Thursday, February 24, 2011

Jurisdiction; Legal fees; Estopppel.


PATERNO LU YM, SR., et. al.,

PATERNO LU YM, SR., et. al.,


G.R. No. 153690
G.R. No. 157381
G.R. No. 170889
February 15, 2011


x x x.

The Value of the Subject Matter Cannot be Estimated

On the claim that the complaint had for its objective the nullification of the issuance of 600,000 shares of stock of LLDC, the real value of which based on underlying real estate values, as alleged in the complaint, stands at P1,087,055,105, the Court’s assailed August 4, 2009 Resolution found:

Upon deeper reflection, we find that the movants’ [Lu Ym father & sons] claim has merit. The 600,000 shares of stock were, indeed, properties in litigation. They were the subject matter of the complaint, and the relief prayed for entailed the nullification of the transfer thereof and their return to LLDC. David, et al., are minority shareholders of the corporation who claim to have been prejudiced by the sale of the shares of stock to the Lu Ym father and sons. Thus, to the extent of the damage or injury they allegedly have suffered from this sale of the shares of stock, the action they filed can be characterized as one capable of pecuniary estimation. The shares of stock have a definite value, which was declared by plaintiffs [David Lu, et al.] themselves in their complaint. Accordingly, the docket fees should have been computed based on this amount. This is clear from the following version of Rule 141, Section 7, which was in effect at the time the complaint was filed[.][21] (emphasis and underscoring supplied)

The said Resolution added that the value of the 600,000 shares of stock, which are the properties in litigation, should be the basis for the computation of the filing fees. It bears noting, however, that David, et al. are not claiming to own these shares. They do not claim to be the owners thereof entitled to be the transferees of the shares of stock. The mention of the real value of the shares of stock, over which David, et al. do not, it bears emphasis, interpose a claim of right to recovery, is merely narrative or descriptive in order to emphasize the inequitable price at which the transfer was effected.

The assailed August 4, 2009 Resolution also stated that “to the extent of the damage or injury [David, et al.] allegedly have suffered from this sale,” the action “can be characterized as one capable of pecuniary estimation.” The Resolution does not, however, explore the value of the extent of the damage or injury. Could it be the pro rata decrease (e.g., from 20% to 15%) of the percentage shareholding of David, et al. vis-à-vis to the whole?

Whatever property, real or personal, that would be distributed to the stockholders would be a mere consequence of the main action. In the end, in the event LLDC is dissolved, David, et al. would not be getting the value of the 600,000 shares, but only the value of their minority number of shares, which are theirs to begin with.

The complaint filed by David, et al. is one for declaration of nullity of share issuance. The main relief prayed for both in the original complaint and the amended complaint is the same, that is, to declare null and void the issuance of 600,000 unsubscribed and unissued shares to Lu Ym father and sons, et al. for a price of 1/18 of their real value, for being inequitable, having been done in breach of director’s fiduciary’s duty to stockholders, in violation of the minority stockholders’ rights, and with unjust enrichment.

As judiciously discussed in the Court’s August 26, 2008 Decision, the test in determining whether the subject matter of an action is incapable of pecuniary estimation is by ascertaining the nature of the principal action or remedy sought. It explained:

x x x To be sure, the annulment of the shares, the dissolution of the corporation and the appointment of receivers/management committee are actions which do not consist in the recovery of a sum of money. If, in the end, a sum of money or real property would be recovered, it would simply be the consequence of such principal action. Therefore, the case before the RTC was incapable of pecuniary estimation.[22] (italics in the original, emphasis and underscoring supplied)

Actions which the Court has recognized as being incapable of pecuniary estimation include legality of conveyances. In a case involving annulment of contract, the Court found it to be one which cannot be estimated:

Petitioners argue that an action for annulment or rescission of a contract of sale of real property is a real action and, therefore, the amount of the docket fees to be paid by private respondent should be based either on the assessed value of the property, subject matter of the action, or its estimated value as alleged in the complaint, pursuant to the last paragraph of §7(b) of Rule 141, as amended by the Resolution of the Court dated September 12, 1990. Since private respondents alleged that the land, in which they claimed an interest as heirs, had been sold for P4,378,000.00 to petitioners, this amount should be considered the estimated value of the land for the purpose of determining the docket fees.

