Gochan vs. Gochan

A complaint denominated as one for specific performance but which prays for the conveyance or transfer of real property is in nature a real action, and docket fees must be assessed on the basis of the assessed value of the property or, if none, the estimated value alleged by the claimant, pursuant to Rule 141, Section 7, of the Rules of Court, as amended.

Respondents were stockholders of Felix Gochan and Sons Realty Corporation and Mactan Realty Development Corporation. Petitioners are the heirs of the late Ambassador Esteban Gochan. In 1996, respondents offered to sell their shares in the two corporations to the individual petitioners, triggering a series of transactions involving the sale of shares, the execution of receipts, waivers, quitclaims, and a disputed "promissory note" containing an inserted phrase regarding partial consideration. The parties' divergent interpretations of what was agreed upon—specifically whether the consideration included, beyond the P200,000,000 cash payment, the conveyance of several parcels of real property—led to the filing of the underlying civil case.

Respondents were stockholders of Felix Gochan and Sons Realty Corporation and Mactan Realty Development Corporation. Sometime in 1996, respondents offered to sell their shares in the two corporations to the individual petitioners, the heirs of the late Ambassador Esteban Gochan, for the sum of P200,000,000. Petitioners accepted and paid the amount, and respondents issued the necessary receipts. In addition, respondents executed their respective Release, Waiver and Quitclaim, undertaking not to initiate any suit, action, or complaint against petitioners for whatever reason or purpose.

In turn, respondents, through Crispo Gochan, Jr., required the individual petitioners to execute a "promissory note" undertaking not to divulge the actual consideration they paid for the shares of stock. Crispo Gochan, Jr. drafted the document in his own handwriting and had it signed by Felix Gochan, III, Louise Gochan, and Esteban Gochan, Jr. Unbeknown to petitioners, Crispo Gochan, Jr. inserted in the promissory note a phrase stating, "Said amount is in partial consideration of the sale."

On April 3, 1998, respondents filed a complaint against petitioners for specific performance and damages with the Regional Trial Court of Cebu City, Branch 11, docketed as Civil Case No. CEB-21854. Respondents alleged that sometime in November 1996, petitioner Louise Gochan, on behalf of all petitioners, offered to buy their shares of stock—254 shares in Felix Gochan and Sons Realty Corporation and 1,624 shares in Mactan Realty Development Corporation—and that they executed a Provisional Memorandum of Agreement enumerating the following as consideration for the sale: (a) P200,000,000; (b) two hectares more or less of the fishpond in Gochan Compound, Mabolo, Lot 4F-2-B; (c) Lot 2, Block 9 with an area of 999 square meters in Gochan Compound, Mabolo, Cebu; (d) three thousand square meters of Villas Magallanes in Mactan, Cebu; and (e) Lot 423 New Gem Building with an area of 605 square meters. Respondents claimed entitlement to the conveyance of these properties in addition to the P200,000,000 they acknowledged receiving, and prayed for moral damages of P15,000,000, exemplary damages of P2,000,000, attorney's fees of P14,000,000, and litigation expenses of P2,000,000.

Petitioners filed their answer raising affirmative defenses: (a) lack of jurisdiction for non-payment of correct docket fees; (b) unenforceability of the obligation to convey real properties due to lack of a written memorandum, pursuant to the Statute of Frauds; (c) extinguishment of the obligation by payment; (d) waiver, abandonment, and renunciation by respondents of all claims; and (e) non-joinder of indispensable parties. On August 7, 1998, petitioners filed a motion for preliminary hearing on the affirmative defenses. The trial court denied the motion on August 11, 1998, ruling that the Statute of Frauds did not apply because the contract was already executed, that the issue of payment was not indubitable because respondents denied under oath the due execution and genuineness of the receipts, that all parties to the memorandum of agreement were impleaded, that docket fees of at least P165,000 had been paid, and that the complaint alleged earnest efforts toward compromise. Petitioners' motion for reconsideration was denied on September 11, 1998.

• Docket Fees: Petitioners contended that the complaint was in the nature of a real action affecting title to real properties, and that respondents should have alleged the value of the real properties as the basis for assessment of the correct docket fees, which they failed to do.
• Statute of Frauds: Petitioners maintained that the obligation to convey real properties was unenforceable for lack of a written memorandum thereof, pursuant to the Statute of Frauds.
• Payment and Waiver: Petitioners argued that respondents' claims had been extinguished by full payment, as evidenced by receipts signed by respondents, and that respondents had executed Release, Waiver and Quitclaim documents renouncing all claims.
• Non-Joinder of Indispensable Parties: Petitioners asserted that Felix Gochan III and Esteban Gochan, Jr. were indispensable parties who should have been impleaded.
• No Forum-Shopping: Petitioners contended that there was no forum-shopping because the two petitions they filed with the Court of Appeals involved different orders, distinct causes of action and issues, and different reliefs sought.

