 31 January 1986, which reversed the decision of the Regional Trial Court in two (2) consolidated cases, namely: Civil Case No. R-81-416 and Civil Case No. R-82-6789. Upon motion of petitioners, we ordered the consolidation of the two (2) Petitions. Respondent Gaw Ching instituted two (2) cases against petitioners Angelina Malabanan, Leonida Senolos, et al. in connection with the sale of piece of land located in Binondo, Manila. The first case, Civil Case No. R-81416, sought to annul such sale and to enjoin the demolition of a building standing on that piece of land, and also prayed for the award of damages. The second case, Civil Case No. G.R. 82-6798, demanded damages from petitioner Senolos for bringing about the demolition of the building. The following facts found by the trial court, and adopted and incorporated by the appellate court, are undisputed: Evidence for plaintiff showed that Gaw Ching has been leasing the house and lot located [in] 697-699 Asuncion Street, Binondo, Manila from Mr. Jabit since 1951. Plaintiff conducted his business (Victoria Blacksmith Shop) on the ground floor and lived on the second floor. When Mr. Jabit died, his daughter, defendant Malabanan continued to lease the premises to plaintiff but at an increased rental of P1,000.00 per month. Before the increase, Gaw Ching paid P700.00 per month, as evidenced by receipts of rentals. There was no written contract of lease between plaintiff and Mr. Jabit as to its duration but the rentals were evidently, paid monthly. On April 27, 1980, Angelina Malabanan told him that she was selling the house and lot for P5,000.00 per square meter. Plaintiff told her however, that the price is prohibitive. On May 13, 1980, defendant Malabanan wrote plaintiff, reiterating that she was selling the house and lot at P5,000.00 per square meter and that if he is not agreeable, she will sell it to another person. After receiving the letter, plaintiff turned over the letter to his counsel, Atty. Sugay. Gaw Ching claims that he is not in a position to buy the property at P5,000.00 per square meter because it was expensive. Subsequently, Gaw Ching tried to pay the rent for June, 1980, but Malabanan refused to accept it. Plaintiff's counsel advised him to deposit the rentals in a bank which he did, after which, his counsel wrote Malabanan informing her about the deposit (Exh. B). On October 2, 1980, plaintiff received another letter from defendant Malabanan which he gave to his counsel who told him that said defendant is offering the house and lot at P5,000.00 per square meter and that if he is not agreeable, she will sell the premises to another person at P4,000.00 per square meter. Plaintiff testified that he was willing to buy the subject property at P4,000.00 but hastened to add that it was still expensive and did not ask his counsel to write Malabanan about it. So, also, it was the opinion of his counsel that it was not necessary to reply because the context of the letter was invariably a threat. On November 3, 1980, plaintiff received another letter from Defendant Malabanan, informing him that the premises in question had already been sold to defendant Leonida Senolos. This time, Atty. Sugay sent a reply dated November 24, 1980, requesting that the pertinent documents of the sale be sent to them but according to plaintiff, they were not furnished a copy of said sale. Consequently, plaintiff received a letter from Atty. Techico dated December 5, 1980 demanding that he vacate the premises and to pay the arrearages in rentals from October to December, as they were more importantly, going to repair and convert the dwelling into a warehouse. Atty. Sugay sent a reply dated February 17, 1981 (Exh. C) requesting Atty. Techico to furnish them with the Deed of Sale and TCT because he doubted the veracity of the sale. It took a long time before Atty. Sugay's letter was answered

and he was never furnished a copy of the Deed of Sale and Transfer Certificate of Title. After exerting all efforts, plaintiff finally was able to procure a copy of the Deed of Sale and TCT No. 14789 (Exh- A) which reflected that the date of entry of the Deed of Sale was December 9, 1980, whereas the Deed of Sale was dated August 23, 1979 (Exh. I). Plaintiff then told Atty. Sugay to file a civil case against defendants. On October 7, 1981, Atty. Techico sent a reply to Atty. Sugay's letter of February 17, 1981 (Exh K). Plaintiff presented the receipt of rentals he paid (Exhs. L to L-6). He deposited the monthly rentals which Malabanan refused to accept, with the Pacific Banking Corporation (Exh. M). At a later period, plaintiff had to move out of the premises when it was demolished by the defendant. Gaw Ching however, admitted that he was not yet a Filipino Citizen at the time the offer to sell was made, i.e., on April 27, 1980, May 13, 1980 and October 2, 1980 and that he became a Filipino citizen only on October 7, 1980, when he was issued a certificate of naturalization (Exh. 1-Malabanan). He did not, however, inform Malabanan on the matter of his newly acquired citizenship. Likewise, Gaw Ching admitted that he did not make any counter-offer in writing so as to price the property. As to plaintiffs claim for damages, he testified, that this was motivated by the incident on November 16, 1981, while he was on the ground floor, when there was a sudden brownout, and around 50 people came thereat, climbed the roof with the use of a ladder, cut the electric wires and started banging the roof. Plaintiff, his wife, and mother-in-law were in the house and about 7 laborers were in the shop when the incident happened. Plaintiff then immediately called up Atty. Sugay and told him that Leonida Senolos called some people to demolish the house. Plaintiff further testified that ... he was not notified of the demolition. . . . On that same day, Atty. Sugay arrived at about 10:00 a.m. and told plaintiff that he was going to the City Hall. When Atty. Sugay came back, he was with Roldan (Building Inspector), who ordered that the demolition be stopped, but Leonida Senolos refused to heed the order. Atty. Sugay and Roldan went back to the City Hall. . . . At about 3:00 p.m., Atty. Sugay came back with another person from the City Hall who presented a letter to Leonida Senolos to which defendant affixed her signature. The formal letter was dated November 6, 1981 addressed to Leonida Senolos by Romulo del Rosario, City Engineer and Building Officer. Upon receipt of the letter, the policeman remained but the demolition continued. Plaintiff together with Atty. Sugay, and the City Hall official, went to the police precinct where the City Hall Official talked with somebody in the precinct. It was only when they returned to the premises at about 4:00 p.m. with a policeman that the demolition was stopped. . . . On cross examination, plaintiff admitted that he received a letter from the Office of the City Engineer dated July 29, 1981 (Exh. 1-Senolos) condemning the building. He also admitted that he was furnished a copy of the Demolition Order (Exh. 2-Senolos) to which he affixed his signature. After receiving Exhibits "I" and "2," Gaw Ching still refused to vacate the premises because he was told that the building was still in good condition and he continued paying the monthly rental. On redirect, plaintiff declared that after receiving the notice of the City Engineer, he filed a complaint with the Ministry of Public Works and Highways by reason of which, the MPWH issued an order that the demolition to be stopped. (Exh. 3). xxx xxx xxx Another witness presented by plaintiff was Felix Tienzo, Actg. Chief of Enforcement Division, (Ministry of Public Works and Highways). . . Mr. Felix Tienzo believes that the City of Manila was correct in ordering the demolition of the building but he intended to hold in abeyance the demolition of the building only in obedience to the order of the MPWH. However, both Mr. Tienzo and Mr. Roldan claim that they do not usually receive an order from the MPWH stopping the demolitions.

