G.R. Nos. 178964 & 178980-81, June 30, 2016

FIRST DIVISION [ G.R. Nos. 178964 & 178980-81, June 30, 2016 ] MAXIMO K. ILUSORIO V. ERLINDA K. ILUSORIO, RAMON K. ILUSORIO, MARIETTA K. ILUSORIO AND SHEREEN K. ILUSORIO); G.R. NOS. 178995-97 (BAGUIO COUNTRY CLUB CORP., ET AL. V. HON. MARCELINO L. SAYO, JR., ET AL.); G.R. NO. 198296 (MA. ERLINDA I. BILDNER V. HON. MARCELINO L. SAYO, JR., ET AL); AND G.R. NO. 198297 (SYLVIA K. ILUSORIO V. HON. MARCELINO L. SAYO, JR., ET AL.

The Consolidated Petitions before us assail the Decisions[1] and Resolutions[2] of the Court of Appeals (CA), which affirmed the ruling of the Regional Trial Court (RTC). The RTC denied the Motions to Dismiss and the Motions for Reconsideration (MRs) filed by herein petitioners: Maximo K. Ilusorio, Baguio Country Club Corporation (BCCC), Federico R. Agcaoili, Victoria C. de los Reyes, Ma. Erlinda I. Bildner, and Sylvia K. Ilusorio. [3] They are the defendants in Civil Case No. 03-108667 pending before the RTC of Manila, Branch 45.

THE FACTS

The civil case from which these Petitions originated concerns the Complaint for the annulment of sale or transfer to other entities by herein petitioners of 463 shares of stock (Potenciano Shares) in the BCCC that are registered in the name of Potenciano Ilusorio (Potenciano), patriarch of the individual parties.

Herein respondents Erlinda and her children - Ramon, Marietta, and Shereen (all surnamed Ilusorio) - filed the instant Complaint. They alleged that Maximo Ilusorio (Max), Sylvia Ilusorio (Sylvia), and Erlinda Bildner (Lin), with the participation and assistance of petitioners Agcaoili and de los Reyes, fraudulently transferred the Potenciano shares to other entities, to the prejudice of their shares in the estate of their deceased father.[4]

They claimed that upon the death of Potenciano, the shares passed by operation of law to his wife and children. Since his estate has not been settled, it is allegedly still co-owned by Erlinda and their six children.[5]

However, when BCCC's list of stockholders as of 24 September 2003 were submitted to the Securities and Exchange Commission, the list showed that except for the 30 shares registered in trust in Sylvia's name, the Potenciano shares were no longer registered in the names of Potenciano or his holding companies. Instead, they were held by new stockholders, namely, petitioner Max or Lin and corporations or entities owned or controlled by them. [6]

Petitioners filed their respective Motions to Dismiss.[7] Petitioners Max, BCCC, Agcaoili and de los Reyes argued that the Complaint filed by respondents against them (1) did not state a cause of action, (2) was fatally defective, and (3) should be settled in a probate court. On the first ground, they argued that the Complaint failed to state a cause of action, because it did not state with particularity the ultimate facts constituting the alleged illegal transfer of the Potenciano shares. On the second ground, they averred that the Complaint contained a defective Verification and Certification against forum shopping, because it was signed only by private respondent Ramon Ilusorio without evidence that he was duly authorized to sign for his co-plaintiffs. On the third ground, the movants asserted that jurisdiction over the case belonged to the probate court, and not to the trial court.[8]

Aside from the above-mentioned grounds, an additional ground raised by petitioners Sylvia and Lin was respondents' non-payment of the proper filing fees.[9] They alleged that respondents circumvented the proper amount of filing fees by not declaring the value of the properties in litigation. [10]

The RTC denied all their Motions to Dismiss,[11] as well as their subsequent Motions for Reconsideration.

Petitions for certiorari were filed before the CA. Maximo's Petition was docketed as CA-G.R. SP No, 88511.[12] Another Petition, docketed as 88546, [13] was separately filed by BCCC, De los Reyes, and Agcaoili. The CA ordered the consolidation of the petitions.[14]

The CA promulgated the assailed Decision[15] dismissing the Petitions for lack of merit.[16] Aggrieved, petitioners filed Motions for Reconsideration, but these motions were also denied for lack of merit.[17]

The Petition for certiorari jointly filed by Sylvia and Lin before the CA, where it was docketed as CA-G.R. SP No. 88575,[18] was likewise denied in the assailed CA Decision.[19] Thereafter, their Motion for Reconsideration was also denied.[20]

Hence, these petitions for review before this Court, which ordered their consolidation in view of the fact that they all originated from the same case (Civil Case No. 03-108667); they have the same antecedent facts and parties; and they share similar issues. [21]

On 3 May 2016, a Motion for Leave to File and to Admit Motion to Drop Erlinda K. Ilusorio as Party Respondent[22] was filed by her heirs on account of her death on 17 February 2016 as proved by the attached Death Certificate. [23]

ISSUE

The pivotal issue in this case is whether the CA erred in affirming the RTC's denial of petitioners' motions to dismiss the civil case initiated by respondents.

