Francel Realty Corporation vs. Court of Appeals

The HLURB has exclusive original jurisdiction over cases involving the rights and obligations of parties in a sale of real estate under P.D. No. 957, including actions filed by developers for the unpaid price of lots or units. Where the determination of the ground for ejectment requires a consideration of the rights of a buyer on installment basis of real property, the case is not a simple unlawful detainer case and must be resolved by the HLURB, not the regular courts.

Petitioner Francel Realty Corporation is a real estate developer that sold a townhouse unit to private respondent Francisco T. Sycip under a Contract to Sell. The sale was governed by P.D. No. 957, which regulates the real estate trade and industry and grants the HLURB jurisdiction over cases involving subdivision lots and condominium units. Private respondent had filed a separate complaint for "unsound real estate business practice" against petitioner with the HLURB, which was pending at the time petitioner filed its ejectment case.

Petitioner Francel Realty Corporation filed a complaint for unlawful detainer against private respondent Francisco T. Sycip in the Municipal Trial Court (MTC) of Bacoor, Cavite. Petitioner alleged that it had executed a Contract to Sell to private respondent Lot 16, Building No. 14 of the Francel Townhomes, at 22 Real Street, Maliksi, Bacoor, Cavite, for P451,000.00. The Contract to Sell provided, among other things, that in case of default in the payment of two or more installments, the whole obligation would become due and demandable, the seller would be entitled to rescind the contract and take possession of the property, the buyer would vacate the premises without the necessity of any court action, and the downpayment would be treated as earnest money or as rental for the use of the premises.

Petitioner alleged that private respondent failed to pay the monthly amortization of P9,303.00 since October 30, 1990, despite demands to update his payments and to vacate the premises, the latest of which was the demand made in the letter dated September 26, 1992. Because of private respondent's unjust refusal to vacate, petitioner was constrained to engage the services of counsel. Petitioner prayed that private respondent be ordered to vacate the premises and pay a monthly rental of P9,303.00 beginning October 30, 1990 until he shall have vacated the premises, plus P25,000.00 as attorney's fees, appearance fee of P1,000.00 per hearing, and expenses of litigation.

On November 9, 1992, private respondent moved to dismiss the complaint, but his motion was denied by the MTC. On January 20, 1993, he filed his answer, alleging that he had stopped paying the monthly amortizations because the townhouse unit sold to him by petitioner was of defective construction. He alleged that he had in fact filed a complaint for "unsound real estate business practice" in the Housing and Land Use Regulatory Board (HLURB Case No. REM-07-9004-80) against petitioner. Private respondent prayed that petitioner be ordered to pay P500,000.00 as moral damages, P500,000.00 as exemplary damages, P75,000.00 as attorney's fees, and that he be given "all other remedies just and equitable."

In its resolution dated February 24, 1993, the MTC ruled that the answer was filed out of time on the ground that it was filed more than ten days after the service of summons. On March 17, 1993, however, it dismissed the complaint for lack of jurisdiction, holding that the case was cognizable by the HLURB. But it also ordered petitioner to pay private respondent P10,000.00 as moral damages, P10,000.00 as exemplary damages, P3,000.00 as attorney's fees, and to pay costs. On appeal, the Regional Trial Court affirmed the decision of the MTC, holding that the case was exclusively cognizable by the HLURB, which had jurisdiction not only over complaints of buyers against subdivision developers but also over actions filed by developers for the unpaid price of the lots or units.

Petitioner filed a petition for review in the Court of Appeals, alleging that the amounts of damages prayed for by private respondent in his Answer were enormous and way beyond the jurisdiction of the inferior court, and that since the inferior court and the respondent court ruled that it had no jurisdiction over the case, then it had no reason, much more jurisdiction, to award damages in excess of the P20,000.00 jurisdiction of the inferior court. The appellate court dismissed the petition, holding that the MTC had jurisdiction over cases of forcible entry and unlawful detainer, regardless of the amount of damages on unpaid rentals sought to be recovered, in view of §1A(1) of the Revised Rule on Summary Procedure. Petitioner moved for reconsideration, contending that since the MTC had ruled that it had no jurisdiction over the case, then it had no jurisdiction either to grant the counterclaim for damages in the total sum of P23,000.00. Its motion was denied for lack of any "cogent reason" to reverse the appellate court's resolution of June 15, 1994.