xxx xxx xxx 1 On 10 August 1984, the trial court rendered a decision which upheld the validity of the contract of sale between petitioner Malabanan and petitioner Senolos. The trial court declared that petitioner Malabanan had not violated Sections 4 and 6 of Presidential Decree No. 1517 in relation to Presidential Proclamation No. 1893 and Letter of Instruction (LOI) No. 935 which provide for a preemptive right on the part of a lessee over leased property. The trial court stressed that respondent Gaw Ching had been given ample opportunity to exercise any right of first refusal he might have had, but he had chosen not to do so. Respondent Gaw Ching went on appeal to the then Intermediate Appellate Court. By a vote of three (3) to two (2), the appellate court voted to reverse the decision of the trial court and hence to nullify the contract of sale between petitioners Malabanan and Senolos inter se. 2 The majority also held that the transaction between petitioners was vitiated by fraud, deceit and bad faith allegedly causing damage to respondent Gaw Ching. Petitioners were held liable jointly and severally to respondent for moral, exemplary and actual damages in the amount of P350,000.00 and for attorney's fees in the amount of P20,000.00 for the indulgence in inequitous conduct to plaintiff-appellant's (respondent Gaw Ching) prejudice and for the unwarranted demolition of the building by defendants-appellees (petitioners herein) after the issuance of the cease-and-desist order on October 30, 1981. While holding that the land in question was located outside the Urban Land Reform Zone declared by Proclamations Nos. 1767 and 1967, the majority ruled that circumstances surrounding the sale of the land to petitioner Senolos had rendered that sale null and void. The majority were here referring to the finding that when petitioner Malabanan offered in October 1980 to sell the land involved to respondent Gaw Ching at P5,000.00 per square meter, that land had already been sold to petitioner Senolos as early as August 1979 for only P1,176.48 per square meter. On the matter of the demolition of the building, the majority held that the same was unwarranted and that even if petitioner Senolos had a demolition order, that order of demolition was valid only if there are no more tenants residing in the building. If there are tenants and they refused to vacate, the order of demolition is unavailing. It could not rise higher than the Civil Code and the Rules of Court. 3 In the instant Petitions for Certiorari, petitioners assail both the annulment of the deed of sale and the grant of P350,000.00 worth of "moral, exemplary and actual damages" to respondent Gaw Ching. We believe that the Petitions must be granted. I The firmly settled rule is that strangers to a contract cannot sue either or both of the contracting parties to annul and set aside that contract. Article 1397 of the Civil Code embodies that rule in the following formulation: Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract. (Emphasis supplied) Article 1397 itself follows from Article 1311 of the Civil Code which establishes the fundamental rule that: Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature,

or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. xxx xxx xxx (Emphasis supplied) As long ago as 1912, this Court in Ibanez v. Hongkong and Shanghai Bank, 4 pointed out that it is the existence of an interest in a particular contract that is the basis of one's right to sue for nullification of that contract and that essential interest in a given contract is, in general, possessed only by one who is a party to the contract. In Ibanez, Mr. Justice Torres wrote: From these legal provisions it is deduced that it is the interest had in a given contract, that is the determining reason of the right which lies in favor of the party obligated principally or subsidiarily to enable him to bring an action for the nullity of the contract in which he intervened, and, therefore, he who has no right in a contract is not entitled to prosecute an action for nullity, for, according to the precedents established by the courts, the person who is not a party to a contract nor has any cause of action or representation from those who intervened therein, is manifestly without right of action and personality such as to enable him to assail the validity of the contract. (Decisions of the Supreme Court of Spain, of April 18, 1901, and November 23, 1903, pronounced in cases requiring an application of the preinserted article 1302 of the Civil Code. 5 Mr. Justice Torres went on to indicate a possible qualification to the above general principle, that is, a situation where a non-party to a contract could be allowed to bring an action for declaring that contract null: He who is not the party obligated principally or subsidiarily in a contract may perhaps be entitled to exercise an action for nullity, if he is prejudiced in his rights with respect to one of the contracting parties; but, in order that such be the case, it is indispensable to show the detriment which positively would result to him from the contract in which he had no intervention xxx xxx xxx (Emphasis supplied) There is an important and clear, albeit implicit, limitation upon the right of a person who is in fact injured by the very operation of a contract between two (2) third parties to sue to nullify that contract: that contract may be nullified only to the extent that such nullification is absolutely necessary to protect the plaintiff's lawful rights. It may be expected that in most instances, an injunction restraining the carrying out of acts in fact injurious to the plaintiff's rights would be sufficient and that there should be no need to set aside the contract itself which is a res inter alios acta and which may have any number of other provisions, implementation of which might have no impact at all upon the plaintiff's rights and interests. What is important for present purposes is that respondent Gaw Ching, admittedly a stranger to the contract of sale of a piece of land between petitioners Malabanan and Senolos inter se, does not fall within the possible exception recognized in Ibanez v. Hongkong & Shanghai Bank. In the first place, Gaw Ching had no legal right of preemption in respect of the house and lot here involved. The majority opinion of the appellate court itself explicitly found that the subject piece of land is locatedoutside the Urban Land Reform Zones declared pursuant to P.D. No. 1517. 7 Even assuming for purposes of argument merely, that the land here involved was in fact embraced in a declared Urban Land Reform Zone (which it was not), Gaw Ching would still not have been entitled to a right of preemption in respect of the land sold. In Santos v. Court of Appeals, 8 this Court held that the preemptive or redemptive rights of a lessee under P.D. No. 1517 exists only in respect of the urban land under lease on which the tenant or lessee had built his home and in which he had resided for ten

(10) years or more and that, in consequence, where both land and building belong to the lessor, that preemptive or redemptive right was simply not available under the law. Finally, we are unable to understand the respondent appellate court's view that respondent Gaw Ching having been a long-time tenant of the property in question, had acquired a preferred right to purchase that property. This holding is simply bereft of any legal basis. We know of no law, outside the Urban Land Reform Zone or P.D. No. 1517, that grants such a right to a lessee no matter how long the period of the lease has been. If such right existed at all, it could only have been created by contract; 9respondent Gaw Ching does not, however, pretend that there had been such a contractual stipulation between him and petitioners. In the second place, assuming once again, for present purposes only, that respondent Gaw Ching did have a preemptive right to purchase the land from petitioner Malabanan (which he did not), it must be stressed that petitioner Malabanan did thrice offer the land to Gaw Ching but the latter had consistently refused to buy. Since Gaw Ching did not in fact accept the offer to sell and did not buy the land, he suffered no prejudice, and could not have suffered any prejudice, by the sale of the same piece of land to petitioner Senolos. No fraud was thus worked upon him notwithstanding his insinuation that the sale of the land to petitioner Senolos had preceded the offer of the same piece of land to himself. In the third place, and contrary to the holding of the majority appellate court opinion, the fact that Gaw Ching had been lessee of the house and lot was simply not enough basis for a right to bring an action to set aside the contract of sale between the petitioners inter se. A lessee, it is elementary, cannot attack the title of his lessor over the subject matter of the lease. 10 Moreover, the lease contract between petitioner Malabanan and respondent Gaw Ching must in any case be held to have lapsed when the leased house was condemned and the order of demolition issued. II We consider next petitioners' claim that the appellate court erred grievously in imposing upon them an award of P350,000.00 for "moral, exemplary and actual damages" not only because petitioners had "indulged in inequitous conduct to [respondent Gaw Ching's] prejudice" but also "for the unwarranted demolition of the building by [petitioners] after the issuance of the cease and desist order on October 30, 1981." Here again, we are compelled to hold that the appellate court lapsed into reversible error. The relevant conclusions of fact which the trial court arrived at are set out in its decision in the following manner: On the legality of the demolition necessarily raising the question: (3) whether or not plaintiff was notified within a reasonable period of time of the demolition, and a fortioriwhether this admittedly exercise of police power, the validity of which was already being determined by the Court could be stopped by a pretenatural [sic] administrative order from the office of the Assistant Secretary for Operation of the MPWH brought about by an appeal by a person other than the owner of the building, which office had not done anything to immediately forestall the imminent injury to person and damage to property. (Please seeP.D. 1096, Rule XII, Sec. 5 thereof). In the first place, the claim of the plaintiff that the demolition of the house rented by him came as a surprise, is fiercely contradicted by his own evidence. A copy of the demolition order is attached to the complaint as Annex "L", now marked as Exhibit "9" for the defendant Senolos, unmistakably show that plaintiff received a copy of the order of demolition from the City Engineer's Office, approved by the Mayor, on October 5, 1981. Verily, the present action before the Court is procedurally and substantially correct in abating a nuisance. This exercise of police power is not only being cordoned sanitaired [sic] by the doctrinal pronouncements, the provisions of Art. 482 in relation to Art. 436 of the Civil Code, Sections 275 and 276 of the compilation of ordinances of the City of Manila but also by Rule VII, par. 5 of the implementing Rules and Regulations of the National Building Code of the Philippines (P.D. 1096). Indeed, the latter law does not authorize any person other than the

