Intramuros Administration vs. Offshore Construction and Development Company

The jurisdiction of a trial court over an ejectment complaint is determined by the allegations in the complaint and the character of the relief sought, and the defendant's claims or defenses in its answer or motion to dismiss do not divest the court of jurisdiction over the subject matter.

Intramuros Administration is an entity that administers certain real properties of the national government within the Intramuros district of Manila. In 1998, it leased three such properties to Offshore Construction and Development Company under Contracts of Lease for a five-year period, subject to a memorandum of stipulations providing for renewal every five years upon mutual written agreement. Presidential Decree No. 1616 required 16th to 19th century Philippine-Spanish architecture in the Intramuros area, a regulatory backdrop that became relevant when Offshore Construction introduced non-conforming improvements on the leased premises.

In 1998, Intramuros Administration leased three properties of the national government — Baluarte de San Andres (2,793 sq. m.), Baluarte de San Francisco de Dilao (1,880 sq. m.), and Revellin de Recoletos (1,036 sq. m.) — to Offshore Construction and Development Company. All three Contracts of Lease, dated August 20, 1998, were for a five-year term from September 1, 1998 to August 31, 2003, with a provision for renewal for another five years upon the parties' mutual written agreement. The contracts were accompanied by addendums and a memorandum of stipulations likewise dated August 20, 1998.

Offshore Construction occupied the premises and introduced improvements. However, Intramuros and the Department of Tourism halted the projects because the improvements did not conform to Presidential Decree No. 1616, which required 16th to 19th century Philippine-Spanish architecture in the area. Offshore Construction consequently filed a complaint for preliminary injunction and temporary restraining order against Intramuros and the Department of Tourism before the Manila Regional Trial Court, docketed as Civil Case No. 98-91587. The parties eventually executed a Compromise Agreement on July 26, 1999, which the RTC approved on February 8, 2000. Under the Compromise Agreement, the parties affirmed the validity of the lease contracts over Baluarte de San Andres and Baluarte de San Francisco de Dilao but terminated the lease over Revellin de Recoletos. The original five-year lease period was retained, and the areas to be occupied by Offshore Construction were modified and specified in detail.

During the lease period, Offshore Construction failed to pay its utility bills and rental fees despite several demand letters. Intramuros tolerated the continuing occupation, hoping Offshore Construction would pay its arrears, which as of July 31, 2004 totaled ₱6,762,153.70. To settle these arrears, Offshore Construction proposed to pay the Department of Tourism's monthly operational expenses for lights and sound equipment, electricity, and performers at the Baluarte Plano Luneta de Sta. Isabel. The parties executed a Memorandum of Agreement covering the period August 15, 2004 to August 25, 2005. However, Offshore Construction continued to fail to pay its arrears, which amounted to ₱13,448,867.45 as of December 31, 2009. On March 26, 2010, Offshore Construction received Intramuros' latest demand letter.

Intramuros filed a Complaint for Ejectment before the Manila Metropolitan Trial Court on April 28, 2010. Offshore Construction filed an Answer with Special and Affirmative Defenses and Compulsory Counterclaim, and on July 12, 2010, filed a Very Urgent Motion praying for dismissal on grounds of violation of the rule on non-forum shopping, lack of jurisdiction, and litis pendentia. Offshore Construction claimed there were two pending cases before the Manila RTC: Civil Case No. 08-119138 for specific performance filed by Offshore Construction against Intramuros, and SP CA No. 10-123257 for interpleader filed by 4H Intramuros, Inc., a group of Offshore Construction's tenants. The MTC granted the motion and dismissed the case on October 19, 2010, finding that Intramuros committed forum shopping by failing to disclose the pending cases and that the MTC lacked jurisdiction because the parties' relationship had evolved into a concession rather than a lease. The RTC affirmed this dismissal in toto on April 14, 2011.

• Prohibited Pleading: Petitioner argued that Offshore Construction's Very Urgent Motion should not have been entertained by the MTC as it was a motion to dismiss, which was prohibited under the Rule on Summary Procedure.
• Jurisdiction Determined by Complaint: Petitioner contended that jurisdiction over the subject matter is determined by the allegations in the complaint and that the trial court's jurisdiction is not lost just because the defendant makes a contrary allegation in its defense. The sole issue in an ejectment suit is the summary restoration of possession, and courts do not lose jurisdiction by a defendant's mere allegation of ownership or concession.
• No Forum Shopping: Petitioner averred that it did not commit forum shopping because it instituted neither the specific performance case nor the interpleader case; it was the defendant in both. The issues in those cases — offsetting of rentals and determination of the rightful lessor of Puerta de Isabel II — were different from the issue of possession in the ejectment case.
• No Concession Agreement: Petitioner maintained that there was no concession agreement between the parties, only lease contracts that had already expired and were not renewed. The Contracts of Lease and Memorandum of Agreement set the expiry of the leases on August 31, 2003, after which Intramuros merely tolerated Offshore Construction's continued occupation in hopes of payment of arrears.