• Correct Docket Fees Paid: Respondents maintained that they paid the correct docket fees in the amount of P165,000 when they filed the complaint, and that the complaint was one for specific performance and damages, incapable of pecuniary estimation.
• Forum-Shopping by Petitioners: Respondents argued that petitioners were guilty of forum-shopping when they filed two petitions for certiorari with the Court of Appeals.
• No Grave Abuse of Discretion: Respondents contended that the Court of Appeals did not err in dismissing the petition for certiorari, as the trial court did not commit grave abuse of discretion in denying the motion for preliminary hearing.

• Nature of the Action and Docket Fees: Whether the complaint, though denominated as one for specific performance and damages, was actually a real action requiring docket fees assessed on the value of the real properties sought to be conveyed.
• Applicability of the Sun Insurance Liberal Rule: Whether the liberal rule allowing payment of docket fees within a reasonable time applies to respondents under the circumstances.
• Forum-Shopping: Whether petitioners were guilty of forum-shopping in filing two petitions for certiorari with the Court of Appeals.
• Grave Abuse of Discretion: Whether the trial court committed grave abuse of discretion in denying petitioners' motion for preliminary hearing on affirmative defenses.

• Nature of the Action and Docket Fees: Yes. The complaint was actually a real action, the relief sought being the conveyance or transfer of real property; docket fees should be computed based on the assessed value of the property, or the estimated value alleged by the claimant, pursuant to Rule 141, Section 7.
• Applicability of the Sun Insurance Liberal Rule: No. The liberal interpretation in Sun Insurance cannot apply because respondents never demonstrated any willingness to abide by the rules and pay the correct docket fees, but instead stubbornly insisted that they had paid the correct fees for a specific performance action.
• Forum-Shopping: No. Petitioners were not guilty of forum-shopping because the two petitions involved different orders, distinct causes of action and issues, and different reliefs sought.
• Grave Abuse of Discretion: Yes. The trial court committed grave abuse of discretion in denying the motion for preliminary hearing, as some of the affirmative defenses appeared indubitable, contrary to the trial court's pronouncement.

• Nature of the Action and Docket Fees: The nature of an action is determined by the allegations in the body of the complaint rather than by its title or heading. Although the complaint was captioned as one for "specific performance and damages," the relief sought was the conveyance or transfer of real property—ultimately, the execution of deeds of conveyance in respondents' favor of the real properties enumerated in the Provisional Memorandum of Agreement. Citing Hernandez vs. Rural Bank of Lucena and Torres vs. J.M. Tuason & Co., Inc., the Court held that where a complaint is entitled as specific performance but prays for the issuance of a deed of sale for a parcel of land, its primary objective and nature is to recover the land itself, and the action is deemed a real action. Consequently, under Rule 141, Section 7, as amended by A.M. No. 00-2-01-SC, the assessed value of the property—or if none, the estimated value alleged by the claimant—shall be the basis for computing docket fees. Respondents paid only P165,000, treating the case as one incapable of pecuniary estimation, when the correct basis should have been the value of the real properties.

• Applicability of the Sun Insurance Liberal Rule: While Sun Insurance allowed payment of docket fees within a reasonable time, that liberal interpretation was predicated on the claimant's demonstrated willingness to abide by the rules and pay the additional fees. In Manchester, the Court refused to cure the defect because of fraud on the government. In Sun Insurance, the liberal rule applied because the private respondent demonstrated willingness to pay the additional docket fees as ordered. In the present case, respondents never demonstrated any willingness to pay the correct docket fees; instead, they stubbornly insisted that the case was one for specific performance and that they had already paid the correct fees. The pattern and intent to defraud the government of the correct docket fees was thus evident, and the liberal rule could not apply.

• Forum-Shopping: Forum-shopping exists when a litigant asks different courts or agencies to rule on the same or related causes and grant the same or substantially the same reliefs, creating the possibility of conflicting decisions. The first petition (CA-G.R. SP No. 49084) involved the propriety of the affirmative defenses in Civil Case No. CEB-21854, while the second petition (CA-G.R. SP No. 54985) raised the issue of whether the trial judge was guilty of manifest partiality warranting his inhibition. Two different orders were questioned, two distinct causes of action and issues were raised, and two different objectives were sought. No forum-shopping existed.

• Grave Abuse of Discretion: The trial court has discretion to conduct a preliminary hearing on affirmative defenses under Section 6 of Rule 16. However, in denying the motion, the trial court ruled that the defenses did not appear tenable or indubitable. The Supreme Court found that some of the defenses—particularly the jurisdictional issue on docket fees—appeared indubitable, contrary to the trial court's pronouncement. The abuse of discretion amounted to an evasion of positive duty or virtual refusal to perform a duty enjoined by law, which would warrant the extraordinary writ of certiorari. The Court of Appeals therefore erred in dismissing the petition.

• Nature of Action Determined by Allegations — The nature of an action is determined by the allegations in the body of the complaint rather than by its title or heading. A complaint denominated as specific performance but praying for conveyance of real property is in nature a real action, and docket fees must be assessed based on the value of the property.