owner, to appeal the order of the City Engineer to the Ministry of Public Works and Highways. This is the position espoused by the City Legal Officer of Manila in defense of the City Engineer and the Mayor, in opposition to the move of the plaintiff to dismiss the order of demolition as improvidently issued. The demolition was invariably a valid exercise of police power which may be ordered done by the authorities or caused to be done at the expense of the owner. The exigency is made more demanding especially, the demolition, when it was ordered stopped thru an order inadvertently issued, as it was not as a consequence of an appeal by the owner of the building, but by the lessee, was during its last stages. It therefore stands to reason that the order of demolition which is unquestionably legal could not be stopped by an inoperative administrative order, assuming that the appeal to the MPWH could validly be filed by the lessee, as it was filed only during the finishing touches of a demolition. Decidedly, the move exude physiological features of delay. This is compounded by the failure of the MPWH to act assertively, which in a sense, could be interpreted as an admission that the issuance of the order was inopportune. On the claim for damages predicated on (4) whether or not there was an indscriminate careless handling and pilferage of the properties of the plaintiff, causing their loss or destruction: It is readily explained that between October 5, 1981 to November 6,1981, plaintiff could have avoided the misplaced fear, but assuming without having necessarily to concede that he was not able to guard against an actual demolition on November 6, 1981, rendering him so helpless, and prompting him to just sit on the sidewalk and watch the demolition team wreck the building indiscriminately, thereby causing destruction and loss of his personal properties, such as: (a) office equipment; (b) assorted tools; (c) machines; (d) finished products; and (e) steel box containing jewelries. The claim is almost too good to be true, considering first, that these items were so huge that they could not be spirited away without being noticed and, secondly; it has been established that there was a policeman detailed to the demolition scene from the start of the said demolition, to whom he could have easily reported the matter, caused the apprehension of the culprits, and prevent the loss of his personal properties, thirdly, he could have grabbed the steel box containing jewelries if this were the last thing he would have done. Waiting idly by the sidewalk and watching your properties pilfered by persons whom you could have successfully identified at the time and referring the matter to the policeman on duty, which plaintiff did not do, is certainly against the natural order of things and the legal presumption that a person takes great care of his concern. Plaintiff strongly relies on the alleged illegal and indiscriminate destruction of his properties as basis for his claim for damages. Truth to tell, there was no suddenness or indiscriminate destruction of plaintiffs property nor pilferage thereof, as alleged, in the demolition of the house owned by the defendant. The order was lawful as it was an abatement of a nuisance and the dismantling of the house owned by defendant Senolos could only be conceived as having been carried out in a manner consistent only with utmost care. Conversely, its indiscriminate destruction is contrary to the interest of the defendant Senolos as it is a truism that every bit of useful material should be preserved either for use of, or for profit of the owner. It would be sheer folly to assume that the demolition team would have taken a selective method of care for the still serviceable materials of the house and a destructive stance for the properties of the occupants. Understandably, the unorthodox position taken by plaintiff would not only lose his residence but also his place of business. By and large, the basis for the claim for damages do not physically nor imaginatively exist, for it has defied reason and common sense. 11 We note that the majority opinion chose to disregard the above conclusions of fact of the trial court and instead quoted extensively from respondent Gaw Ching's brief and, presumably relied upon such brief The majority opinion, however, failed to indicate why it preferred Gaw Ching's version of the facts set out in his brief over the trial court's findings. No indication was offered where the trial court had fallen

into error or what evidence had been misapprehended by it. In this situation, the Court considers that it must go back to the trial court's findings of fact in line with the time-honored rule that such findings are entitled to great respect from appellate courts since the trial court judge had the opportunity to examine the evidence directly and to listen to the witnesses and observe their demeanor while testifying. It appears therefore that firstly, the order of condemnation or demolition had been issued by the proper authorities which order was valid and subsisting at the time the demolition was actually carried out. Secondly, under Section 5.3 of Rule VII entitled "Abandonment/Demolition of Buildings" of the Rules and Regulations Implementing the National Building Code of the Philippines (P.D. No. 1096, as amended dated 19 February 1977), an order for demolition may be appealed, by the owner of the building or installation to be demolished, to the Secretary of Public Works and Highways. In the case at bar, it was respondent Gaw Ching, a lessee merely of the building condemned that sought to block the implementation of the demolition order. It does not even appear from the record whether or not Gaw Ching actually filed a formal appeal to the Secretary, even though he was not entitled to do so. What does appear from the record 12 is that Gaw Ching's counsel, Atty. Sugay, was able to obtain a letter dated 6 November 1981 from the Office of the City Engineer and Building Official, enclosing a xerox copy of a letter from the Assistant Secretary for Operations, Ministry of Public Works and Highways, "directing this office to hold the demolition in abeyance." This letter, which did not purport to set aside the order of demolition, was served upon the demolition team on site while the demolition was in progress. After some hesitation, the demolition was in fact stopped. 13 It is worth noting that officials from the Office of the City Engineer, City of Manila, testified that it was not "normal practice to receive an order from the Ministry of Public Works and Highways stopping demolitions." In the fourth place, respondent Gaw Ching, in the action that he had filed before the Regional Trial Court of Manila to set aside the contract of sale between petitioners Malabanan and Senolos, had sought preliminary injunction precisely to restrain the implementation of the order for demolition. That application for preliminary injunction was denied by the trial court and the order for demolition was implemented only after such denial. Thus, there was no subsisting court order restraining the demolition at the time such demolition was carried out. In the fifth place, Gaw Ching had ample notice of the demolition order and had adequate time to remove his belongings from the premises if he was minded to obey the order for demolition. He chose not to obey that order. If he did suffer any lossesthe trial court did not believe his claims that he didhe had only himself to blame. ACCORDINGLY, The Court Resolved to GRANT the Petition and to REVERSE and SET ASIDE the Decision of the then Intermediate Appellate Court dated 31 January 1986 and its Resolution dated 5 June 1986, in ACG.R. CV Nos. 05136-05137. The Decision of the trial court dated 10 August 1984 in consolidated Civil Cases Nos. R-81-416 and R-82-6798, is hereby REINSTATED. No pronouncement as to costs. Fernan C.J., Gutierrez, Jr. and Corts, JJ., concur. Bidin J., took no part. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 75919 May 7, 1987 MANCHESTER DEVELOPMENT CORPORATION, ET AL., petitioners, vs. COURT OF APPEALS, CITY LAND DEVELOPMENT CORPORATION, STEPHEN ROXAS, ANDREW LUISON, GRACE LUISON and JOSE DE MAISIP, respondents.