• Hierarchy of Courts: Respondent argued that the Petition for Review should be dismissed because it violates the principle of hierarchy of courts and raises questions of fact. Intramuros should have filed a Petition for Review with the Court of Appeals under Rule 42 instead of directly filing with the Supreme Court.
• Questions of Fact: Respondent claimed that Intramuros raised questions of fact — the expiration of the Contracts of Lease and the existence of a business concession — which are not proper for a Rule 45 petition.
• Concession Agreement: Respondent claimed that it occupied Puerta de Isabel II by virtue of a legal concession based on the parties' contracts and contemporaneous and subsequent acts. Under the Contracts of Lease, it was required to invest around ₱20,000,000 in the leased properties, and it lost its initial investments when they were demolished. Under the Compromise Agreement, it was again required to make new developments worth millions, making the relationship more than ordinary lessor-lessee.
• Implied Renewal and Novation: Respondent argued that even if the lease contracts had expired, they were impliedly renewed by the mutual and voluntary acts of the parties under Article 1670 of the Civil Code, and that there was novation of the contracts, with courts empowered to fix a period under Article 1687.
• Estoppel: Respondent contended that Intramuros was guilty of estoppel in pais for continuing to accept rental payments as late as July 10, 2009, despite the alleged expiration of the leases on August 31, 2003.

• Hierarchy of Courts: Whether direct resort to the Supreme Court is proper despite the availability of a petition for review with the Court of Appeals under Rule 42.
• Jurisdiction: Whether the Metropolitan Trial Court had jurisdiction over the ejectment complaint filed by Intramuros Administration.
• Forum Shopping: Whether Intramuros Administration committed forum shopping when it filed its ejectment complaint despite the pending cases for specific performance and interpleader.
• Right to Possession: Whether Intramuros Administration is entitled to possess the leased premises and to collect unpaid rentals.

• Hierarchy of Courts: Yes. Direct resort to the Supreme Court was proper and warranted under the circumstances, given the exigency of the situation and the purely legal questions raised, notwithstanding the general rule requiring intermediate review by the Court of Appeals.
• Jurisdiction: Yes. The MTC had jurisdiction over the ejectment complaint because the complaint sufficiently alleged all jurisdictional facts for unlawful detainer, and the defendant's defenses cannot oust the court's jurisdiction, which is determined solely by the complaint's allegations.
• Forum Shopping: No. Intramuros did not commit forum shopping because there was no identity of rights asserted or reliefs prayed for between the ejectment case and the pending specific performance and interpleader cases, and a judgment in any one would not amount to res judicata in the others.
• Right to Possession: Yes, as to possession; No, as to rentals. Intramuros is entitled to physical possession of the leased premises, but the Court declined to award unpaid rentals because that issue was pending before the RTC in the specific performance case.

• Hierarchy of Courts: Ordinarily, the proper remedy from an RTC decision exercising appellate jurisdiction is a petition for review with the Court of Appeals under Rule 42. The issues raised — jurisdiction over the subject matter and existence of forum shopping — are questions of law cognizable by the Court of Appeals. However, the doctrine of hierarchy of courts is not inviolable, and one recognized exception is the exigency of the situation being litigated. The controversy had been dragging on since 2010, inconsistent with the summary nature of ejectment proceedings, which should be resolved with expediency. Moreover, the Rules of Court permit direct resort to the Supreme Court from RTC decisions on questions of law under Section 2(c) of Rule 41 and Section 5, Article VIII of the Constitution. Petitioner's resort was therefore proper and warranted.

• Jurisdiction: The sole issue in ejectment proceedings is physical possession of the property. The nature of the action and the court's jurisdiction are determined by the allegations in the complaint. A complaint for unlawful detainer must allege: (1) initial possession by contract with or tolerance of the plaintiff; (2) possession became illegal upon notice of termination of the right to possess; (3) defendant remained in possession and deprived plaintiff of enjoyment; and (4) complaint filed within one year from the last demand to vacate. All four were alleged in Intramuros' complaint: Offshore Construction was a lessee by virtue of the Contracts of Lease, whose validity was affirmed in the Compromise Agreement; Intramuros demanded that it vacate; it continued to occupy despite demand; and the complaint was filed on April 28, 2010, within one year of the last demand received on March 26, 2010. The defendant's defenses — including the claim of a concession agreement, implied renewal, or litis pendentia — do not affect the court's jurisdiction, which is determined solely by the complaint's allegations. Not even a claim of implied new lease or tacita reconduccion removes the MTC's jurisdiction. Courts are reminded not to abdicate their jurisdiction to resolve the issue of physical possession, as there is a public need to prevent a breach of the peace by requiring parties to resort to legal means to recover possession.

