Ruby Shelter Builders and Realty Development Corporation vs. Formaran III

An action for annulment or rescission of a sale of real property is a real action, not one incapable of pecuniary estimation, when the ultimate objective is the recovery of title to and possession of the real property, especially when title has already been transferred to the adverse party.

Petitioner obtained a multi-million peso loan from respondents Tan and Obiedo, secured by real estate mortgages. Upon default, the parties executed a Memorandum of Agreement (MOA) requiring petitioner to execute Deeds of Absolute Sale (dacion en pago) with a right to redeem. Petitioner failed to redeem; respondents notarized the deeds, secured new TCTs in their names, and took possession of the properties. Petitioner then filed a complaint to annul the deeds, claiming they were mere securities constituting pactum commissorium.

• Original Filing: RTC, Branch 22, Naga City, Civil Case No. RTC-2006-0030
• Lower Court Decision: March 24, 2006 (Order granting respondent's Omnibus Motion to pay additional docket fees under Sec 7(a)); March 29, 2006 (Order denying motion for partial reconsideration)
• Appeal: Petition for Certiorari to the CA (CA-G.R. SP No. 94800)
• CA Decision: November 22, 2006 (Denied petition, affirmed RTC orders)
• SC Action: Petition for Review on Certiorari under Rule 45 directly to the SC

• The Loan and MOA: Petitioner borrowed P95,700,620.00 from respondents Tan and Obiedo, secured by mortgages over five parcels of land. Upon default, a MOA dated March 17, 2005 was executed. The MOA condoned interests/penalties (P74,678,647.00) in exchange for petitioner executing Deeds of Absolute Sale over the five properties, dated January 2, 2006. Petitioner had until December 31, 2005 to redeem the properties by paying specific redemption prices.
• Execution of Deeds and Transfer of Title: Petitioner executed the Deeds of Absolute Sale (notarized January 3, 2006). Petitioner failed to pay by December 31, 2005. On March 8, 2006, respondents presented the deeds to the Register of Deeds and secured new TCTs in their names.
• The RTC Complaint: On March 16, 2006, petitioner filed a complaint for declaration of nullity of deeds of sale and damages, with prayer for TRO/injunction. Petitioner paid P13,644.25, assessed by the Clerk of Court under Sec 7(b)(1), Rule 141 (actions incapable of pecuniary estimation). Petitioner claimed the deeds were mere securities (pactum commissorium) and the acknowledgment was falsified. Petitioner deliberately omitted that respondents already had new TCTs and possession, and did not pray for cancellation of respondents' titles or recovery of possession.
• Respondent's Defense and Motion: Respondent Tan argued the deeds were valid dacion en pago, not securities. He filed an Omnibus Motion arguing the case is a real action requiring fees under Sec 7(a) based on property value. The RTC Clerk of Court computed the additional docket fees at P720,392.60.

• The complaint is primarily for annulment of deeds of sale, which is an action incapable of pecuniary estimation under Sec 7(b)(1), Rule 141.
• Relies on Spouses De Leon v. Court of Appeals, which held that an action for annulment/rescission of a contract of sale of real property is incapable of pecuniary estimation.
• The CA decision affirming the RTC orders will result in grave injustice due to the prohibitive amount of additional docket fees (P720,392.60).

• The action involves real properties; docket fees should be computed under Sec 7(a), Rule 141.
• The issue of how much filing/docket fees should be paid was never raised as an issue in Russell v. Vestil.
• The ultimate objective of the complaint is the recovery of real property, making it a real action.

• Procedural Issues: Whether the CA committed grave abuse of discretion in affirming the RTC order requiring petitioner to pay additional docket fees computed under Sec 7(a), Rule 141.
• Substantive Issues: Whether an action for declaration of nullity of deeds of sale involving real property, where title and possession have already transferred to the adverse party, is a real action subject to docket fees based on the property's value under Sec 7(a), or an action incapable of pecuniary estimation under Sec 7(b)(1), Rule 141.

• Procedural: The CA did not commit grave abuse of discretion. The RTC and CA properly applied the law. Grave abuse of discretion implies a capricious and whimsical exercise of judgment equivalent to lack of jurisdiction; the lower courts acted properly and in accordance with law.
• Substantive: The action is a real action. The nature of an action is determined by the allegations in the complaint and the principal relief sought. Although the complaint was captioned as annulment of deeds, the ultimate objective was the recovery of title and possession. Petitioner deliberately omitted that respondents already had new TCTs and possession to evade higher fees. An action for annulment/rescission of sale of real property is a real action when its prime objective is to recover the real property, especially when title has already transferred. Docket fees must be computed under Sec 7(a) based on the fair market value of the property. Spouses De Leon does not apply because there, the action was solely for annulment/rescission with no transfer of title or possession to the adverse party. The claim of "prohibitive" fees lacks merit; a corporate entity engaged in multi-million transactions cannot claim indigency to evade docket fees.

• Nature of Action Determined by Allegations/Principal Relief — The nature of an action is determined by the allegations in the body of the pleading and the principal action or remedy sought, not by its title or heading. Determination must be done on a case-to-case basis depending on the facts and circumstances.
• Real Action — A real action is one affecting title to or recovery of possession of real property. An action for annulment or rescission of a sale of real property is a real action if its prime objective is to recover said real property.
• Payment of Docket Fees is Jurisdictional — The court acquires jurisdiction over any case only upon the payment of the prescribed docket fee (Manchester Development Corp. v. CA).
• Sun Insurance Doctrine — Guidelines for docket fee payment: (1) Payment of docket fee vests trial court with jurisdiction; court may allow payment within reasonable time but not beyond prescriptive/reglementary period; (2) Same rule applies to permissive counterclaims, third-party claims; (3) If judgment awards a claim not specified or left for determination, additional filing fee constitutes a lien on the judgment.

• Section 7(a), Rule 141, Rules of Court (as amended by A.M. No. 04-2-04-SC) — Governs docket fees for real actions based on the fair market value of the real property in litigation (stated in current tax declaration or BIR zonal valuation, whichever is higher). Applied to compute petitioner's additional docket fees.
• Section 7(b)(1), Rule 141, Rules of Court — Governs docket fees for actions where the value of the subject matter cannot be estimated. Held inapplicable to petitioner's complaint because it is a real action.
• Section 1, Rule 4, Rules of Court — Defines a real action as one affecting title to or recovery of possession of real property. Used to classify the nature of petitioner's action.