• Jurisdiction Vested Upon Payment of Docket Fees — The court acquires jurisdiction over a case only upon payment of the prescribed docket fees. Where the fees paid are insufficient, the court may allow payment within a reasonable time, provided the claimant demonstrates willingness to abide by the rules. Failure to demonstrate such willingness, coupled with stubborn insistence that the correct fees were already paid, precludes application of the liberal rule.

• Forum-Shopping Test — Forum-shopping exists when a litigant resorts to two different fora to obtain the same or substantially the same reliefs, creating the possibility of conflicting decisions. Where two petitions involve different orders, distinct causes of action, and different reliefs, forum-shopping does not exist.

• Grave Abuse of Discretion in Denial of Preliminary Hearing — A trial court's denial of a motion for preliminary hearing on affirmative defenses may be struck down via certiorari where the abuse of discretion amounts to an evasion of positive duty or virtual refusal to perform a duty enjoined by law, particularly where the defenses appear indubitable.

• "In this jurisdiction, the dictum adhered to is that the nature of an action is determined by the allegations in the body of the pleading or complaint itself, rather than by its title or heading." — This passage states the controlling rule for classifying actions, which is central to the determination of the proper docket fees and venue.

• "where a complaint is entitled as one for specific performance but nonetheless prays for the issuance of a deed of sale for a parcel of land, its primary objective and nature is one to recover the parcel of land itself and, thus, is deemed a real action." — This formulation, drawn from Torres vs. J.M. Tuason & Co., Inc., defines the doctrinal basis for reclassifying a nominally personal action as a real action.

• "the liberal interpretation of the rules relating to the payment of docket fees as applied in the case of Sun Insurance cannot apply to the instant case as respondents have never demonstrated any willingness to abide by the rules and to pay the correct docket fees." — This passage delineates the boundary of the Sun Insurance liberal rule, conditioning its applicability on the claimant's demonstrated willingness to pay the correct fees.

• Sun Insurance Office, Ltd. (SIOL) vs. Asuncion, 170 SCRA 274 (1989) — Established that jurisdiction vests upon payment of docket fees and allowed liberal interpretation permitting payment within a reasonable time. The Court distinguished this case, holding the liberal rule inapplicable because respondents never demonstrated willingness to pay the correct fees.

• Manchester Development Corporation vs. Court of Appeals — Cited for the principle that where fraud on the government in the payment of docket fees is evident, the court does not acquire jurisdiction. The Court found a similar pattern of intent to defraud in the present case.

• Hernandez vs. Rural Bank of Lucena, 81 SCRA 75 (1978) — Defined a real action as one where the plaintiff seeks the recovery of real property or which affects title to or possession of real property. Applied to classify respondents' complaint as a real action.

• Torres vs. J.M. Tuason & Co., Inc., 12 SCRA 174 (1964) — Held that a complaint for specific performance praying for a deed of sale of land is in nature an action to recover the land itself. Followed as controlling precedent for reclassifying the complaint.

• Golangco vs. Court of Appeals, 283 SCRA 493 (1997) — Laid down the test for determining forum-shopping. Applied to conclude that petitioners were not guilty of forum-shopping.

• Tacay vs. Regional Trial Court of Tagum, Davao del Norte, 180 SCRA 433 (1989) — Cited in the dissenting opinion for further liberalizing the rule on deficiency docket fees, distinguishing between complaints with unspecified claims and those with specified amounts but insufficient fees paid.

• Section 7, Rule 141, Rules of Court (as amended by A.M. No. 00-2-01-SC) — Provides that in a real action, the assessed value of the property, or if there is none, the estimated value thereof as alleged by the claimant, shall be the basis for computing docket fees. Applied to determine the correct docket fees for respondents' complaint, which was reclassified as a real action.

• Section 6, Rule 16, 1997 Rules of Civil Procedure — Grants the trial court discretion to conduct a preliminary hearing on affirmative defenses. The Court found that the trial court gravely abused this discretion in denying petitioners' motion.

• Section 1, Rule 4, 1997 Rules of Civil Procedure — Defines a real action as one affecting title to or recovery of possession of real property. Applied in classifying the complaint as a real action.

Kapunan, J., and Pardo, J., concurred. Davide, Jr., C.J., is listed as concurring in the disposition but made of record his dissent to the reasoning of the ponencia.

• Davide, Jr., C.J. — Chief Justice Davide dissented to both drafts of the decision. On the docket fees issue, he argued that Tacay vs. Regional Trial Court of Tagum further liberalized the rule in Sun Insurance, and that where fees for a real action have been paid but amounts of related damages are unspecified, the action should not be dismissed—the court retains jurisdiction over the real action and should merely expunge the unspecified damage claims or allow amendment. He found good faith on the part of respondents in insisting on their cause of action, noting that even the Court of Appeals sustained their position. On the preliminary hearing issue, he argued that the denial of a motion for preliminary hearing is an interlocutory order not subject to appeal, and that certiorari lies only upon a clear showing of grave abuse of discretion. He submitted that the trial court did not commit grave abuse of discretion, as the ponencia itself admitted that only "some" of the defenses appeared indubitable—not all. He voted to deny due course to the petition.