Specified Contractors & Development, Inc. vs. Pobocan

An action for specific performance to compel execution of deeds of conveyance pursuant to an oral contract is a personal action subject to a six-year prescriptive period under Article 1145 of the New Civil Code, not a real action under Article 1141, where the complaint seeks enforcement of contractual obligation rather than recovery of title or possession of real property.

Respondent Jose A. Pobocan served as president of Specified Contractors & Development, Inc. and its subsidiary until his retirement in March 2011. Allegedly, petitioner Architect Enrique O. Olonan orally agreed to grant respondent one condominium unit for every building constructed by the company to induce him to remain employed. Pursuant to this alleged agreement, respondent claimed entitlement to Unit 708 of Xavierville Square Condominium and Unit 208 of Sunrise Holiday Mansion Building I in Alfonso, Cavite.

• Employment Relationship: Respondent served as president of Specified Contractors and Starland Properties Inc., and executive assistant of its subsidiaries, until his retirement in March 2011.
• Alleged Oral Agreement: Petitioner Architect Olonan allegedly promised respondent one unit for every building constructed by the company as part of his compensation package to induce continued employment.
• Subject Properties: Two units allegedly assigned under this arrangement were Unit 708 of Xavierville Square Condominium in Quezon City and Unit 208 of Sunrise Holiday Mansion Building I in Alfonso, Cavite.
• Demand Letter: On March 14, 2011, respondent wrote to Architect Olonan requesting execution of Deeds of Assignment or Sale over the subject units and other benefits, citing the 1994 agreement for Unit 208 and the December 1, 1999 agreement for Unit 708 (then Unit 803).
• Complaint: When petitioners failed to comply, respondent instituted the complaint for specific performance on November 21, 2011, praying for execution of conveyance documents and damages.
• Possession: Respondent had been occupying Unit 708 (formerly Unit 803) of Xavierville Square Condominium. Petitioners claimed this occupancy was merely tolerated due to respondent's position as company president without surrender of ownership. Petitioners asserted that Unit 208 remained under their possession and control.
• Certificate of Titles: Condominium Certificate of Title (CCT) No. N-18347 for Unit 708 was issued on September 11, 1997, while CCT No. CT-613 for Unit 208 was issued on March 12, 1996.

• Jurisdiction: Petitioners argued that the RTC lacked jurisdiction because the complaint involved a claim arising from an employer-employee relationship, which falls within the exclusive jurisdiction of the labor arbiter.
• Statute of Frauds: The alleged oral agreement for the transfer of real property was unenforceable under the statute of frauds for lack of any written document, note, or memorandum evidencing the assignment or transfer of the subject units.
• Prescription: Assuming the oral agreements existed, the cause of action had prescribed, having been allegedly entered into in 1994 and 1999, with the complaint filed only in 2011.

• Nature of Action: Respondent maintained that the action was for specific performance to compel execution of deeds of conveyance, not a real action, and therefore the RTC had jurisdiction.
• Partial Performance: Respondent argued that partial performance of the alleged obligation—evidenced by his possession of Unit 708, payment of condominium dues and realty taxes for that unit, endorsement of furniture for Unit 208, and receipt of rental shares from Unit 208—removed the agreement from the coverage of the statute of frauds.
• Prescriptive Period: Respondent contended that the obligation to convey the units arose only upon their completion and readiness for occupancy, not at the time of the oral agreement, and that the action was a real action prescribing in thirty years.

• Jurisdiction: Whether the RTC had jurisdiction over the complaint, which allegedly invoked rights arising from an employer-employee relationship.
• Prescription: Whether respondent's cause of action had already prescribed.
• Statute of Frauds: Whether the action was barred by the statute of frauds.

• Jurisdiction: Jurisdiction over the subject matter is determined by the allegations in the complaint and the character of the relief sought. The complaint sought to compel petitioners to execute written instruments pursuant to an alleged oral contract, making it an action for specific performance—a personal action incapable of pecuniary estimation cognizable by the RTC. Petitioners were estopped from raising the jurisdictional issue after actively participating in RTC proceedings, obtaining a favorable ruling, and raising the issue only after the CA reversed the RTC.
• Prescription: The action was for specific performance, a personal action founded upon an oral contract, which prescribes in six years under Article 1145 of the New Civil Code, not thirty years under Article 1141 governing real actions. The complaint, filed on November 21, 2011, was instituted seventeen years after the 1994 oral agreement and almost twelve years after the December 1, 1999 agreement, well beyond the six-year period. Even if the obligation were deemed to arise upon completion of the units, the certificates of title were issued in 1996 and 1997, more than thirteen and fourteen years before the 2011 demand letter, respectively. The right of action had already accrued and prescribed.
• Statute of Frauds: In light of the dismissal being warranted on the ground of prescription, which was apparent from the complaint and its annexes, discussion of the statute of frauds was rendered unnecessary.