On the other hand, private respondents counter that an action for annulment or rescission of a contract of sale of real property is incapable of pecuniary estimation and, so, the docket fees should be the fixed amount of P400.00 in Rule 141, §7(b)(1). In support of their argument, they cite the cases of Lapitan v. Scandia, Inc. and Bautista v. Lim. In Lapitan this Court, in an opinion by Justice J.B.L. Reyes, held:

A review of the jurisprudence of this Court indicates that in determining whether an action is one the subject matter of which is not capable of pecuniary estimation, this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance would depend on the amount of the claim. However, where the basic issue is something other than the right to recover a sum of money, or where the money claim is purely incidental to, or a consequence of, the principal relief sought, like in suits to have the defendant perform his part of the contract (specific performance) and in actions for support, or for annulment of a judgment or to foreclose a mortgage, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance. The rationale of the rule is plainly that the second class cases, besides the determination of damages, demand an inquiry into other factors which the law has deemed to be more within the competence of courts of first instance, which were the lowest courts of record at the time that the first organic laws of the Judiciary were enacted allocating jurisdiction (Act 136 of the Philippine Commission of June 11, 1901).

Actions for specific performance of contracts have been expressly pronounced to be exclusively cognizable by courts of first instance: De Jesus vs. Judge Garcia, L-26816, February 28, 1967; Manufacturer's Distributors, Inc. vs. Yu Siu Liong, L-21285, April 29, 1966. And no cogent reason appears, and none is here advanced by the parties, why an action for rescission (or resolution) should be differently treated, a "rescission" being a counterpart, so to speak, of "specific performance". In both cases, the court would certainly have to undertake an investigation into facts that would justify one act or the other. No award for damages may be had in an action for rescission without first conducting an inquiry into matters which would justify the setting aside of a contract, in the same manner that courts of first instance would have to make findings of fact and law in actions not capable of pecuniary estimation expressly held to be so by this Court, arising from issues like those raised in Arroz v. Alojado, et al., L-22153, March 31, 1967 (the legality or illegality of the conveyance sought for and the determination of the validity of the money deposit made); De Ursua v. Pelayo, L-13285, April 18, 1950 (validity of a judgment); Bunayog v. Tunas, L-12707, December 23, 1959 (validity of a mortgage); Baito v. Sarmiento, L-13105, August 25, 1960 (the relations of the parties, the right to support created by the relation, etc., in actions for support), De Rivera, et al. v. Halili, L-15159, September 30, 1963 (the validity or nullity of documents upon which claims are predicated). Issues of the same nature may be raised by a party against whom an action for rescission has been brought, or by the plaintiff himself. It is, therefore, difficult to see why a prayer for damages in an action for rescission should be taken as the basis for concluding such action as one capable of pecuniary estimation — a prayer which must be included in the main action if plaintiff is to be compensated for what he may have suffered as a result of the breach committed by defendant, and not later on precluded from recovering damages by the rule against splitting a cause of action and discouraging multiplicity of suits.[23] (emphasis and underscoring supplied)

IN FINE, the Court holds that David Lu, et al.’s complaint is one incapable of pecuniary estimation, hence, the correct docket fees were paid. The Court thus proceeds to tackle the arguments on estoppel and lien, mindful that the succeeding discussions rest merely on a contrary assumption, viz., that there was deficient payment.

Estoppel Has Set In

Assuming arguendo that the docket fees were insufficiently paid, the doctrine of estoppel already applies.

The assailed August 4, 2009 Resolution cited Vargas v. Caminas[24] on the non-applicability of the Tijam doctrine where the issue of jurisdiction was, in fact, raised before the trial court rendered its decision. Thus the Resolution explained:

Next, the Lu Ym father and sons filed a motion for the lifting of the receivership order, which the trial court had issued in the interim. David, et al., brought the matter up to the CA even before the trial court could resolve the motion. Thereafter, David, at al., filed their Motion to Admit Complaint to Conform to the Interim Rules Governing Intra-Corporate Controversies. It was at this point that the Lu Ym father and sons raised the question of the amount of filing fees paid. They also raised this point again in the CA when they appealed the trial court’s decision in the case below.

We find that, in the circumstances, the Lu Ym father and sons are not estopped from challenging the jurisdiction of the trial court. They raised the insufficiency of the docket fees before the trial court rendered judgment and continuously maintained their position even on appeal to the CA. Although the manner of challenge was erroneous – they should have addressed this issue directly to the trial court instead of the OCA – they should not be deemed to have waived their right to assail the jurisdiction of the trial court.[25] (emphasis and underscoring supplied)

Lu Ym father and sons did not raise the issue before the trial court. The narration of facts in the Court’s original decision shows that Lu Ym father and sons merely inquired from the Clerk of Court on the amount of paid docket fees on January 23, 2004. They thereafter still “speculat[ed] on the fortune of litigation.”[26] Thirty-seven days later or on March 1, 2004 the trial court rendered its decision adverse to them.

Meanwhile, Lu Ym father and sons attempted to verify the matter of docket fees from the Office of the Court Administrator (OCA). In their Application for the issuance a writ of preliminary injunction filed with the Court of Appeals, they still failed to question the amount of docket fees paid by David Lu, et al. It was only in their Motion for Reconsideration of the denial by the appellate court of their application for injunctive writ that they raised such issue.