OUR RULING

We affirm the CA ruling.

The Complaint sufficiently states a cause of action.

Petitioners Max, BCCC, De los Reyes, and Agcaoili argue that the CA seriously erred when it affirmed the RTC Decision denying their Motions to Dismiss. They allege that the Complaint in Civil Case No. 03-108667 does not sufficiently state a cause of action. In addition, they contend that the phrase "illegally transferred" in paragraph 24 of the Complaint constitutes a conclusion of law, and not an ultimate fact. [24] Paragraph 24 provides:

It is apparent that LIN, SYLVIA, MAX and CHRISTIE, with the participation and assistance of AGCAOILI and DELOS REYES, have illegally transferred the ILUSORIO SHARES to HIGHLANDS, RHINEFIELDS, HERITAGE, PACIFIC, CONTINENTAL, which are corporations or entities owned or controlled by them, and to LIN and MAX. (Emphasis supplied) [25]

We disagree with petitioners.

In determining the sufficiency of a complaint, the three elements of a cause of action must concur in the allegations therein: (a) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (b) an obligation on the part of the named defendant to respect or not to violate such right; and (c) an act or omission on the part of the named defendant violative of the right of the plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for recovery of damages. [26]

We explained in Zuniga-Santos v. Santos-Gran[27] that the basic test in a motion to dismiss on the ground of failure to state a cause of action is whether, assuming the truth of the facts alleged in the complaint, a valid judgment could be rendered in accordance with the relief demanded. [28] As a corollary, only ultimate or essential and not evidentiary facts or legal conclusions are considered for purposes of applying the test. [29] The inquiry is into the sufficiency, not the veracity, of the material allegations.[30]

After a careful scrutiny of the subject Complaint, We find that respondents have alleged ultimate facts which sufficiently state a cause of action.

We quote with approval the discourse of the CA on this matter:

In this case, private respondents have alleged ultimate facts which, if hypothetically admitted, could be the basis of a valid judgment. Private respondents had alleged that the late Potenciano Ilusorio was "the owner of record of 1 Founders share and 13 common shares," and "the beneficial owner of 28 founder shares and 391 common shares," of BCCC, with "total shareholdings of 433 shares xx equivalent to approximately 21% of the total issued and outstanding shares of stock"; that Potenciano's wife, Erlinda, and his children - private respondents Ramon, Marietta and Shereen, petitioner Maximo, Bildner and Sylvia, are his heirs; that the subject shares are conjugal properties of the Ilusorio spouses; that petitioner Maximo, his wife Cristina, and Bildner, with the participation and assistance of BCCC s president, Agcaoili, and corporate secretary Delos Reyes, transferred the 433 Ilusorio shares to Highlands, Rhinefields, Heritage, Pacific, and petitioner Continental, which are corporations owned or controlled by them, and to Maximo and Bildner, so that by 2003, the said shares appeared in the BCCC's list of stockholders to be under the names of the corporations, with shareholdings of 103, 100, 100, 90 and 30 shares, respectively, and under the names of Bildner and Maximo who each holds 5 shares; and that the transfer was simulated, made without Erlinda's marital consent and without any valid consideration, and that Potenciano, who was frail and suffering from Alzheimer's disease, was not legally capacitated to make the transfer. Taken together, these principal allegations make out a cause of action. (Emphasis supplied) [31]

Indeed, the Court cannot accept the contention that the phrase "illegally transferred" in paragraph 24 of the Complaint constitutes a conclusion of law.[32] That statement must not be read in isolation; rather, as properly held by the CA, it should be read together with the other paragraphs of the Complaint. Taken together, they would show that the statement is but an inference from the ultimate facts found within the same Complaint and supported by factual premises in the surrounding paragraphs. In other words, the allegations in the Complaint, if true, would show that the petitioners violated a right pertaining to respondents.

