Regulus Development, Inc. vs. Dela Cruz

A court that issues an order pursuant to its equity jurisdiction retains jurisdiction to execute that order, including the levy of real property, as the court of origin, independent of any dismissed main case; the levy is not an execution of a judgment in the dismissed action but of the equity order itself.

Regulus Development, Inc. owned the San Juan Apartments in Pasay City. Antonio dela Cruz leased two units under month-to-month contracts subject to automatic renewal until termination by written notice. After the lease was terminated and dela Cruz refused to vacate, Regulus filed an ejectment complaint before the Metropolitan Trial Court of Pasay City in 2001. The MTC ruled for Regulus; the RTC affirmed on appeal. On further review, the Court of Appeals reversed and dismissed the ejectment case, a dismissal that became final on March 19, 2003. The dismissal effectively blotted out the complaint as if it had never been filed. While the ejectment case was pending, dela Cruz had consigned monthly rentals with the RTC. After dismissal, Regulus moved to withdraw those consigned amounts. The RTC, invoking justice and equity and noting the continued existence of the lease contracts, granted the motion in orders dated July 25, 2003 and November 28, 2003. Those orders were upheld on certiorari by the CA and, ultimately, by the Supreme Court in G.R. SP No. 171429. Regulus then sought execution of the RTC orders by withdrawing the deposited rentals and the supersedeas bond, but the collected amounts fell short of the rentals due from May 2001 to May 2004. Regulus therefore moved for a levy on dela Cruz’s real property. The RTC granted the motion and ordered the levy, eventually leading to a public auction where Regulus was the highest bidder. Dela Cruz later redeemed the property. He then filed a certiorari petition in the CA to nullify the levy orders. The CA reversed the RTC, holding that the RTC had no jurisdiction to levy because the ejectment case had been finally dismissed and execution should have been sought before the MTC. Regulus elevated the matter to the Supreme Court.

• The Lease and Ejectment Case: Petitioner Regulus Development, Inc. owned the San Juan Apartments in Pasay City. Respondent Antonio dela Cruz leased two units, 2002-A and 2002-B, in 1993 and 1994 under monthly lease contracts that renewed automatically unless terminated by written notice. After termination and dela Cruz’s refusal to vacate, Regulus filed a complaint for ejectment on May 1, 2001 before the MTC of Pasay City.

• Dismissal of the Ejectment Case and the RTC’s Equity Orders: The MTC ruled for Regulus; the RTC affirmed. On petition for review, the CA reversed and dismissed the ejectment case (CA-G.R. SP No. 69504); the dismissal became final on March 19, 2003. Pending appeal, dela Cruz had consigned monthly rentals with the RTC. Regulus moved to withdraw those consigned funds. In orders dated July 25, 2003 and November 28, 2003, the RTC granted the motion, reasoning that while the dismissal of the ejectment complaint meant there was no complaint at all, Regulus was still entitled to rentals for the use and occupation of the units based on the lease contracts and on principles of justice and equity. The RTC also issued a writ of execution dated December 18, 2003 for those orders.

• Finality of the Equity Orders: Dela Cruz challenged the RTC’s July and November 2003 orders via certiorari before the CA (CA-G.R. SP No. 81277). The CA dismissed the petition, holding that the orders were issued pursuant to the RTC’s equity jurisdiction under Section 5, Rule 39 and Rules 5 and 6 of Rule 135 of the Rules of Court. Dela Cruz’s subsequent petition for review to the Supreme Court (G.R. SP No. 171429) was denied in a resolution dated June 7, 2006, which became final and executory.

• Execution and Levy on Real Property: After the equity orders became final, Regulus returned to the RTC and secured an alias writ of execution dated April 26, 2007, allowing withdrawal of the deposited rentals and the supersedeas bond representing rentals from May to October 2001. When the withdrawn amounts proved insufficient to cover rentals from May 2001 to May 2004, Regulus moved for levy on dela Cruz’s property covered by TCT No. 136829. The RTC granted the motion in an order dated June 30, 2008; a motion for reconsideration was denied on August 26, 2008. A public auction was held on November 4, 2008, with Regulus as the highest bidder; the certificate of sale was registered. On January 7, 2010, dela Cruz redeemed the property, paying the bid price plus legal interest, and the funds were released to Regulus.

• CA Proceedings and Reversal: Despite the redemption, the CA issued its decision on November 23, 2010, reversing the RTC’s June 30, 2008 and August 26, 2008 lev y orders. The CA ruled that the RTC had no jurisdiction to levy on the property because the ejectment case had long been dismissed and execution of any judgment should be sought before the MTC where the ejectment complaint originated. The CA ordered the RTC to remand the case to the MTC for execution. The CA denied Regulus’s motion for reconsideration on August 10, 2011, leading to the present petition.

• Equity Jurisdiction Basis: Petitioner argued that the RTC’s release of consigned rentals and the subsequent levy were ordered in the exercise of the RTC’s equity jurisdiction, not as an execution of the dismissed ejectment case; the equity jurisdiction provided an independent basis for the levy.

