Abagatnan vs. Spouses Clarito

Prior barangay conciliation under Section 412 of the Local Government Code is required only when the real parties in interest actually reside in the same city or municipality; the residence of an attorney-in-fact is irrelevant to this requirement. Where at least one real party in interest resides outside the city or municipality where the dispute arose, the Lupon has no authority over the dispute and prior conciliation is not a precondition to filing in court.

Wenceslao Abagatnan and his late wife Lydia Capote acquired Lot 1472-B, a 5,046-square-meter parcel in Barangay Cogon, Roxas City, by virtue of a Deed of Absolute Sale dated August 1, 1967 from Mateo Ambrad and Soterafia Clarito. Upon Lydia's death on October 4, 1999, her children—petitioners in this case—succeeded to her conjugal share. Respondents, spouses Jonathan and Elsa Clarito, are distant relatives of Wenceslao and occupied a 480-square-meter portion of the property with his permission. The dispute arose when petitioners sought to sell the property and respondents refused to vacate.

Wenceslao Abagatnan and his late wife Lydia Capote acquired Lot 1472-B, a 5,046-square-meter parcel located at Barangay Cogon, Roxas City, from Mateo Ambrad and Soterafia Clarito through a Deed of Absolute Sale executed on August 1, 1967. Upon Lydia's death on October 4, 1999, her children—Jose Audie Abagatnan, Josephine A. Parce, Jimmy Abagatnan, John Abagatnan, Jenalyn A. De Leon, Joey Abagatnan, Jojie Abagatnan, and Joy Abagatnan—succeeded to her conjugal share of the property.

In 1990, respondents spouses Jonathan Clarito and Elsa Clarito approached Wenceslao and asked permission to construct a residential house of light materials on a 480-square-meter portion of Lot 1472-B. Because Jonathan was a distant relative, Wenceslao allowed them to do so on the condition that they would vacate the property should he need it for his own use. In September 2006, petitioners decided to sell portions of Lot 1472-B, including the portion occupied by respondents. They offered to sell the subject property to respondents, but the latter declined. Petitioners then sent a Demand Letter dated October 2, 2006 requiring respondents to vacate within fifteen days from receipt, but respondents refused to heed the demand.

On November 10, 2006, petitioners filed a Complaint for Unlawful Detainer and Damages before the MTCC, Branch 2, Roxas City. The Complaint alleged that prior barangay conciliation was not required because not all petitioners were residents of Roxas City—Jimmy resided in Poblacion, Siniloan, Laguna, and Jenalyn resided in Barangay de La Paz, Pasig City. Respondents countered in their Answer with Counterclaim that barangay conciliation was mandatory, since Jimmy and Jenalyn had executed a Special Power of Attorney in favor of their sister Josephine, a resident of Roxas City. Respondents also asserted that Lot 1472-B was only a portion of Lot 1472 covered by OCT No. 9882 under the name of Nicolas Clarito et al., Jonathan's predecessors-in-interest, though the title had been lost or destroyed during the war and only a copy of the owner's duplicate was presented.

The MTCC ruled in favor of petitioners, finding by preponderance of evidence that they had a better right of material possession, crediting their proof of purchase, the demand letter, and respondents' refusal to vacate. The RTC affirmed, holding that the evidence of ownership was preponderant on petitioners' side and that the lack of barangay conciliation could not be raised on appeal as it was not included in the Pre-Trial Order. The CA, while sustaining the factual findings of both lower courts, dismissed the complaint without prejudice for failure to undergo prior barangay conciliation, reasoning that the two non-resident petitioners had authorized their resident sister to act as attorney-in-fact and that the dispute fell within the Lupon's authority.

• Barangay Conciliation Not Required: Petitioners argued that prior barangay conciliation was not a pre-condition to filing the complaint in court because not all real parties in interest resided in Roxas City—Jimmy resided in Laguna and Jenalyn resided in Pasig City.
• Irrelevance of Attorney-in-Fact's Residence: Petitioners maintained that the residence of the attorney-in-fact is irrelevant to the "actual residence" requirement under Section 412 of the LGC, which pertains specifically to the real parties in interest.
• Waiver by Pre-Trial Order: Petitioners relied on the RTC's observation that the lack of barangay conciliation proceedings was not included in the Pre-Trial Order and thus could not be raised on appeal.

• Mandatory Barangay Conciliation: Respondents argued that prior barangay conciliation was a mandatory requirement that could not be dispensed with, since the two non-resident petitioners had already executed a Special Power of Attorney in favor of their sister Josephine, a resident of Roxas City.
• Claim of Ownership: Respondents insisted that Lot 1472-B was only a portion of Lot 1472 covered by OCT No. 9882 under the name of Nicolas Clarito et al., Jonathan's predecessors-in-interest, and that said title was lost or destroyed during the war, though a copy of the owner's duplicate was presented in court.

• Barangay Conciliation Requirement: Whether the CA correctly dismissed the complaint for failure to comply with the prior barangay conciliation requirement under Section 412 of the LGC, despite the fact that not all real parties in interest resided in the same city or municipality.

• Barangay Conciliation Requirement: No. The CA erred in dismissing the complaint. The "actual residence" requirement under Section 412 of the LGC pertains to the real parties in interest, not to their attorney-in-fact. Since two real parties in interest resided outside Roxas City, the Lupon had no authority over the dispute and prior conciliation was not a precondition to filing in court.