• Forum Shopping: Forum shopping exists when a party avails of several judicial remedies in different courts, simultaneously or successively, all founded on the same transactions and essential facts and raising substantially the same issues. The test is whether the elements of litis pendentia are present or whether a final judgment in one case would amount to res judicata in another. While there was identity of parties, there was no identity of rights asserted or reliefs prayed for. The specific performance case sought offsetting of rentals under the July 27, 2004 Memorandum of Agreement, which expressly covered only arrears as of July 31, 2004 — it could not be the source of a continuing right of possession after the leases expired. The interpleader case sought to determine the rightful lessor of Puerta de Isabel II, but its plaintiffs were sublessees whose right of possession depends entirely on that of their sublessor, Offshore Construction. A complaint for interpleader by sublessees cannot bar recovery of physical possession by the rightful possessor. Petitioner's counterclaim for unpaid rentals in the specific performance case was compulsory, arising from the same transaction, and could not constitute forum shopping. However, any recovery of unpaid rentals in either the ejectment or the specific performance case must bar recovery in the other under the principle of unjust enrichment.

• Right to Possession: The Contracts of Lease expired on August 31, 2003. There was no proof of any mutual written agreement for extension. Respondent's argument of implied renewal through petitioner's tolerance and acceptance of rental payments was unavailing: tolerance does not create a permanent and indefeasible right of possession, and upon demand to vacate, the possessor's continued occupation becomes illegal. The alleged concession agreement was unsupported by the evidence — the Contracts of Lease were lease contracts as defined in Article 1643 of the Civil Code, with a fixed five-year term and no stipulation allowing occupation until recovery of investments. Neither the Compromise Agreement nor the Memorandum of Agreement created a concession. The Court ordered respondent to vacate but declined to award unpaid rentals, as that issue was pending before Branch 37, RTC Manila in the specific performance case, where the parties disputed the amounts to be offset and the actual rentals due.

• Jurisdiction determined by allegations in the complaint — The nature of an action and the court's jurisdiction over it are determined by the allegations in the complaint and the character of the relief sought, irrespective of whether the plaintiff is entitled to recover upon the claim asserted. The defenses made by the defendant in its answer or motion to dismiss do not affect the court's jurisdiction. Applied: The MTC had jurisdiction over the ejectment complaint because it alleged all jurisdictional facts for unlawful detainer, notwithstanding Offshore Construction's defense that the relationship was one of concession.

• Requisites of unlawful detainer — A complaint for unlawful detainer must allege: (1) initial possession of property by the defendant by contract with or by tolerance of the plaintiff; (2) possession became illegal upon notice by plaintiff to defendant of the termination of the latter's right of possession; (3) thereafter, the defendant remained in possession and deprived the plaintiff of the enjoyment thereof; and (4) within one year from the last demand on defendant to vacate, the plaintiff instituted the complaint for ejectment. Applied: All four requisites were present in Intramuros' complaint.

• Tolerance does not create permanent right of possession — A person who occupies the land of another at the latter's tolerance or permission, without any contract between them, is bound by an implied promise to vacate upon demand. One whose stay is merely tolerated becomes a deforciant illegally occupying the property the moment he is required to leave. Applied: After the lease contracts expired, Intramuros' tolerance of Offshore Construction's occupation did not give the latter a permanent right; upon demand, its possession became illegal.

• Forum shopping test — litis pendentia or res judicata — Forum shopping exists when a party avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and essential facts and raising substantially the same issues. The test is whether the elements of litis pendentia are present or whether a final judgment in one case will amount to res judicata in another. When neither exists, neither can forum shopping exist. Applied: Neither litis pendentia nor res judicata was present because the ejectment, specific performance, and interpleader cases involved different rights and reliefs.

• Exceptions to the hierarchy of courts — The doctrine requiring respect for the hierarchy of courts is not inviolable. Recognized exceptions include the exigency of the situation being litigated. Applied: The controversy had been dragging on since 2010, inconsistent with the summary nature of ejectment proceedings, justifying direct resort to the Supreme Court.

• "The sole issue in ejectment proceedings is determining which of the parties has the better right to physical possession of a piece of property. The defendant's claims and allegations in its answer or motion to dismiss do not oust a trial court's jurisdiction to resolve this issue." — This is the opening statement of the decision, articulating the core principle that governs the entire ruling.