• Mootness: Petitioner contended that the CA petition should have been dismissed as moot and academic because the property had already been auctioned and redeemed, and the redemption price had been released to petitioner, leaving no actual controversy.

• Procedural Defect: Petitioner maintained that the CA petition should have been dismissed outright for lack of a notarial seal on the Verification and Certification against Forum Shopping, rendering the petition fatally defective.

• Lack of Jurisdiction: Respondent adopted the CA’s conclusion that the RTC had no jurisdiction to order the levy, as the ejectment case was already final and the levy could not be justified as execution pending appeal.

• Nullity of Execution: Respondent argued that the levy on execution and the subsequent auction sale were null and void, and therefore the CA’s ruling on the jurisdictional issue was not rendered moot and academic.

• Waiver of Formal Defect: Respondent countered that it was too late for petitioner to raise the alleged formal defect in the verification and certification, as the CA had already given due course to the petition.

• Jurisdiction of the RTC to Levy: Whether the RTC had jurisdiction to issue the orders directing the levy on respondent’s real property, despite the final dismissal of the ejectment case, and whether the levy was properly anchored on the RTC’s equity jurisdiction rather than its appellate jurisdiction.

• Mootness: Whether the subsequent auction sale and redemption of the property rendered the CA petition moot and academic, thereby precluding the CA from deciding the jurisdictional question.

• Defect in Verification/Certification: Whether the absence of the notarial seal on the Verification and Certification against Forum Shopping attached to the CA petition warranted outright dismissal of the petition.

• Jurisdiction of the RTC to Levy: The RTC possessed jurisdiction to levy on respondent’s real property. The orders allowing withdrawal of consigned rentals — issued on July 25, 2003 and November 28, 2003 — were rendered in the exercise of the RTC’s equity jurisdiction, a jurisdiction separate and distinct from its appellate jurisdiction over the dismissed ejectment case. The dismissal of the ejectment complaint had the effect of blotting out the complaint completely, so the RTC could not have been acting as an appellate court. The levy order of June 30, 2008 was issued to satisfy the amounts due under the lease contracts as determined in those equity orders, not as execution of an ejectment judgment. Moreover, the initial writ of execution of December 18, 2003 already expressly authorized levy on real property if personal property was insufficient; the later levy order was merely a reiteration and enforcement of that original writ. Under Section 1, Rule 39 of the Rules of Court, execution is to be sought from the court of origin — here, the RTC that issued the equity orders. Thus, the RTC correctly entertained the motion for levy, and the CA erred in treating the levy as an attempted execution of a non-existent ejectment judgment.

• Mootness: The CA correctly exercised jurisdiction over the petition despite the redemption. A case becomes moot and academic only when supervening events eliminate any practical use or value for the court’s resolution. The question whether the RTC had jurisdiction to levy remained a justiciable controversy; jurisdiction is conferred by law and cannot be waived or conferred by agreement, and its absence may be raised at any stage, even on appeal. Even if the specific controversy were otherwise moot, the jurisdictional issue was capable of repetition yet evading review, justifying the CA’s adjudication.

• Defect in Verification/Certification: The absence of a notarial seal was not fatal. The Verification and Certification against Forum Shopping were in fact submitted and bore the notary public’s signature and stamp; only the seal was missing. A defect in the verification does not necessarily render the pleading fatally defective; the court may order its correction or act on the pleading if the ends of justice so require. While noncompliance with the certification against forum shopping is generally not curable by subsequent compliance, the rule is not jurisdictional and may be relaxed on grounds of substantial compliance or special circumstances. Here, the CA correctly refused to dismiss the petition, adhering to the principle that litigation should, as much as possible, be resolved on the merits, and procedural rules should not be applied with undue strictness when they do not impair the proper administration of justice.

• Equity Jurisdiction — Equity jurisdiction aims to provide complete justice where strict legal rules would cause inflexibility; its purpose, among others, is to prevent unjust enrichment and to ensure restitution. In this case, the RTC’s orders for withdrawal of consigned rentals and the ensuing levy were rooted in equity jurisdiction to give effect to the lease contracts after the ejectment case had been dismissed, thereby preventing the lessee’s unjust retention of the property without payment.

• Court of Origin Rule in Execution — Under Section 1, Rule 39 of the Rules of Court, execution of a final judgment or order is to be applied for in the court of origin — the court that issued the order or judgment. The RTC, having issued the equity orders, was the proper court to order their execution, including the levy on real property.

• Separability of Equity and Appellate Jurisdiction — A court’s equity jurisdiction is distinct from its appellate jurisdiction. The dismissal of the ejectment case extinguished the appellate authority of the RTC over that matter but did not affect its inherent power to issue equitable orders to do justice between the parties on the basis of the underlying lease agreements.

• Verification and Certification Defects — A defect in the verification does not necessarily render a pleading fatally defective; the court may order its correction or act on the pleading if the attending circumstances warrant. Noncompliance or defect in the certification against forum shopping, while generally not curable by subsequent correction, is not jurisdictional and may be relaxed upon a showing of substantial compliance or special circumstances.

