Francel Realty Corp. vs. Court of Appeals

G.R. No. 117051 (January 22, 1996)

Facts:

Petitioner Francel Realty Corporation initiated a complaint for unlawful detainer against private respondent Francisco T. Sycip in the Municipal Trial Court (MTC) of Bacoor, Cavite. The basis of the complaint was a Contract to Sell executed between the parties for a townhouse unit located at Francel Townhomes, with a total price of P451,000.00. The contract stipulated that in the event of default in the payment of two or more installments, the entire obligation would become due, allowing the seller to rescind the contract and take possession of the property. It also stated that the buyer would vacate the premises without the need for court action, and the downpayment would be treated as earnest money or rental for the use of the premises.

Petitioner alleged that private respondent had failed to pay the monthly amortization of P9,303.00 since October 30, 1990, despite several demands to update his payments and vacate the premises, the latest being a letter dated September 26, 1992. Due to private respondent's refusal to vacate, petitioner sought legal counsel and filed the complaint, requesting that private respondent be ordered to vacate and pay monthly rentals from October 30, 1990, along with attorney's fees and litigation expenses.

Private respondent filed a motion to dismiss the complaint, which was denied by the MTC. He subsequently filed an answer, claiming that he ceased payments due to the defective construction of the townhouse. He also mentioned that he had filed a complaint against the petitioner for "unsound real estate business practice" with the Housing and Land Use Regulatory Board (HLURB). In his answer, he sought moral and exemplary damages, as well as attorney's fees.

The MTC ruled that private respondent's answer was filed out of time and later dismissed the complaint for lack of jurisdiction, stating that the case was cognizable by the HLURB. The MTC also awarded private respondent damages, which included moral and exemplary damages and attorney's fees. This decision was affirmed by the Regional Trial Court on appeal.

Petitioner then filed a petition for review in the Court of Appeals, arguing that the MTC had no jurisdiction to award damages since it had already ruled that it lacked jurisdiction over the case.

Legal Issues:

1. Does the MTC have jurisdiction over the complaint for unlawful detainer filed by the petitioner?
2. If the MTC lacks jurisdiction, can it still award damages in the form of moral and exemplary damages and attorney's fees?

Arguments:

• Petitioner’s Arguments:

  • The MTC's ruling that it lacked jurisdiction over the case should preclude it from awarding damages.
  • The amounts claimed by private respondent in his counterclaim exceeded the jurisdictional limits of the MTC.

• Private Respondent’s Arguments:

  • The MTC has jurisdiction over unlawful detainer cases regardless of the amount of damages sought.
  • The counterclaim for damages was valid and should be awarded based on the circumstances of the case.

Court’s Decision and Legal Reasoning:

The Court held that the MTC correctly determined it had no jurisdiction over the complaint for unlawful detainer. The case involved the rights of a buyer under a Contract to Sell and the provisions of P.D. No. 957, which governs real estate transactions. Since private respondent claimed a right to stop payments due to alleged defects in the property, the matter fell under the exclusive jurisdiction of the HLURB.

The Court further reasoned that the MTC erred in awarding damages to private respondent because a counterclaim can only be filed if the court has jurisdiction over the main action. Since the MTC had already ruled it lacked jurisdiction, the counterclaim was invalid. Additionally, the MTC's decision noted that the counterclaim was filed out of time, further invalidating it.

The Court also found no basis for the award of moral and exemplary damages or attorney's fees, as there was no evidence of bad faith or malicious intent on the part of the petitioner in filing the unlawful detainer action.

Significant Legal Principles Established:

1. The jurisdiction of the MTC over unlawful detainer cases is limited to actions where the court has jurisdiction over the subject matter; if it lacks jurisdiction, it cannot award damages.
2. Counterclaims must be filed in a court that has jurisdiction over the main action; otherwise, they are considered invalid.
3. Awards for damages, including moral and exemplary damages and attorney's fees, require a clear basis in fact and law, and cannot be awarded without justification.