• Jurisdiction over the Complaint: Petitioner argued that the MTC correctly held itself to be without jurisdiction over the complaint, as the case was cognizable by the HLURB.
• Award of Damages: Petitioner argued that since the MTC had ruled that it had no jurisdiction over the case, then it had no jurisdiction to award damages in excess of the P20,000.00 jurisdiction of the inferior court, and that the amounts of damages prayed for by private respondent in his Answer were enormous and way beyond the jurisdiction of the inferior court.

• Jurisdiction of the MTC: Respondent Court of Appeals held that the MTC had jurisdiction over cases of forcible entry and unlawful detainer, regardless of the amount of damages on unpaid rentals sought to be recovered, in view of §1A(1) of the Revised Rule on Summary Procedure.
• Defective Construction: Private respondent alleged that he had stopped paying the monthly amortizations because the townhouse unit sold to him by petitioner was of defective construction, and that he had filed a complaint for "unsound real estate business practice" with the HLURB.

• Jurisdiction over the Complaint: Whether the MTC has jurisdiction over petitioner's complaint for unlawful detainer, or whether the case falls within the exclusive original jurisdiction of the HLURB.
• Award of Damages on the Counterclaim: Whether the MTC validly awarded damages to private respondent on his counterclaim despite having dismissed the complaint for lack of jurisdiction.

• Jurisdiction over the Complaint: No. The MTC correctly held itself to be without jurisdiction over petitioner's complaint. The case involves a determination of the rights and obligations of parties in a sale of real estate under P.D. No. 957, which is exclusively cognizable by the HLURB.
• Award of Damages on the Counterclaim: No. The MTC erred in granting private respondent's counterclaim for damages. Pursuant to Rule 6, §8 of the Rules of Court, a party may file a counterclaim only if the court has jurisdiction to entertain the claim; otherwise, the counterclaim cannot be filed.

• Jurisdiction over the Complaint: While generally an unlawful detainer action falls within the original and exclusive jurisdiction of the MTC, the determination of the ground for ejectment in this case requires a consideration of the rights of a buyer on installment basis of real property. Private respondent claims that he has a right under P.D. No. 957, §23 to stop paying monthly amortizations after giving due notice to the owner or developer of his decision to do so because of petitioner's alleged failure to develop the subdivision or condominium project according to the approved plans and within the time for complying with the same. The case thus involves a determination of the rights and obligations of parties in a sale of real estate under P.D. No. 957. This is not a simple case for unlawful detainer arising from the failure of the lessee to pay the rents, comply with the conditions of a lease agreement, or vacate the premises after the expiration of the lease. Since the determinative question is exclusively cognizable by the HLURB, the question of the right of petitioner must be determined by the agency. The Court relied on Estate Developers and Investors Corporation vs. Antonio Sarte and Erlinda Sarte, where the developer filed a complaint to collect the balance of the price of a lot bought on installment basis, and the Court held that the action was not a simple action to collect on a promissory note but a complaint to collect amortization payments arising from or in connection with a sale of a subdivision lot under PD Nos. 957 and 1344, falling within the exclusive original jurisdiction of the HLURB. Petitioner's cause of action against private respondent should instead be filed as a counterclaim in HLURB Case No. REM-07-9004-80 in accordance with Rule 6, §6 of the Rules of Court, which is of suppletory application to the 1987 HLURB Rules of Procedure per §3 of the same.
• Award of Damages on the Counterclaim: It was error for the MTC to grant private respondent's counterclaim for damages. Pursuant to Rule 6, §8, a party may file a counterclaim only if the court has jurisdiction to entertain the claim; otherwise, the counterclaim cannot be filed. Even assuming that the MTC had jurisdiction, the award of damages to private respondent must be disallowed for two reasons. First, the MTC decision itself stated that the answer with its counterclaim was filed out of time, or more than 10 days from private respondent's receipt of summons; in effect, private respondent did not make any counterclaim. Second, a reading of the MTC decision showed no justification for the award of moral and exemplary damages and attorney's fees. As held in Buan vs. Camaganacan, an award of attorney's fees without justification is a "conclusion without a premise, its basis being improperly left to speculation and conjecture." With respect to the award of moral and exemplary damages, the record is bereft of any proof that petitioner acted maliciously or in bad faith in filing the present action which would warrant such an award.