Lu Ym father and sons’ further inquiry from the OCA cannot redeem them. A mere inquiry from an improper office at that, could not, by any stretch, be considered as an act of having raised the jurisdictional question prior to the rendition of the trial court’s decision. In one case, it was held:

Here it is beyond dispute that respondents paid the full amount of docket fees as assessed by the Clerk of Court of the Regional Trial Court of Malolos, Bulacan, Branch 17, where they filed the complaint. If petitioners believed that the assessment was incorrect, they should have questioned it before the trial court. Instead, petitioners belatedly question the alleged underpayment of docket fees through this petition, attempting to support their position with the opinion and certification of the Clerk of Court of another judicial region. Needless to state, such certification has no bearing on the instant case.[27] (italics in the original; emphasis and underscoring in the original)

The inequity resulting from the abrogation of the whole proceedings at this late stage when the decision subsequently rendered was adverse to the father and sons is precisely the evil being avoided by the equitable principle of estoppel.

No Intent to Defraud the Government

Assuming arguendo that the docket fees paid were insufficient, there is no proof of bad faith to warrant a dismissal of the complaint, hence, the following doctrine applies:

x x x In Sun Insurance Office, Ltd., (SIOL) v. Asuncion, this Court ruled that the filing of the complaint or appropriate initiatory pleading and the payment of the prescribed docket fee vest a trial court with jurisdiction over the subject matter or nature of the action. If the amount of docket fees paid is insufficient considering the amount of the claim, the clerk of court of the lower court involved or his duly authorized deputy has the responsibility of making a deficiency assessment. The party filing the case will be required to pay the deficiency, but jurisdiction is not automatically lost.[28] (underscoring supplied)

The assailed Resolution of August 4, 2009 held, however, that the above-quoted doctrine does not apply since there was intent to defraud the government, citing one attendant circumstance– the annotation of notices of lis pendens on real properties owned by LLDC. It deduced:

From the foregoing, it is clear that a notice of lis pendens is availed of mainly in real actions. Hence, when David, et al., sought the annotation of notices of lis pendens on the titles of LLDC, they acknowledged that the complaint they had filed affected a title to or a right to possession of real properties. At the very least, they must have been fully aware that the docket fees would be based on the value of the realties involved. Their silence or inaction to point this out to the Clerk of Court who computed their docket fees, therefore, becomes highly suspect, and thus, sufficient for this Court to conclude that they have crossed beyond the threshold of good faith and into the area of fraud. Clearly, there was an effort to defraud the government in avoiding to pay the correct docket fees. Consequently, the trial court did not acquire jurisdiction over the case.[29]

All findings of fraud should begin the exposition with the presumption of good faith. The inquiry is not whether there was good faith on the part of David, et al., but whether there was bad faith on their part.

The erroneous annotation of a notice of lis pendens does not negate good faith. The overzealousness of a party in protecting pendente lite his perceived interest, inchoate or otherwise, in the corporation’s properties from depletion or dissipation, should not be lightly equated to bad faith.

That notices of lis pendens were erroneously annotated on the titles does not have the effect of changing the nature of the action. The aggrieved party is not left without a remedy, for they can move to cancel the annotations. The assailed August 4, 2009 Resolution, however, deemed such act as an acknowledgement that the case they filed was a real action, concerning as it indirectly does the corporate realties, the titles of which were allegedly annotated. This conclusion does not help much in ascertaining the filing fees because the value of these real properties and the value of the 600,000 shares of stock are different.

Further, good faith can be gathered from the series of amendments on the provisions on filing fees, that the Court was even prompted to make a clarification.

When David Lu, et al. filed the Complaint on August 14, 2000 or five days after the effectivity of the Securities Regulation Code or Republic Act No. 8799,[30] the then Section 7 of Rule 141 was the applicable provision, without any restricted reference to paragraphs (a) and (b) 1 & 3 or paragraph (a) alone. Said section then provided:

SEC. 7. Clerks of Regional Trial Courts. –

(a) For filing an action or a permissive counterclaim or money claim against an estate not based on judgment, or for filing with leave of court a third-party, fourth-party, etc. complaint, or a complaint in intervention, and for all clerical services in the same, if the total sum claimed, exclusive of interest, or the stated value of the property in litigation, is:

x x x x

(b) For filing:

1. Actions where the value of the subject matter cannot be estimated

……….….. x x x

2. Special civil actions except judicial foreclosure of mortgage which shall be governed by paragraph (a) above

…...….……. x x x

3. All other actions not involving property

……….…… x x x

In a real action, the assessed value of the property, or if there is none, the estimated value thereof shall be alleged by the claimant and shall be the basis in computing the fees.

x x x x[31] (emphasis supplied)

The Court, by Resolution of September 4, 2001 in A. M. No. 00-8-10-SC,[32] clarified the matter of legal fees to be collected in cases formerly cognizable by the Securities and Exchange Commission following their transfer to the RTC.