• "It is axiomatic that what determines the nature of an action as well as which court has jurisdiction over it, are the allegations in the complaint and the character of the relief sought. 'Jurisdiction over the subject matter is determined upon the allegations made in the complaint, irrespective of whether the plaintiff is entitled to recover upon a claim asserted therein - a matter resolved only after and as a result of the trial. Neither can the jurisdiction of the court be made to depend upon the defenses made by the defendant in his answer or motion to dismiss.'" — This passage, quoting Morta vs. Occidental, states the controlling doctrine on jurisdiction in ejectment cases and is the ratio decidendi for the jurisdiction issue.

• "When a demand to vacate has been made, as what petitioner had done, respondent's possession became illegal and it should have left the leased premises." — This states the rule on tolerance and unlawful detainer, explaining why Offshore Construction's continued occupation after demand constituted unlawful withholding of possession.

• "Courts are reminded not to abdicate their jurisdiction to resolve the issue of physical possession, as there is a public need to prevent a breach of the peace by requiring parties to resort to legal means to recover possession of real property." — This articulates the public policy rationale behind the summary nature of ejectment proceedings and the duty of trial courts to retain jurisdiction.

• Morta vs. Occidental, 367 Phil. 438 (1999) — Cited for the principle that jurisdiction over the subject matter is determined by the allegations in the complaint, not by the defendant's defenses. Followed and applied as controlling authority on the jurisdiction issue.
• Caniza vs. Court of Appeals, 335 Phil. 1107 (1997) — Cited for the principle that tolerance of occupation does not create a permanent right of possession, and that one whose stay is tolerated becomes a deforciant upon demand to vacate. Followed.
• Spouses Reyes vs. Spouses Chung, G.R. No. 228112 (2017) — Cited for the definition and test of forum shopping, including the requisites of litis pendentia and res judicata. Followed.
• Barcenas vs. Spouses Tomas and Caliboso, 494 Phil. 565 (2005) — Cited for the proposition that direct recourse to the Supreme Court from an RTC decision is proper on questions of law under Rule 41, Section 2(c). Followed.
• Diocese of Bacolod vs. Commission on Elections, 751 Phil. 301 (2015) — Cited for the doctrine of hierarchy of courts and its exceptions, including exigency of the situation. Followed.
• Pajuyo vs. Court of Appeals, 474 Phil. 557 (2004) — Cited for the principle that courts should not abdicate their jurisdiction to resolve the issue of physical possession in ejectment proceedings. Followed.
• Spouses Ponciano vs. Hon. Parentela, Jr., 387 Phil. 621 (2000) — Cited for the definition of a compulsory counterclaim, used to explain why petitioner's counterclaim for unpaid rentals in the specific performance case did not constitute forum shopping. Followed.

• Rule 42, Section 1, Rules of Court — Provides that the remedy from an adverse RTC decision rendered in exercise of appellate jurisdiction is a verified petition for review with the Court of Appeals. Discussed but found not to bar direct resort to the Supreme Court under the circumstances.
• Rule 41, Section 2(c), Rules of Court — Provides for appeal by certiorari to the Supreme Court in cases where only questions of law are raised or involved. Applied to justify direct resort.
• Rule 45, Rules of Court — Governs the petition for review on certiorari filed by petitioner before the Supreme Court.
• Article VIII, Section 5, 1987 Constitution — Vests the Supreme Court with power to review final judgments of lower courts where only errors or questions of law are involved. Applied to support direct resort.
• Article 1643, Civil Code — Defines lease of things: one party binds himself to give another the enjoyment or use of a thing for a price certain and for a period. Applied to characterize the Contracts of Lease as lease contracts, not a concession agreement.
• Article 1670, Civil Code — Provides for implied new lease (tacita reconduccion) if the lessee continues enjoying the thing leased for fifteen days with acquiescence of the lessor. Raised by respondent but found insufficient to defeat the ejectment action.
• Article 1687, Civil Code — Allows courts to fix a longer term for leases without fixed periods. Raised by respondent but not applied.
• Article 22, Civil Code — Prohibits unjust enrichment. Applied to provide that any recovery of unpaid rentals in either the ejectment or specific performance case must bar recovery in the other.
• Article 1657(2), Civil Code — Obliges the lessee to use the thing leased as stipulated or as inferred from its nature. Cited to support that restrictions on use are consistent with the lessor's rights.
• Presidential Decree No. 1616 — Requires 16th to 19th century Philippine-Spanish architecture in the Intramuros area. Contextual background for the dispute over improvements introduced by respondent.

Presbitero J. Velasco, Jr. (Chairperson), Lucas P. Bersamin, Samuel R. Martires, and Alexander G. Gesmundo. No separate concurring opinions were noted.

None.