Tanjuatco, Oreta and Tanjuatco for petitioners. Pecabar Law Offices for private respondents. RESOLUTION

GANCAYCO, J.: Acting on the motion for reconsideration of the resolution of the Second Division of January 28,1987 and another motion to refer the case to and to be heard in oral argument by the Court En Banc filed by petitioners, the motion to refer the case to the Court en banc is granted but the motion to set the case for oral argument is denied. Petitioners in support of their contention that the filing fee must be assessed on the basis of the amended complaint cite the case of Magaspi vs. Ramolete. 1 They contend that the Court of Appeals erred in that the filing fee should be levied by considering the amount of damages sought in the original complaint. The environmental facts of said case differ from the present in that 1. The Magaspi case was an action for recovery of ownership and possession of a parcel of land with damages. 2While the present case is an action for torts and damages and specific performance with prayer for temporary restraining order, etc. 3 2. In the Magaspi case, the prayer in the complaint seeks not only the annulment of title of the defendant to the property, the declaration of ownership and delivery of possession thereof to plaintiffs but also asks for the payment of actual moral, exemplary damages and attorney's fees arising therefrom in the amounts specified therein. 4 However, in the present case, the prayer is for the issuance of a writ of preliminary prohibitory injunction during the pendency of the action against the defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the property in question, to attach such property of defendants that maybe sufficient to satisfy any judgment that maybe rendered, and after hearing, to order defendants to execute a contract of purchase and sale of the subject property and annul defendants' illegal forfeiture of the money of plaintiff, ordering defendants jointly and severally to pay plaintiff actual, compensatory and exemplary damages as well as 25% of said amounts as maybe proved during the trial as attorney's fees and declaring the tender of payment of the purchase price of plaintiff valid and producing the effect of payment and to make the injunction permanent. The amount of damages sought is not specified in the prayer although the body of the complaint alleges the total amount of over P78 Million as damages suffered by plaintiff. 5 3. Upon the filing of the complaint there was an honest difference of opinion as to the nature of the action in the Magaspi case. The complaint was considered as primarily an action for recovery of ownership and possession of a parcel of land. The damages stated were treated as merely to the main cause of action. Thus, the docket fee of only P60.00 and P10.00 for the sheriff's fee were paid. 6 In the present case there can be no such honest difference of opinion. As maybe gleaned from the allegations of the complaint as well as the designation thereof, it is both an action for damages and specific performance. The docket fee paid upon filing of complaint in the amount only of P410.00 by considering the action to be merely one for specific performance where the amount involved is not capable of pecuniary estimation is obviously erroneous. Although the total amount of damages sought is not stated in the prayer of the complaint yet it is spelled out in the body of the complaint totalling in the amount of P78,750,000.00 which should be the basis of assessment of the filing fee. 4. When this under-re assessment of the filing fee in this case was brought to the attention of this Court together with similar other cases an investigation was immediately ordered by the Court. Meanwhile plaintiff through another counsel with leave of court filed an amended complaint on September 12, 1985 for the

inclusion of Philips Wire and Cable Corporation as co-plaintiff and by emanating any mention of the amount of damages in the body of the complaint. The prayer in the original complaint was maintained. After this Court issued an order on October 15, 1985 ordering the re- assessment of the docket fee in the present case and other cases that were investigated, on November 12, 1985 the trial court directed plaintiffs to rectify the amended complaint by stating the amounts which they are asking for. It was only then that plaintiffs specified the amount of damages in the body of the complaint in the reduced amount of P10,000,000.00. 7 Still no amount of damages were specified in the prayer. Said amended complaint was admitted. On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to pay the amount of P3,104.00 as filing fee covering the damages alleged in the original complaint as it did not consider the damages to be merely an or incidental to the action for recovery of ownership and possession of real property. 8 An amended complaint was filed by plaintiff with leave of court to include the government of the Republic as defendant and reducing the amount of damages, and attorney's fees prayed for to P100,000.00. Said amended complaint was also admitted. 9 In the Magaspi case, the action was considered not only one for recovery of ownership but also for damages, so that the filing fee for the damages should be the basis of assessment. Although the payment of the docketing fee of P60.00 was found to be insufficient, nevertheless, it was held that since the payment was the result of an "honest difference of opinion as to the correct amount to be paid as docket fee" the court "had acquired jurisdiction over the case and the proceedings thereafter had were proper and regular." 10 Hence, as the amended complaint superseded the original complaint, the allegations of damages in the amended complaint should be the basis of the computation of the filing fee. 11 In the present case no such honest difference of opinion was possible as the allegations of the complaint, the designation and the prayer show clearly that it is an action for damages and specific performance. The docketing fee should be assessed by considering the amount of damages as alleged in the original complaint. As reiterated in the Magaspi case the rule is well-settled "that a case is deemed filed only upon payment of the docket fee regardless of the actual date of filing in court . 12 Thus, in the present case the trial court did not acquire jurisdiction over the case by the payment of only P410.00 as docket fee. Neither can the amendment of the complaint thereby vest jurisdiction upon the Court. 13 For an legal purposes there is no such original complaint that was duly filed which could be amended. Consequently, the order admitting the amended complaint and all subsequent proceedings and actions taken by the trial court are null and void. The Court of Appeals therefore, aptly ruled in the present case that the basis of assessment of the docket fee should be the amount of damages sought in the original complaint and not in the amended complaint. The Court cannot close this case without making the observation that it frowns at the practice of counsel who filed the original complaint in this case of omitting any specification of the amount of damages in the prayer although the amount of over P78 million is alleged in the body of the complaint. This is clearly intended for no other purpose than to evade the payment of the correct filing fees if not to mislead the docket clerk in the assessment of the filing fee. This fraudulent practice was compounded when, even as this Court had taken cognizance of the anomaly and ordered an investigation, petitioner through another counsel filed an amended complaint, deleting all mention of the amount of damages being asked for in the body of the complaint. It was only when in obedience to the order of this Court of October 18, 1985, the trial court directed that the amount of damages be specified in the amended complaint, that petitioners' counsel wrote the damages sought in the much reduced amount of P10,000,000.00 in the body of the complaint but not in the prayer thereof. The design to avoid payment of the required docket fee is obvious. The Court serves warning that it will take drastic action upon a repetition of this unethical practice. To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar pleadings should specify the amount of damages being prayed for not only in the body of the pleading but also in the prayer, and said damages shall be considered in the assessment of the filing fees in any case. Any pleading that fails to comply with this requirement shall not bib accepted nor admitted, or shall otherwise be expunged from the record.

The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much less the payment of the docket fee based on the amounts sought in the amended pleading. The ruling in the Magaspi case 14 in so far as it is inconsistent with this pronouncement is overturned and reversed. WHEREFORE, the motion for reconsideration is denied for lack of merit. SO ORDERED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. Nos. 79937-38 February 13, 1989 SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS and D.J. WARBY, petitioners, vs. HON. MAXIMIANO C. ASUNCION, Presiding Judge, Branch 104, Regional Trial Court, Quezon City and MANUEL CHUA UY PO TIONG, respondents. Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Offices for petitioners. Tanjuatco, Oreta, Tanjuatco, Berenguer & Sanvicente Law Offices for private respondent.

GANCAYCO, J.: Again the Court is asked to resolve the issue of whether or not a court acquires jurisdiction over a case when the correct and proper docket fee has not been paid. On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a complaint with the Regional Trial Court of Makati, Metro Manila for the consignation of a premium refund on a fire insurance policy with a prayer for the judicial declaration of its nullity against private respondent Manuel Uy Po Tiong. Private respondent as declared in default for failure to file the required answer within the reglementary period. On the other hand, on March 28, 1984, private respondent filed a complaint in the Regional Trial Court of Quezon City for the refund of premiums and the issuance of a writ of preliminary attachment which was docketed as Civil Case No. Q-41177, initially against petitioner SIOL, and thereafter including E.B. Philipps and D.J. Warby as additional defendants. The complaint sought, among others, the payment of actual, compensatory, moral, exemplary and liquidated damages, attorney's fees, expenses of litigation and costs of the suit. Although the prayer in the complaint did not quantify the amount of damages sought said amount may be inferred from the body of the complaint to be about Fifty Million Pesos (P50,000,000.00). Only the amount of P210.00 was paid by private respondent as docket fee which prompted petitioners' counsel to raise his objection. Said objection was disregarded by respondent Judge Jose P. Castro who was then presiding over said case. Upon the order of this Court, the records of said case together with twenty-two other cases assigned to different branches of the Regional Trial Court of Quezon City which were under investigation for under-assessment of docket fees were transmitted to this Court. The Court thereafter returned the said records to the trial court with the directive that they be re-raffled to the other judges in Quezon City, to the exclusion of Judge Castro. Civil Case No. Q-41177 was re-raffled to Branch 104, a sala which was then vacant. On October 15, 1985, the Court en banc issued a Resolution in Administrative Case No. 85-10-8752-RTC directing the judges in said cases to reassess the docket fees and that in case of deficiency, to order its