• Mootness and the Jurisdictional Exception — A case is moot and academic when supervening events eliminate a justiciable controversy, but courts may still entertain it when the issue is capable of repetition yet evades judicial review. An issue of jurisdiction remains a justiciable controversy that prevents a case from becoming moot, because jurisdiction is a matter of law that cannot be waived and may be raised at any stage.

• Procedural Leniency — Courts should not be unduly strict on procedural lapses that do not impair the proper administration of justice; the higher objective of procedural rules is to protect substantive rights, and litigation should, as much as possible, be decided on the merits rather than on technicalities.

• “The lack of notarial seal in the notarial certificate is a defect in a document that is required to be executed under oath. Nevertheless, a defect in the verification does not necessarily render the pleading fatally defective. The court may order its submission or correction, or act on the pleading if the attending circumstances are such that strict compliance with the Rule may be dispensed with in order that the ends of justice may be served.” — Establishes the lenient treatment of formal defects in verifications.

• “The rule is that courts should not be unduly strict on procedural lapses that do not really impair the proper administration of justice. The higher objective of procedural rules is to ensure that the substantive rights of the parties are protected. Litigations should, as much as possible, be decided on the merits and not on technicalities. Every party-litigant must be afforded ample opportunity for the proper and just determination of his case, free from the unacceptable plea of technicalities.” — Articulates the Court’s policy against excessive technicality.

• “The RTC’s equity jurisdiction is separate and distinct from its appellate jurisdiction on the ejectment case. The RTC could not have issued its orders in the exercise of its appellate jurisdiction since there was nothing more to execute on the dismissed ejectment case. … Hence, the RTC orders were clearly issued in the exercise of the RTC’s equity jurisdiction, not on the basis of its appellate jurisdiction.” — Clarifies the distinction between equity and appellate jurisdiction.

• “Execution shall be applied for in the court of origin, in accordance with Section 1, Rule 39 of the Rules of Court. … The RTC is the court with jurisdiction to order the execution of the issued RTC orders.” — Reaffirms the rule on the proper court for execution.

• Altres, et al. v. Empleo, et al., G.R. No. 180986, December 10, 2008 — Followed for the rule that a defect in the verification does not necessarily render a pleading fatally defective; the court may allow correction or act on the pleading to serve the ends of justice.

• In-N-Out Burger Inc. v. Sehwani, Incorporated, et al., G.R. No. 179127, December 24, 2008 — Cited for the principle that noncompliance or defect in the certification against forum shopping is not jurisdictional and may be relaxed on grounds of substantial compliance or special circumstances.

• Heirs of Amada A. Zaulda v. Zaulda, G.R. No. 201234, March 17, 2014 — Applied to support the policy that courts should not be unduly strict on procedural lapses and that cases should be resolved on the merits.

• Peñafrancia Sugar Mill, Inc. v. Sugar Regulatory Administration, G.R. No. 208660, March 5, 2014 — Followed for the definition of a moot and academic case.

• Carpio v. CA, et al., G.R. No. 183102, February 27, 2013 — Cited for the exception to mootness when the issue is capable of repetition yet evades judicial review.

• Garcia v. Ferro Chemicals, Inc., G.R. No. 172505, October 1, 2014 — Invoked for the doctrine that jurisdiction is vested by law, cannot be waived, and may be raised even on appeal; a reviewing court is not precluded from ruling on the lower court’s lack of jurisdiction even if the issue was not raised by the parties.

• Trans International v. CA, et al., 348 Phil. 830 (1998) — Cited for the principle that the appellate jurisdiction of courts is conferred by law and acquired upon perfection of an appeal.

• Reyes v. Lim, et al., 456 Phil. 1 (2003) — Relied upon for the definition and purposes of equity jurisdiction, including the prevention of unjust enrichment and the assurance of restitution.

• Section 5, Rule 39, Rules of Court — Effect of reversal of executed judgment; cited in the prior CA decision affirming the RTC’s equity jurisdiction to order restitution or reparation as equity and justice may warrant.

• Sections 5 and 6, Rule 135, Rules of Court — Inherent powers of courts and the means to carry jurisdiction into effect; used as additional statutory anchors for the RTC’s authority to issue the equitable orders allowing withdrawal of deposits.

• Section 1, Rule 39, Rules of Court — Execution upon final judgments or orders; defines the court of origin as the proper forum for seeking execution, applied here to hold that the RTC was the correct court to enforce its own equity orders.

• Section 1, Rule 129, Rules of Court — Judicial notice, when mandatory; invoked by the Court to take judicial notice of the prior Supreme Court resolution in G.R. SP No. 171429 that affirmed the validity of the RTC equity orders.

• Section 8, A.M. No. 02-8-13-SC (2004 Rules on Notarial Practice) — Definition of “Notarial Certificate”; referred to in discussing the missing notarial seal and why it did not render the verification and certification fatally defective.

Antonio T. Carpio, Mariano C. Del Castillo, Jose Catral Mendoza, Marvic M.V.F. Leonen