• Exclusive Original Jurisdiction of the HLURB over P.D. No. 957 Cases — The HLURB has exclusive original jurisdiction over cases involving the rights and obligations of parties in a sale of real estate under P.D. No. 957, including actions filed by developers for the unpaid price of lots or units. Where the determinative question in an ejectment case requires a consideration of the rights of a buyer on installment basis of real property, the case is not a simple unlawful detainer case and must be resolved by the HLURB.
• Counterclaim Requires Jurisdiction over the Subject Matter — Pursuant to Rule 6, §8 of the Rules of Court, a party may file a counterclaim only if the court has jurisdiction to entertain the claim. A court that has no jurisdiction over the subject matter of the action cannot entertain a counterclaim, and any award of damages on such counterclaim is void.
• Award of Damages Without Justification — An award of attorney's fees without justification is a "conclusion without a premise, its basis being improperly left to speculation and conjecture." Moral and exemplary damages require proof that the party acted maliciously or in bad faith.

• "The action here is not a simple action to collect on a promissory note; it is a complaint to collect amortization payments arising from or in connection with a sale of a subdivision lot under PD Nos. 957 and 1344, and accordingly falls within the exclusive original jurisdiction of the HLURB to regulate the real estate trade and industry, and to hear and decide cases of unsound real estate business practices." — This passage, quoted from Estate Developers and Investors Corporation vs. Antonio Sarte and Erlinda Sarte, articulates the controlling doctrine on the exclusive jurisdiction of the HLURB over cases involving P.D. No. 957.
• "Pursuant to Rule 6, §8 a party may file a counterclaim only if the court has jurisdiction to entertain the claim. Otherwise the counterclaim cannot be filed." — This states the rule that a counterclaim cannot be entertained by a court that lacks jurisdiction over the subject matter of the action.
• "an award of attorney's fees without justification is a 'conclusion without a premise, its basis being improperly left to speculation and conjecture.'" — This quotation from Buan vs. Camaganacan establishes the standard that attorney's fees must be justified, and an award without basis must be stricken out.

• Estate Developers and Investors Corporation vs. Antonio Sarte and Erlinda Sarte, G.R. No. 93646, August 13, 1990 — Controlling precedent. The Court relied on this case to hold that a complaint to collect amortization payments arising from or in connection with a sale of a subdivision lot under PD Nos. 957 and 1344 falls within the exclusive original jurisdiction of the HLURB.
• Estate Developers and Investors Corp. vs. Court of Appeals, 213 SCRA 353 (1992) — Cited as a related case supporting the same doctrine on HLURB exclusive jurisdiction.
• Tiu Po vs. Bautista, 103 SCRA 388 (1981) — Cited to support the proposition that it was error for the MTC to grant the counterclaim for damages.
• Metals Engineering Resources Corp. vs. Court of Appeals, 203 SCRA 273 (1991) — Cited to support the rule that a counterclaim can only be filed if the court has jurisdiction to entertain the claim.
• Buan vs. Camaganacan, 16 SCRA 221 (1966) — Cited for the rule that an award of attorney's fees without justification is a "conclusion without a premise."
• Albenson Enterprises vs. Court of Appeals, 217 SCRA 16 (1993) — Cited to support the proposition that moral and exemplary damages require proof of malice or bad faith.

• Section 23, P.D. No. 957 — The provision granting a buyer on installment basis the right to stop paying monthly amortizations after giving due notice to the owner or developer of his decision to do so because of the latter's alleged failure to develop the subdivision or condominium project according to the approved plans and within the time for complying with the same. The Court held that the determination of this right is exclusively cognizable by the HLURB.
• Rule 6, §6, Rules of Court — The provision allowing a defendant to file a counterclaim. The Court held that petitioner's cause of action against private respondent should instead be filed as a counterclaim in the pending HLURB case, in accordance with this provision, which is of suppletory application to the 1987 HLURB Rules of Procedure per §3 of the same.
• Rule 6, §8, Rules of Court — The provision stating that a party may file a counterclaim only if the court has jurisdiction to entertain the claim. The Court applied this to hold that the MTC, having no jurisdiction over the subject matter, could not entertain the counterclaim.
• §1A(1), Revised Rule on Summary Procedure — The provision cited by the Court of Appeals to support its holding that the MTC had jurisdiction over cases of forcible entry and unlawful detainer regardless of the amount of damages on unpaid rentals sought to be recovered. The Supreme Court did not adopt this reasoning, holding instead that the case was not a simple ejectment case.
• §5, Revised Rule on Summary Procedure — The provision requiring the defendant to file his answer within ten (10) days from service of summons. The MTC used this to rule that private respondent's answer was filed out of time.

• Justice Regalado
• Justice Romero
• Justice Puno