Clarification has been sought on the legal fees to be collected and the period of appeal applicable in cases formerly cognizable by the Securities and Exchange Commission. It appears that the Interim Rules of Procedure on Corporate Rehabilitation and the Interim Rules of Procedure for Intra-Corporate Controversies do not provide the basis for the assessment of filing fees and the period of appeal in cases transferred from the Securities and Exchange Commission to particular Regional Trial Courts.

The nature of the above mentioned cases should first be ascertained. Section 3(a), Rule 1 of the 1997 Rules of Civil Procedure defines civil action as one by which a party sues another for the enforcement or protection of a right, or the prevention or redress of a wrong. It further states that a civil action may either be ordinary or special, both being governed by the rules for ordinary civil actions subject to the special rules prescribed for special civil actions. Section 3(c) of the same Rule, defines a special proceeding as a remedy by which a party seeks to establish a status, a right, or a particular fact.

Applying these definitions, the cases covered by the Interim Rules for Intra-Corporate Controversies should be considered as ordinary civil actions. These cases either seek the recovery of damages/property or specific performance of an act against a party for the violation or protection of a right. These cases are:

(1) Devices or schemes employed by, or any act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of any corporation, partnership, or association;

(2) Controversies arising out of intra-corporate, partnership, or association relations, between and among stockholders, members or associates; and between, any or all of them and the corporation, partnership, or association of which they are stockholders, members or associates, respectively;

(3) Controversies in the election or appointment of directors, trustees, officers, or managers of corporations, partnerships, or associations;

(4) Derivative suits; and

(5) Inspection of corporate books.

On the other hand, a petition for rehabilitation, the procedure for which is provided in the Interim Rules of Procedure on Corporate Recovery, should be considered as a special proceeding. It is one that seeks to establish the status of a party or a particular fact. As provided in section 1, Rule 4 of the Interim Rules on Corporate Recovery, the status or fact sought to be established is the inability of the corporate debtor to pay its debts when they fall due so that a rehabilitation plan, containing the formula for the successful recovery of the corporation, may be approved in the end. It does not seek a relief from an injury caused by another party.

Section 7 of Rule 141 (Legal Fees) of the Revised Rules of Court lays the amount of filing fees to be assessed for actions or proceedings filed with the Regional Trial Court. Section 7(a) and (b) apply to ordinary civil actions while 7(d) and (g) apply to special proceedings.

In fine, the basis for computing the filing fees in intra-corporate cases shall be section 7(a) and (b) l & 3 of Rule 141. For petitions for rehabilitation, section 7(d) shall be applied. (emphasis and underscoring supplied)

The new Section 21(k) of Rule 141 of the Rules of Court, as amended by A.M. No. 04-2-04-SC[33] (July 20, 2004), expressly provides that “[f]or petitions for insolvency or other cases involving intra-corporate controversies, the fees prescribed under Section 7(a) shall apply.” Notatu dignum is that paragraph (b) 1 & 3 of Section 7 thereof was omitted from the reference. Said paragraph[34] refers to docket fees for filing “[a]ctions where the value of the subject matter cannot be estimated” and “all other actions not involving property.”

By referring the computation of such docket fees to paragraph (a) only, it denotes that an intra-corporate controversy always involves a property in litigation, the value of which is always the basis for computing the applicable filing fees. The latest amendments seem to imply that there can be no case of intra-corporate controversy where the value of the subject matter cannot be estimated. Even one for a mere inspection of corporate books.

If the complaint were filed today, one could safely find refuge in the express phraseology of Section 21 (k) of Rule 141 that paragraph (a) alone applies.

In the present case, however, the original Complaint was filed on August 14, 2000 during which time Section 7, without qualification, was the applicable provision. Even the Amended Complaint was filed on March 31, 2003 during which time the applicable rule expressed that paragraphs (a) and (b) l & 3 shall be the basis for computing the filing fees in intra-corporate cases, recognizing that there could be an intra-corporate controversy where the value of the subject matter cannot be estimated, such as an action for inspection of corporate books. The immediate illustration shows that no mistake can even be attributed to the RTC clerk of court in the assessment of the docket fees.

Finally, assuming there was deficiency in paying the docket fees and assuming further that there was a mistake in computation, the deficiency may be considered a lien on the judgment that may be rendered, there being no established intent to defraud the government.

WHEREFORE, the assailed Resolutions of August 4, 2009 and September 23, 2009 are REVERSED and SET ASIDE. The Court’s Decision of August 26, 2008 is REINSTATED.

The Court of Appeals is DIRECTED to resume the proceedings and resolve the remaining issues with utmost dispatch in CA-G.R. CV No. 81163.