SPOUSES ARSENIO AND NIEVES S. REYES, PETITIONERS, VS. SOLEMAR DEVELOPMENT CORPORATION AND RENATO M. TANSECO, RESPONDENTS

Reyes versus Solemar Development

The Case

This is the story of spouses Arsenio and Nieves Reyes, who claim to own a large parcel of land in Parañaque, and Solemar Development Corporation, headed by Renato Tanseco, who claim the very same land under their own titles. The spouses sued for damages and injunction after Tanseco entered the property and tore down their fence. The case matters for two enduring lessons: first, that jurisdiction over the subject matter is fixed by the allegations of the complaint, not by its caption; and second, that a final judgment quieting title binds not only the named parties but also those in privity with them, including the Republic itself.

Procedural History

On the first track, the spouses filed a complaint for damages and preliminary injunction with the Regional Trial Court of Makati City, Branch 135. They later sought to amend the complaint to implead a lessee and to attack Solemar's titles. The trial court admitted the amended complaint, but the Court of Appeals annulled that order, and the Supreme Court affirmed with finality. Solemar then moved to dismiss the original complaint for lack of jurisdiction, arguing it was really a forcible entry case. The trial court denied the motion, ruling that the case involved recovery of possession and ownership. On certiorari, the Court of Appeals reversed and ordered the dismissal, holding that the complaint was meant to restore possession. The spouses elevated the matter to the Supreme Court by petition for review.

On the second track, the Republic, through the Land Registration Authority, sued the spouses in the Regional Trial Court of Makati City, Branch 60, to declare their title void. Meanwhile, Solemar sued the spouses to quiet its own titles before Branch 61, which declared the spouses' title spurious and cancelled it. That decision became final after the Court of Appeals and the Supreme Court refused to disturb it. When the Solicitor General moved to withdraw the Republic's complaint, the trial court refused, citing the spouses' compulsory counterclaim. The Court of Appeals ordered the dismissal, without prejudice to the spouses' claim against the Assurance Fund. The spouses then came to the Supreme Court by petition for review. The two petitions were later consolidated.

Facts

The spouses Reyes held Transfer Certificate of Title Number 31798 over a parcel of land in Barangay San Dionisio, Parañaque. In December 1991, they fenced the property and posted two security guards. On January 6, 1992, Renato Tanseco, accompanied by police officers, entered the premises and demolished the perimeter fence, allegedly using force and intimidation and relying on a demolition notice and permit.

Eight days later, on January 14, 1992, the spouses filed their complaint for damages and injunction. Solemar answered that it owned the property and that the spouses' title was of doubtful authenticity, as found by the Land Registration Authority Verification Committee. In a separate quieting of title case, the trial court found Solemar's eight titles valid and traced through the original registration, while the spouses' title was shown to be spurious. That judgment became final and the spouses' title was cancelled.

When the Republic sought to withdraw its own nullity complaint, the trial court refused because of the spouses' compulsory counterclaim, which included a claim against the Assurance Fund. The Court of Appeals ordered the dismissal of both the complaint and the counterclaim, without prejudice to a claim against the Assurance Fund after impleading the proper parties.

Issues

• Whether or not the spouses' complaint is one for forcible entry falling within the jurisdiction of the Municipal Trial Court, rather than a case for recovery of ownership cognizable by the Regional Trial Court.
• Whether or not the final judgment in the quieting of title case operates as res judicata against the Republic, notwithstanding that the Republic was not impleaded therein.
• Whether or not the dismissal of the Republic's complaint also carries with it the dismissal of the spouses' compulsory counterclaim, including their claim against the Assurance Fund.

Applicable Provisions

Section 1 of Rule 70 of the Rules of Court defines forcible entry and its one-year period:

SECTION 1. Who may institute proceedings, and when. — Subject to the provisions of the next succeeding section, a person deprived of possession of any land or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against whom the possession of any land or building is unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract, express or implied, or the legal representatives or assigns of any such lessor, vendor, vendee, or other person, may, at any time within one (1) year after such unlawful deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession, or any person or persons claiming under them, for the restitution of such possession, together with damages and costs.

This provision governs the first issue, because the spouses filed suit within one year of the alleged forcible entry, which places the action within the Municipal Trial Court's jurisdiction.

Section 96 of Presidential Decree Number 1529 governs actions against the Assurance Fund:

An action for compensation from the Assurance Fund must be filed against the Register of Deeds of the province or city where the land is situated and the National Treasurer as defendants when such action is brought to recover for loss or damage or for deprivation of land or any estate or interest therein arising wholly through fraud, negligence, omission, mistake or misfeasance of the court personnel, Register of Deeds, his deputy, or other employees of the registry in the performance of their respective duties.

This provision bears on the third issue, because the spouses' counterclaim failed to implead the indispensable parties and to allege the facts required for such a claim.

Ruling

On the first issue, the Court held that the Court of Appeals did not err. Jurisdiction over the subject matter is determined by the allegations of the complaint, irrespective of whether the plaintiff is entitled to recover, and cannot depend on how one party characterizes the case. Reading the complaint, the Court found that the spouses were asserting their right to peaceful possession, which is proper in an ejectment suit. Significantly, the complaint was filed within one year, in fact within eight days, of the forcible entry. All ejectment cases fall within the Municipal Trial Court's jurisdiction. The denial of the petition followed.

On the second issue, the Court held that the requisites of res judicata were present: a final judgment on the merits, rendered by a court with jurisdiction, with identity of parties, subject matter, and cause of action. It rejected the argument that there was no identity of parties because the Republic was not impleaded, stressing that substantial identity suffices where there is privity. The quieting of title case had been filed not only against the spouses but also against the Register of Deeds, an officer of the Republic, so the Republic could not be considered a stranger. To allow a remand would violate the stability of judgments and would let one branch of the trial court pass upon issues already settled by a coordinate court and sustained by the Supreme Court.

On the third issue, the Court held that the dismissal of the counterclaim was proper. A compulsory counterclaim is ancillary to the main controversy and cannot subsist once the main case is dismissed. The dismissal was without prejudice to the spouses pursuing their claim against the Assurance Fund after impleading the proper parties, since their one-paragraph counterclaim did not sufficiently allege the facts constituting the conditions for payment from the Fund.

Doctrine

First, jurisdiction over the subject matter is determined by the allegations of the complaint, not by its caption or by the parties' characterization. A complaint captioned as one for damages may nonetheless be an ejectment case if its allegations assert the right to peaceful possession, and if it is filed within one year of the forcible entry, it falls under the Municipal Trial Court.

Second, res judicata does not require absolute identity of parties; substantial identity, or privity between them, is sufficient. A judgment quieting title binds the Republic where its officer, the Register of Deeds, was a party to the case.

Third, a compulsory counterclaim is ancillary and cannot survive the dismissal of the main complaint. A claim against the Assurance Fund under Section 96 of Presidential Decree Number 1529 must implead the Register of Deeds and the National Treasurer and must allege the facts of fraud or negligence.

Disposition

The Supreme Court denied both petitions, sustained the dismissal of the spouses' complaint for lack of jurisdiction in the Regional Trial Court, and dismissed their counterclaim without prejudice to a separate claim against the Assurance Fund, with costs against the spouses.

Remember This

Memorize this line: jurisdiction is determined by the allegations of the complaint, not by its title. Examiners use this case to test the one-year rule in forcible entry, the substantial identity rule in res judicata, and the ancillary nature of a compulsory counterclaim.