payment. The Resolution also requires all clerks of court to issue certificates of re-assessment of docket fees. All litigants were likewise required to specify in their pleadings the amount sought to be recovered in their complaints. On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q-41177 was temporarily assigned, issuedan order to the Clerk of Court instructing him to issue a certificate of assessment of the docket fee paid by private respondent and, in case of deficiency, to include the same in said certificate. On January 7, 1984, to forestall a default, a cautionary answer was filed by petitioners. On August 30,1984, an amended complaint was filed by private respondent including the two additional defendants aforestated. Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter assigned, after his assumption into office on January 16, 1986, issued a Supplemental Order requiring the parties in the case to comment on the Clerk of Court's letter-report signifying her difficulty in complying with the Resolution of this Court of October 15, 1985 since the pleadings filed by private respondent did not indicate the exact amount sought to be recovered. On January 23, 1986, private respondent filed a "Compliance" and a "Re-Amended Complaint" stating therein a claim of "not less than Pl0,000,000. 00 as actual compensatory damages" in the prayer. In the body of the said second amended complaint however, private respondent alleges actual and compensatory damages and attorney's fees in the total amount of about P44,601,623.70. On January 24, 1986, Judge Asuncion issued another Order admitting the second amended complaint and stating therein that the same constituted proper compliance with the Resolution of this Court and that a copy thereof should be furnished the Clerk of Court for the reassessment of the docket fees. The reassessment by the Clerk of Court based on private respondent's claim of "not less than P10,000,000.00 as actual and compensatory damages" amounted to P39,786.00 as docket fee. This was subsequently paid by private respondent. Petitioners then filed a petition for certiorari with the Court of Appeals questioning the said order of Judie Asuncion dated January 24, 1986. On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of P20,000,000.00 as d.qmages so the total claim amounts to about P64,601,623.70. On October 16, 1986, or some seven months after filing the supplemental complaint, the private respondent paid the additional docket fee of P80,396.00. 1 On August 13, 1987, the Court of Appeals rendered a decision ruling, among others, as follows: WHEREFORE, judgment is hereby rendered: 1. Denying due course to the petition in CA-G.R. SP No. 1, 09715 insofar as it seeks annulment of the order (a) denying petitioners' motion to dismiss the complaint, as amended, and (b) granting the writ of preliminary attachment, but giving due course to the portion thereof questioning the reassessment of the docketing fee, and requiring the Honorable respondent Court to reassess the docketing fee to be paid by private respondent on the basis of the amount of P25,401,707.00. 2 Hence, the instant petition. During the pendency of this petition and in conformity with the said judgment of respondent court, private respondent paid the additional docket fee of P62,432.90 on April 28, 1988. 3

The main thrust of the petition is that the Court of Appeals erred in not finding that the lower court did not acquire jurisdiction over Civil Case No. Q-41177 on the ground of nonpayment of the correct and proper docket fee. Petitioners allege that while it may be true that private respondent had paid the amount of P182,824.90 as docket fee as herein-above related, and considering that the total amount sought to be recovered in the amended and supplemental complaint is P64,601,623.70 the docket fee that should be paid by private respondent is P257,810.49, more or less. Not having paid the same, petitioners contend that the complaint should be dismissed and all incidents arising therefrom should be annulled. In support of their theory, petitioners cite the latest ruling of the Court in Manchester Development Corporation vs. CA, 4 as follows: The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much less the payment of the docket fee based on the amounts sought in the amended pleading. The ruling in the Magaspi Case in so far as it is inconsistent with this pronouncement is overturned and reversed. On the other hand, private respondent claims that the ruling in Manchester cannot apply retroactively to Civil Case No. Q41177 for at the time said civil case was filed in court there was no such Manchester ruling as yet. Further, private respondent avers that what is applicable is the ruling of this Court in Magaspi v. Ramolete, 5 wherein this Court held that the trial court acquired jurisdiction over the case even if the docket fee paid was insufficient. The contention that Manchester cannot apply retroactively to this case is untenable. Statutes regulating the procedure of the courts will be construed as applicable to actions pending and undetermined at the time of their passage. Procedural laws are retrospective in that sense and to that extent. 6 In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full amount of the docket fee is an indispensable step for the perfection of an appeal. In a forcible entry and detainer case before the justice of the peace court of Manaoag, Pangasinan, after notice of a judgment dismissing the case, the plaintiff filed a notice of appeal with said court but he deposited only P8.00 for the docket fee, instead of P16.00 as required, within the reglementary period of appeal of five (5) days after receiving notice of judgment. Plaintiff deposited the additional P8.00 to complete the amount of the docket fee only fourteen (14) days later. On the basis of these facts, this court held that the Court of First Instance did notacquire jurisdiction to hear and determine the appeal as the appeal was not thereby perfected. In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to become a Filipino citizen by sending it through registered mail to the Office of the Solicitor General in 1953 but the required filing fee was paid only in 1956, barely 5V2 months prior to the filing of the petition for citizenship. This Court ruled that the declaration was not filed in accordance with the legal requirement that such declaration should be filed at least one year before the filing of the petition for citizenship. Citing Lazaro, this Court concluded that the filing of petitioner's declaration of intention on October 23, 1953 produced no legal effect until the required filing fee was paid on May 23, 1956. In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were applied. It was an original petition for quo warranto contesting the right to office of proclaimed candidates which was mailed, addressed to the clerk of the Court of First Instance, within the one-week period after the proclamation as provided therefor by law. 10However, the required docket fees were paid only after the expiration of said period. Consequently, this Court held that the date of such payment must be deemed to be the real date of filing of aforesaid petition and not the date when it was mailed. Again, in Garica vs, Vasquez, 11 this Court reiterated the rule that the docket fee must be paid before a court will act on a petition or complaint. However, we also held that said rule is not applicable when petitioner seeks the probate of several wills of the same decedent as he is not required to file a separate action for each will but instead he may have other wills probated in the same special proceeding then pending before the same court. Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case is deemed filed only upon payment of the docket fee regardless of the actual date of its filing in court. Said case involved a complaint for