• Barangay Conciliation Requirement: Section 412(a) of the LGC requires parties to undergo conciliation before the Lupon Chairman or the Pangkat as a pre-condition to filing a complaint in court, but only for matters within the Lupon's authority. Section 408 of the LGC provides that the Lupon has authority to bring together parties actually residing in the same city or municipality for amicable settlement, subject to exceptions. One exception applies where the dispute involves parties who actually reside in barangays of different cities or municipalities, unless the barangay units adjoin each other and the parties agree to submit to the Lupon. The express statutory requirement of actual residency pertains specifically to the real parties in interest, as held in Pascual vs. Pascual and reiterated in Banting vs. Spouses Maglapuz. The residence of an attorney-in-fact is irrelevant to this determination; construing it otherwise would abrogate the meaning of a "real party in interest" under Rule 3 of the Rules of Court. Here, the Complaint specifically alleged that Jimmy resided in Siniloan, Laguna, and Jenalyn resided in Pasig City—both outside Roxas City. The Lupon therefore had no jurisdiction over the dispute, and prior barangay conciliation was not required. The execution of an SPA in favor of Josephine, a Roxas City resident, did not change this result. Additionally, the lack of barangay conciliation could not be raised on appeal because it was not included in the Pre-Trial Order, which delimited the issues to be tried. Parties are bound by the delimitation of issues agreed upon during pre-trial proceedings.

• Actual Residence Requirement for Barangay Conciliation — The requirement under Section 412 of the LGC that a case be referred for conciliation before the Lupon as a precondition to filing in court applies only to cases where the real parties in interest actually reside in the same city or municipality. The residence of the attorney-in-fact of a real party in interest is irrelevant. This rule follows from the definition of a "real party in interest" under Section 2, in relation to Section 3, of Rule 3 of the Rules of Court, as the party who stands to be benefited or injured by the judgment. Construing the residence of an attorney-in-fact as sufficient would abrogate the meaning of a real party in interest.

• Delimitation of Issues by Pre-Trial Order — The issues to be tried between parties in a case are limited to those defined in the pre-trial order, as well as those which may be implied from those written in the order or inferred by necessary implication. Non-inclusion of an issue in the Pre-Trial Order bars its consideration during trial and on appeal. Parties are bound by the delimitation of issues agreed upon during pre-trial proceedings.

• "the requirement under Section 412 of the [LGC] that a case be referred for conciliation before the Lupon as a precondition to its filing in court applies only to those cases where the real parties-in-interest actually reside in the same city or municipality." — This passage, quoting Banting vs. Spouses Maglapuz, articulates the controlling rule on the actual residence requirement for barangay conciliation and is the ratio decidendi of the case.

• "the residence of the attorney-in-fact of a real party in interest is irrelevant in so far as the 'actual residence' requirement under the LGC for prior barangay conciliation is concerned." — This passage clarifies that the SPA executed in favor of a resident co-petitioner does not satisfy the actual residence requirement, reinforcing the distinction between a real party in interest and an attorney-in-fact.

• "the non-inclusion of this issue in the Pre-Trial Order barred its consideration during the trial." — This passage applies the doctrine of delimitation of issues by pre-trial order, establishing that the barangay conciliation issue was procedurally barred from being raised on appeal.

• Pascual vs. Pascual, 511 Phil. 700 (2005) — Controlling precedent. Held that the express statutory requirement of actual residency in the LGC pertains specifically to the real parties in interest, and cannot be construed to apply to the attorney-in-fact of the party-plaintiff. Applied directly to hold that the residence of Josephine as attorney-in-fact was irrelevant.
• Banting vs. Spouses Maglapuz, 531 Phil. 101 (2006) — Followed. Reiterated the rule from Pascual that the barangay conciliation requirement applies only where the real parties in interest actually reside in the same city or municipality. Quoted verbatim in the decision.
• LICOMCEN, Inc. vs. Engr. Abainza, 704 Phil. 166 (2013) — Cited for the doctrine that issues to be tried are limited to those defined in the pre-trial order and those inferable by necessary implication. Applied to bar consideration of the barangay conciliation issue on appeal.
• Zamora vs. Heirs of Izquierdo, 485 Phil. 416 (2004) — Cited as source of the quoted text of Section 412(a) of the LGC.

• Section 412(a), Republic Act No. 7160 (Local Government Code of 1991) — Requires parties to undergo conciliation before the Lupon Chairman or the Pangkat as a pre-condition to filing a complaint in court for any matter within the authority of the Lupon. Applied as the central provision: the Court held that its "actual residence" requirement pertains to real parties in interest, not attorney-in-fact.
• Section 408, Republic Act No. 7160 (Local Government Code of 1991) — Defines the authority of the Lupon to bring together parties actually residing in the same city or municipality for amicable settlement, and enumerates exceptions including disputes involving parties residing in barangays of different cities or municipalities. Applied to determine that the Lupon had no authority over the dispute since two real parties in interest resided outside Roxas City.
• Section 2, Rule 3, Rules of Court — Defines a real party in interest as the party who stands to be benefited or injured by the judgment, or the party entitled to the avails of the suit. Cited in relation to Section 3 of Rule 3 to explain why the attorney-in-fact's residence cannot substitute for the real party in interest's residence.
• Section 7, Rule 18, Rules of Court — Governs the pre-trial order and delimitation of issues. Cited to support the rule that issues not included in the pre-trial order are barred from consideration.

Chief Justice Maria Lourdes P.A. Sereno (Chairperson), Associate Justice Teresita J. Leonardo-De Castro, Associate Justice Estela M. Perlas-Bernabe, and Associate Justice Alfredo Benjamin S. Caguioa concurred in the decision. No separate concurring opinions were written.