• Determination of Nature of Action and Jurisdiction — The nature of an action and the jurisdiction of the court are determined by the allegations in the complaint and the character of the relief sought, irrespective of whether the plaintiff is entitled to the claims asserted. What determines jurisdiction is the cause of action alleged, not the defenses raised.
• Specific Performance as Personal Action — An action to compel execution of a deed of sale based on a previous oral contract is a personal action for specific performance, not a real action, even if the end result would be the transfer of real property. Real actions affect title to or possession of real property; personal actions seek enforcement of contracts or recovery of damages.
• Prescription of Oral Contracts — Actions upon oral contracts must be brought within six years from the time the right of action accrues under Article 1145 of the New Civil Code. The shorter period reflects the frailty of human memory and the evidentiary risks associated with oral agreements.
• Estoppel to Challenge Jurisdiction — A party who actively participates in proceedings before a court, obtains a favorable ruling therefrom, and only raises the issue of jurisdiction after an adverse ruling on appeal is estopped from questioning that court's jurisdiction.
• Future Things as Objects of Contracts — Future things may be the object of a contract under Article 1347 of the New Civil Code, as in pre-selling agreements; however, this does not delay the accrual of the cause of action for enforcement beyond the statutory period.

• "What determines the nature of the action and which court has jurisdiction over it are the allegations in the complaint and the character of the relief sought."
• "Not all actions involving real property are real actions. Although the end result of the respondent's claim was the transfer of the subject property to his name, the suit was still essentially for specific performance, a personal action, because it sought [the] execution of a deed of absolute sale based on a contract which he had previously made."
• "The shorter period provided by law to institute an action based on an oral contract is due to the frailty of human memory. Nothing prevented the parties from reducing the alleged oral agreement into writing, stipulating the same in a contract of employment or partnership, or even mentioning the same in an office memorandum early on."
• "While the lack of jurisdiction of a court may be raised at any stage of an action, nevertheless, the party raising such question may be estopped if he has actively taken part in the very proceedings which he questions and he only objects to the court's jurisdiction because the judgment or the order subsequently rendered is adverse to him."

• Spouses Saraza, et al. v. Francisco, 722 Phil. 346 (2013) — Cited for the principle that an action seeking execution of a deed of sale based on a previous contract is essentially for specific performance, a personal action, notwithstanding that the end result is transfer of property.
• Cabutihan v. Landcenter Construction & Development Corporation, 432 Phil. 927 (2002) — Distinguished actions seeking execution of deeds of sale not connected to a contract from those, like the present case, seeking enforcement of a contractual undertaking.
• Surviving Heirs of Alfredo R. Bautista v. Lindo, 728 Phil. 630 (2014) — Cited for the classification of actions for specific performance as incapable of pecuniary estimation and therefore cognizable by Regional Trial Courts.
• Domondon v. NLRC, 508 Phil. 541 (2005) — Distinguished as involving monetary claims arising from employer-employee relationship where the existence of the agreement was not in issue, unlike the present case where the existence of the oral agreement itself was the crux of the controversy.
• National Steel Corporation v. Court of Appeals, 362 Phil. 150 (1999) — Cited for the doctrine of estoppel to raise jurisdictional objections after active participation in proceedings.

• Article 1141, New Civil Code — Real actions over immovables prescribe after thirty years; erroneously applied by the RTC to the personal action for specific performance.
• Article 1144, New Civil Code — Actions upon written contracts prescribe in ten years; raised by petitioners but inapplicable to the oral agreement alleged.
• Article 1145, New Civil Code — Actions upon oral contracts prescribe in six years; applied by the Court to bar respondent's claim filed twelve to seventeen years after the alleged agreements.
• Article 1347, New Civil Code — Future things may be the object of a contract; invoked by respondent to argue delayed accrual of cause of action, rejected by the Court as not affecting the prescriptive period once the right to demand performance accrued.

Maria Lourdes P.A. Sereno (Chief Justice, Chairperson), Teresita J. Leonardo-De Castro, Mariano Del Castillo, and Francis H. Jardeleza.