recovery of ownership and possession of a parcel of land with damages filed in the Court of First Instance of Cebu. Upon the payment of P60.00 for the docket fee and P10.00 for the sheriffs fee, the complaint was docketed as Civil Case No. R-11882. The prayer of the complaint sought that the Transfer Certificate of Title issued in the name of the defendant be declared as null and void. It was also prayed that plaintiff be declared as owner thereof to whom the proper title should be issued, and that defendant be made to pay monthly rentals of P3,500.00 from June 2, 1948 up to the time the property is delivered to plaintiff, P500,000.00 as moral damages, attorney's fees in the amount of P250,000.00, the costs of the action and exemplary damages in the amount of P500,000.00. The defendant then filed a motion to compel the plaintiff to pay the correct amount of the docket fee to which an opposition was filed by the plaintiff alleging that the action was for the recovery of a parcel of land so the docket fee must be based on its assessed value and that the amount of P60.00 was the correct docketing fee. The trial court ordered the plaintiff to pay P3,104.00 as filing fee. The plaintiff then filed a motion to admit the amended complaint to include the Republic as the defendant. In the prayer of the amended complaint the exemplary damages earlier sought was eliminated. The amended prayer merely sought moral damages as the court may determine, attorney's fees of P100,000.00 and the costs of the action. The defendant filed an opposition to the amended complaint. The opposition notwithstanding, the amended complaint was admitted by the trial court. The trial court reiterated its order for the payment of the additional docket fee which plaintiff assailed and then challenged before this Court. Plaintiff alleged that he paid the total docket fee in the amount of P60.00 and that if he has to pay the additional fee it must be based on the amended complaint. The question posed, therefore, was whether or not the plaintiff may be considered to have filed the case even if the docketing fee paid was not sufficient. In Magaspi, We reiterated the rule that the case was deemed filed only upon the payment of the correct amount for the docket fee regardless of the actual date of the filing of the complaint; that there was an honest difference of opinion as to the correct amount to be paid as docket fee in that as the action appears to be one for the recovery of property the docket fee of P60.00 was correct; and that as the action is also one, for damages, We upheld the assessment of the additional docket fee based on the damages alleged in the amended complaint as against the assessment of the trial court which was based on the damages alleged in the original complaint. However, as aforecited, this Court overturned Magaspi in Manchester. Manchester involves an action for torts and damages and specific performance with a prayer for the issuance of a temporary restraining order, etc. The prayer in said case is for the issuance of a writ of preliminary prohibitory injunction during the pendency of the action against the defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the property in question, the attachment of such property of defendants that may be sufficient to satisfy any judgment that may be rendered, and, after hearing, the issuance of an order requiring defendants to execute a contract of purchase and sale of the subject property and annul defendants' illegal forfeiture of the money of plaintiff. It was also prayed that the defendants be made to pay the plaintiff jointly and severally, actual, compensatory and exemplary damages as well as 25% of said amounts as may be proved during the trial for attorney's fees. The plaintiff also asked the trial court to declare the tender of payment of the purchase price of plaintiff valid and sufficient for purposes of payment, and to make the injunction permanent. The amount of damages sought is not specified in the prayer although the body of the complaint alleges the total amount of over P78 Millon allegedly suffered by plaintiff. Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for the docket fee based on the nature of the action for specific performance where the amount involved is not capable of pecuniary estimation. However, it was obvious from the allegations of the complaint as well as its designation that the action was one for damages and specific performance. Thus, this court held the plaintiff must be assessed the correct docket fee computed against the amount of damages of about P78 Million, although the same was not spelled out in the prayer of the complaint. Meanwhile, plaintiff through another counsel, with leave of court, filed an amended complaint on September 12, 1985 by the inclusion of another co-plaintiff and eliminating any mention of the amount of damages in the body of the complaint. The prayer in the original complaint was maintained.

On October 15, 1985, this Court ordered the re-assessment of the docket fee in the said case and other cases that were investigated. On November 12, 1985, the trial court directed the plaintiff to rectify the amended complaint by stating the amounts which they were asking for. This plaintiff did as instructed. In the body of the complaint the amount of damages alleged was reduced to P10,000,000.00 but still no amount of damages was specified in the prayer. Said amended complaint was admitted. Applying the principle in Magaspi that "the case is deemed filed only upon payment of the docket fee regardless of the actual date of filing in court," this Court held that the trial court did not acquire jurisdiction over the case by payment of only P410.00 for the docket fee. Neither can the amendment of the complaint thereby vest jurisdiction upon the Court. For all legal purposes there was no such original complaint duly filed which could be amended. Consequently, the order admitting the amended complaint and all subsequent proceedings and actions taken by the trial court were declared null and void. 13 The present case, as above discussed, is among the several cases of under-assessment of docket fee which were investigated by this Court together with Manchester. The facts and circumstances of this case are similar toManchester. In the body of the original complaint, the total amount of damages sought amounted to about P50 Million. In the prayer, the amount of damages asked for was not stated. The action was for the refund of the premium and the issuance of the writ of preliminary attachment with damages. The amount of only P210.00 was paid for the docket fee. On January 23, 1986, private respondent filed an amended complaint wherein in the prayer it is asked that he be awarded no less than P10,000,000.00 as actual and exemplary damages but in the body of the complaint the amount of his pecuniary claim is approximately P44,601,623.70. Said amended complaint was admitted and the private respondent was reassessed the additional docket fee of P39,786.00 based on his prayer of not less than P10,000,000.00 in damages, which he paid. On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of P20,000,000.00 in damages so that his total claim is approximately P64,601,620.70. On October 16, 1986, private respondent paid an additional docket fee of P80,396.00. After the promulgation of the decision of the respondent court on August 31, 1987 wherein private respondent was ordered to be reassessed for additional docket fee, and during the pendency of this petition, and after the promulgation of Manchester, on April 28, 1988, private respondent paid an additional docket fee of P62,132.92. Although private respondent appears to have paid a total amount of P182,824.90 for the docket fee considering the total amount of his claim in the amended and supplemental complaint amounting to about P64,601,620.70, petitioner insists that private respondent must pay a docket fee of P257,810.49. The principle in Manchester could very well be applied in the present case. The pattern and the intent to defraud the government of the docket fee due it is obvious not only in the filing of the original complaint but also in the filing of the second amended complaint. However, in Manchester, petitioner did not pay any additional docket fee until] the case was decided by this Court on May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this Court held that the court a quo did not acquire jurisdiction over the case and that the amended complaint could not have been admitted inasmuch as the original complaint was null and void. In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester, private respondent demonstrated his willingness to abide by the rules by paying the additional docket fees as required. The promulgation of the decision in Manchester must have had that sobering influence on private respondent who thus paid the additional docket fee as ordered by the respondent court. It triggered his change of stance by manifesting his willingness to pay such additional docket fee as may be ordered. Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the total amount of the claim. This is a matter which the clerk of court of the lower court and/or his duly authorized docket clerk or clerk in-charge should determine and, thereafter, if any amount is found due, he must require the private respondent to pay the same. Thus, the Court rules as follows:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. 2. The same rule applies to permissive counterclaims, third party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period. 3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee. WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of the court a quo is hereby instructed to reassess and determine the additional filing fee that should be paid by private respondent considering the total amount of the claim sought in the original complaint and the supplemental complaint as may be gleaned from the allegations and the prayer thereof and to require private respondent to pay the deficiency, if any, without pronouncement as to costs. SO ORDERED. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 116121 July 18, 2011

THE HEIRS OF THE LATE RUBEN REINOSO, SR., represented by Ruben Reinoso Jr., Petitioners, vs. COURT OF APPEALS, PONCIANO TAPALES, JOSE GUBALLA, and FILWRITERS GUARANTY ASSURANCE CORPORATION,** Respondent. DECISION MENDOZA, J.: Before the Court is a petition for review assailing the May 20, 1994 Decision1 and June 30, 1994 Resolution2 of the Court of Appeals (CA), in CA-G.R. CV No. 19395, which set aside the March 22, 1988 Decision of the Regional Trial Court, Branch 8, Manila (RTC) for non-payment of docket fees. The dispositive portion of the CA decision reads: IN VIEW OF ALL THE FOREGOING, the decision appealed from is SET ASIDE and REVERSED and the complaint in this case is ordered DISMISSED. No costs pronouncement. SO ORDERED. The complaint for damages arose from the collision of a passenger jeepney and a truck at around 7:00 oclock in the evening of June 14, 1979 along E. Rodriguez Avenue, Quezon City. As a result, a passenger of

the jeepney, Ruben Reinoso, Sr. (Reinoso), was killed. The passenger jeepney was owned by Ponciano Tapales (Tapales) and driven by Alejandro Santos (Santos), while the truck was owned by Jose Guballa (Guballa) and driven by Mariano Geronimo (Geronimo). On November 7, 1979, the heirs of Reinoso (petitioners) filed a complaint for damages against Tapales and Guballa. In turn, Guballa filed a third party complaint against Filwriters Guaranty Assurance Corporation (FGAC) under Policy Number OV-09527. On March 22, 1988, the RTC rendered a decision in favor of the petitioners and against Guballa. The decision in part, reads: In favor of herein plaintiffs and against defendant Jose Guballa: 1. For the death of Ruben Reinoso, Sr. P 30,000.00

2. Loss of earnings (monthly income at the time of death (P 2,000.00 Court used P 1,000.00 only per month (or P 12,000.00 only per year) & victim then being 55 at death had ten (10) years life expectancy 120,000.00 3. Mortuary, Medical & funeral expenses and all incidental expenses in the wake in serving those who condoled 4. Moral damages .. 5. Exemplary damages 6. Litigation expenses . 7. Attorneys fees Or a total of For damages to property: In favor of defendant Ponciano Tapales and against defendant Jose Guballa: 1. Actual damages for repair is already awarded to defendant-cross-claimant Ponciano Tapales by Br. 9, RTC-Malolos, Bulacan (Vide: Exh. 1-GTapales); hence, cannot recover twice. 2. Compensatory damages (earnings at P 150.00 per day) and for two (2) months jeepney stayed at the repair shop. 3. Moral damages ... 4. Exemplary damages . 5. Attorneys fees or a total of

15,000.00 50,000.00 25,000.00 15,000.00 25,000.00 P 250,000.00

P 9,000.00 10,000.00 10,000.00 15,000.00 P 44,000.00

Under the 3rd party complaint against 3rd party defendant Filwriters Guaranty Assurance Corporation, the Court hereby renders judgment in favor of said 3rd party plaintiff by way of 3rd party liability under policy No. OV-09527 in the amount of P 50,000.00 undertaking plus P 10,000.00 as and for attorneys fees. For all the foregoing, it is the well considered view of the Court that plaintiffs, defendant Ponciano Tapales and 3rd Party plaintiff Jose Guballa established their claims as specified above, respectively. Totality of evidence preponderance in their favor. JUDGMENT WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows: In favor of plaintiffs for the death of Ruben Reinoso, Sr.P250,000.00; In favor of defendant Ponciano Tapales due to damage of his passenger jeepney . P44,000.00; In favor of defendant Jose Guballa under Policy No. OV-09527 P60,000.00; All the specified accounts with 6% legal rate of interest per annum from date of complaint until fully paid (Reformina vs. Tomol, 139 SCRA 260; and finally; Costs of suit. SO ORDERED.3 On appeal, the CA, in its Decision dated May 20, 1994, set aside and reversed the RTC decision and dismissed the complaint on the ground of non-payment of docket fees pursuant to the doctrine laid down in Manchester v. CA.4 In addition, the CA ruled that since prescription had set in, petitioners could no longer pay the required docket fees.5 Petitioners filed a motion for reconsideration of the CA decision but it was denied in a resolution dated June 30, 1994.6 Hence, this appeal, anchored on the following GROUNDS: A. The Court of Appeals MISAPPLIED THE RULING of the Supreme Court in the case of Manchester Corporation vs. Court of Appeals to this case. B. The issue on the specification of the damages appearing in the prayer of the Complaint was NEVER PLACED IN ISSUE BY ANY OF THE PARTIES IN THE COURT OF ORIGIN (REGIONAL TRIAL COURT) NOR IN THE COURT OF APPEALS. C. The issues of the case revolve around the more substantial issue as to the negligence of the private respondents and their culpability to petitioners."7 The petitioners argue that the ruling in Manchester should not have been applied retroactively in this case, since it was filed prior to the promulgation of the Manchester decision in 1987. They plead that though this Court stated that failure to state the correct amount of damages would lead to the dismissal of the complaint, said doctrine should be applied prospectively. Moreover, the petitioners assert that at the time of the filing of the complaint in 1979, they were not certain of the amount of damages they were entitled to, because the amount of the lost income would still be finally determined in the course of the trial of the case. They claim that the jurisdiction of the trial court remains even if there was failure to pay the correct filing fee as long as the correct amount would be paid subsequently.

Finally, the petitioners stress that the alleged defect was never put in issue either in the RTC or in the CA. The Court finds merit in the petition. The rule is that payment in full of the docket fees within the prescribed period is mandatory. 8 In Manchester v. Court of Appeals,9 it was held that a court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. The strict application of this rule was, however, relaxed two (2) years after in the case ofSun Insurance Office, Ltd. v. Asuncion,10 wherein the Court decreed that where the initiatory pleading is not accompanied by the payment of the docket fee, the court may allow payment of the fee within a reasonable period of time, but in no case beyond the applicable prescriptive or reglementary period. This ruling was made on the premise that the plaintiff had demonstrated his willingness to abide by the rules by paying the additional docket fees required.11 Thus, in the more recent case of United Overseas Bank v. Ros,12 the Court explained that where the party does not deliberately intend to defraud the court in payment of docket fees, and manifests its willingness to abide by the rules by paying additional docket fees when required by the court, the liberal doctrine enunciated in Sun Insurance Office, Ltd., and not the strict regulations set in Manchester, will apply. It has been on record that the Court, in several instances, allowed the relaxation of the rule on non-payment of docket fees in order to afford the parties the opportunity to fully ventilate their cases on the merits. In the case of La Salette College v. Pilotin,13the Court stated: Notwithstanding the mandatory nature of the requirement of payment of appellate docket fees, we also recognize that its strict application is qualified by the following: first, failure to pay those fees within the reglementary period allows only discretionary, not automatic, dismissal; second, such power should be used by the court in conjunction with its exercise of sound discretion in accordance with the tenets of justice and fair play, as well as with a great deal of circumspection in consideration of all attendant circumstances.14 While there is a crying need to unclog court dockets on the one hand, there is, on the other, a greater demand for resolving genuine disputes fairly and equitably,15 for it is far better to dispose of a case on the merit which is a primordial end, rather than on a technicality that may result in injustice. In this case, it cannot be denied that the case was litigated before the RTC and said trial court had already rendered a decision. While it was at that level, the matter of non-payment of docket fees was never an issue. It was only the CA which motu propio dismissed the case for said reason. Considering the foregoing, there is a need to suspend the strict application of the rules so that the petitioners would be able to fully and finally prosecute their claim on the merits at the appellate level rather than fail to secure justice on a technicality, for, indeed, the general objective of procedure is to facilitate the application of justice to the rival claims of contending parties, bearing always in mind that procedure is not to hinder but to promote the administration of justice.16 The Court also takes into account the fact that the case was filed before the Manchester ruling came out. Even if said ruling could be applied retroactively, liberality should be accorded to the petitioners in view of the recency then of the ruling. Leniency because of recency was applied to the cases of Far Eastern Shipping Company v. Court of Appeals17 and Spouses Jimmy and Patri Chan v. RTC of Zamboanga.18 In the case of Mactan Cebu International Airport Authority v. Mangubat (Mactan),19 it was stated that the "intent of the Court is clear to afford litigants full opportunity to comply with the new rules and to temper enforcement of sanctions in view of the recencyof the changes introduced by the new rules." In Mactan, the Office of the Solicitor General (OSG) also failed to pay the correct docket fees on time. We held in another case: x x x It bears stressing that the rules of procedure are merely tools designed to facilitate the attainment of justice. They were conceived and promulgated to effectively aid the court in the dispensation of justice. Courts are not slaves to or robots of technical rules, shorn of judicial discretion. In rendering justice, courts have always been, as they ought to be, conscientiously guided by the norm that, on the balance, technicalities take a backseat against substantive rights, and not the other way around. Thus, if the application of the Rules would

tend to frustrate rather than promote justice, it is always within the power of the Court to suspend the Rules, or except a particular case from its operation.20 The petitioners, however, are liable for the difference between the actual fees paid and the correct payable docket fees to be assessed by the clerk of court which shall constitute a lien on the judgment pursuant to Section 2 of Rule 141 which provides: SEC. 2. Fees in lien. Where the court in its final judgment awards a claim not alleged, or a relief different from, or more than that claimed in the pleading, the party concerned shall pay the additional fees which shall constitute a lien on the judgment in satisfaction of said lien. The clerk of court shall assess and collect the corresponding fees. As the Court has taken the position that it would be grossly unjust if petitioners claim would be dismissed on a strict application of the Manchester doctrine, the appropriate action, under ordinary circumstances, would be for the Court to remand the case to the CA. Considering, however, that the case at bench has been pending for more than 30 years and the records thereof are already before this Court, a remand of the case to the CA would only unnecessarily prolong its resolution. In the higher interest of substantial justice and to spare the parties from further delay, the Court will resolve the case on the merits. The facts are beyond dispute. Reinoso, the jeepney passenger, died as a result of the collision of a jeepney and a truck on June 14, 1979 at around 7:00 oclock in the evening along E. Rodriguez Avenue, Quezon City. It was established that the primary cause of the injury or damage was the negligence of the truck driver who was driving it at a very fast pace. Based on the sketch and spot report of the police authorities and the narration of thejeepney driver and his passengers, the collision was brought about because the truck driver suddenly swerved to, and encroached on, the left side portion of the road in an attempt to avoid a wooden barricade, hitting the passenger jeepney as a consequence. The analysis of the RTC appears in its decision as follows: Perusal and careful analysis of evidence adduced as well as proper consideration of all the circumstances and factors bearing on the issue as to who is responsible for the instant vehicular mishap convince and persuade this Court that preponderance of proof is in favor of plaintiffs and defendant Ponciano Tapales. The greater mass of evidence spread on the records and its influence support plaintiffs plaint including that of defendant Tapales. The Land Transportation and Traffic Rule (R.A. No. 4136), reads as follows: "Sec. 37. Driving on right side of highway. Unless a different course of action is required in the interest of the safety and the security of life, person or property, or because of unreasonable difficulty of operation in compliance therewith, every person operating a motor vehicle or an animal drawn vehicle on highway shall pass to the right when meeting persons or vehicles coming toward him, and to the left when overtaking persons or vehicles going the same direction, and when turning to the left in going from one highway to another, every vehicle shall be conducted to the right of the center of the intersection of the highway." Having in mind the foregoing provision of law, this Court is convinced of the veracity of the version of the passenger jeepney driver Alejandro Santos, (plaintiffs and Tapales witness) that while running on lane No. 4 westward bound towards Ortigas Avenue at between 30-40 kms. per hour (63-64 tsn, Jan. 6, 1984) the "sand & gravel" truck from the opposite direction driven by Mariano Geronimo, the headlights of which the former had seen while still at a distance of about 30-40 meters from the wooden barricade astride lanes 1 and 2, upon reaching said wooden block suddenly swerved to the left into lanes 3 and 4 at high speed "napakabilis po ng dating ng truck." (29 tsn, Sept. 26, 1985) in the process hitting them (Jeepney passenger) at the left side up to where the reserve tire was in an oblique manner "pahilis" (57 tsn, Sept. 26, 1985). The jeepney after it was bumped by the truck due to the strong impact was thrown "resting on its right side while the left side was on top of the Bangketa (side walk)". The passengers of the jeepney and its driver were injured including two passengers who died. The left side of the jeepney suffered considerable damage as seen in the picture (Exhs. 4 & 5-Tapales, pages 331-332, records) taken while at the repair shop.

The Court is convinced of the narration of Santos to the effect that the "gravel & sand" truck was running in high speed on the good portion of E. Rodriguez Avenue (lane 1 & 2) before the wooden barricade and (having in mind that it had just delivered its load at the Corinthian Gardens) so that when suddenly confronted with the wooden obstacle before it had to avoid the same in a manner of a reflex reaction or knee-jerk response by forthwith swerving to his left into the right lanes (lanes 3 & 4). At the time of the bumping, the jeepney was running on its right lane No. 4 and even during the moments before said bumping, moving at moderate speed thereon since lane No. 3 was then somewhat rough because being repaired also according to Mondalia who has no reason to prevaricate being herself one of those seriously injured. The narration of Santos and Mondalia are convincing and consistent in depicting the true facts of the case untainted by vacillation and therefore, worthy to be relied upon. Their story is forfeited and confirmed by the sketch drawn by the investigating officer Pfc. F. Amaba, Traffic Division, NPD, Quezon City who rushed to the scene of the mishap (Vide: Resolution of Asst fiscal Elizabeth B. Reyes marked as Exhs. 7, 7-A, 7-B-Tapales, pp. 166-168, records; the Certified Copy found on pages 598-600, ibid, with the attached police sketch of Pfc. Amaba, marked as Exh. 8-Tapales on page 169, ibid; certified copy of which is on page 594, ibid) indicating the fact that the bumping indeed occurred at lane No. 4 and showing how the gavel & sand truck is positioned in relation to the jeepney. The said police sketch having been made right after the accident is a piece of evidence worthy to be relied upon showing the true facts of the bumping-occurrence. The rule that official duty had been performed (Sec.5(m), R-131, and also Sec. 38, R-a30, Rev. Rules of Court) there being no evidence adduced and made of record to the contrary is that said circumstance involving the two vehicles had been the result of an official investigation and must be taken as true by this Court.21
1awphi1

While ending up on the opposite lane is not conclusive proof of fault in automobile collisions,22 the position of the two vehicles, as depicted in the sketch of the police officers, clearly shows that it was the truck that hit the jeepney. The evidentiary records disclosed that the truck was speeding along E. Rodriguez, heading towards Santolan Street, while the passenger jeepney was coming from the opposite direction. When the truck reached a certain point near the Meralco Post No. J9-450, the front portion of the truck hit the left middle side portion of the passenger jeepney, causing damage to both vehicles and injuries to the driver and passengers of the jeepney. The truck driver should have been more careful, because, at that time, a portion of E. Rodriguez Avenue was under repair and a wooden barricade was placed in the middle thereof. The Court likewise sustains the finding of the RTC that the truck owner, Guballa, failed to rebut the presumption of negligence in the hiring and supervision of his employee. Article 2176, in relation to Article 2180 of the Civil Code, provides: Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. xxxx Art. 2180. The obligation imposed by Art. 2176 is demandable not only for ones own acts or omissions but also for those of persons for whom one is responsible. xxxx Employers shall be liable for the damage caused by their employees and household helpers acting within the scope of their assigned tasks even though the former are not engaged in any business or industry. xxxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. Whenever an employees negligence causes damage or injury to another, there instantly arises a presumptionjuris tantum that the employer failed to exercise diligentissimi patris families in the selection or

supervision of his employee.23 Thus, in the selection of prospective employees, employers are required to examine them as to their qualification, experience and service record. With respect to the supervision of employees, employers must formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for breaches thereof. These facts must be shown by concrete proof, including documentary evidence.24 Thus, the RTC committed no error in finding that the evidence presented by respondent Guballa was wanting. It ruled: x x x. As expected, defendant Jose Guballa, attempted to overthrow this presumption of negligence by showing that he had exercised the due diligence required of him by seeing to it that the driver must check the vital parts of the vehicle he is assigned to before he leaves the compound like the oil, water, brakes, gasoline, horn (9 tsn, July 17, 1986); and that Geronimo had been driving for him sometime in 1976 until the collision in litigation came about (5-6 tsn, ibid); that whenever his trucks gets out of the compound to make deliveries, it is always accompanied with two (2) helpers (16-17 tsn, ibid). This was all which he considered as selection and supervision in compliance with the law to free himself from any responsibility. This Court then cannot consider the foregoing as equivalent to an exercise of all the care of a good father of a family in the selection and supervision of his driver Mariano Geronimo."25 WHEREFORE, the petition is GRANTED. The May 20, 1994 Decision and June 30, 1994 Resolution of the Court of Appeals are REVERSED and SET ASIDE and the March 22, 1988 Decision of the Regional Trial Court, Branch 8, Manila, is REINSTATED. SO ORDERED.