Petitioners' other allegations against the sufficiency of the statement of cause of action include (1) lack of consideration of the transfers of shares;[33] (2) necessity of Erlinda's consent;[34] and (3) Potenciano's lack of capacity to transfer the shares.[35] With respect to these allegations, it is well to note that in Zuniga-Santos,[36] explained the difference between the dismissal of a complaint for failure to state a cause of action and its dismissal based on lack of cause of action. We did so to highlight the hypothetical nature of the allegations in the complaint, as it is merely a test employed to determine the sufficiency of the complaint. Whether or not these allegations are true will have to be threshed out during the trial of the case. [37]

Hence, Our ruling in the instant cases addresses only the issue of the alleged insufficiency of the allegations of the subject Complaint. The allegations bear out the participation of all the petitioners in the illegal transfer of the Potenciano shares. The insufficiency of the factual basis of the allegations in the Complaint is another matter that will be determined only after a full-blown trial has been conducted.

The RTC, and not the probate
court, has jurisdiction over the
subject matter of the case.

Petitioners allege that the CA gravely erred when it ruled that the RTC, instead of a probate or intestate court, can take cognizance of the civil case in the exercise of its general jurisdiction. They stress that after the death of Potenciano, the BCCC shares that are the subject of the Complaint now belong to his estate. Therefore, they contend that the probate court has jurisdiction to settle the issues with regard to whatever rights respondents have over the disputed shares.[38]

In Agtarap v. Agtarap,[39] We explained the extent of the jurisdiction of a probate or intestate court as follows:

The general rule is that the jurisdiction of the trial court, either as a probate or an intestate court, relates only to matters having to do with the probate of the will and/or settlement of the estate of deceased persons, but does not extend to the determination of questions of ownership that arise during the proceedings. The patent rationale for this rule is that such court merely exercises special and limited jurisdiction. As held in several cases, a probate court or one in charge of estate proceedings, whether testate or intestate, cannot adjudicate or determine title to properties claimed to be a part of the estate and which are claimed to belong to outside parties, not by virtue of any right of inheritance from the deceased but by title adverse to that of the deceased and his estate. All that the said court could do as regards said properties is to determine whether or not they should be included in the inventory of properties to be administered by the administrator. If there is no dispute, there poses no problem, but if there is, then the parties, the administrator, and the opposing parties have to resort to an ordinary action before a court exercising general jurisdiction for a final determination of the conflicting claims of title. [40]

In the instant case, the subject Complaint seeks to annul the alleged illegal sale and transfer of the Potenciano shares, which are now in the names of other entities or third persons. Respondents, as plaintiffs, alleged that herein petitioners were responsible for the illegal sale and transfer of the shares. They pray that these shares be returned to the estate of the deceased father.[41]

The Complaint of respondents before the trial court does not seek the inventory of properties or the administration of the estate of their deceased family patriarch. Rather, the cause of action is clearly the annulment of the transfer or sale and the recovery of the shares presently under the names of entities who are not heirs of the estate of the late Potenciano Ilusorio. Essentially, there is an issue of ownership. It is not a probate or an intestate court, but the RTC in the exercise of its general jurisdiction that has the authority to take cognizance of the Complaint filed by respondents.

While jurisprudence provides certain exceptions by which the probate or intestate court can determine the ownership of property,[42]  none of these exceptions obtains in the instant case.

In further opposition to the RTC's jurisdiction, petitioners raise an earlier CA Decision in CA-G.R. SP No. 67687,[43] which has become final and executory. It was held therein that the dispute on the claimed BCCC shares involved in that case was within the exclusive jurisdiction of the %nily courts. Petitioners argue that this ruling constitutes res judicata with respect to the present civil case and therefore bars the RTC as a regular court from proceeding with the case. However, the CA herein is correct in ruling that the earlier CA Decision does not constitute res judicata, because not all requisites for the rule to apply are present.[44] Primarily, there is no identity of parties, causes of action, and reliefs prayed by the parties.[45] The issue involved in the earlier CA Decision was the right to administer Potenciano's BCCC shares, while the issue involved in the civil case herein is the illegality of the sale or transfer of Potenciano's BCCC shares.[46]

On this point, We affirm the CA ruling that the RTC correctly acquired jurisdiction over the case.

The signature of Ramon
Ilusorio in the Verification and
Certification against forum
shopping is sufficient

Petitioners question the sufficiency of the Complaint's Verification and Certification against forum shopping. These were signed by respondent Ramon Ilusorio only on behalf of his mother and other siblings. Petitioners posit that if only Ramon signed the Verification and Certification, how could he have certified that his mother and siblings caused the preparation of the Complaint, read it, and attested to the truth of the allegations therein based on t^eir own personal knowledge?

In Delfino, Sr. v. Anasao,[47] We held that the verification requirement is deemed substantially complied with even when only one of the plaintiff-heirs, who had sufficient knowledge and belief to swear to the truth of the allegations in the petition, signed the verification attached to it. The same liberality was likewise applied to the Certification against forum shopping when the Court allowed the signature of only one of the petitioners because of the commonality of interest of all the parties with respect to the subject of the controversy.[48]

Here, We find that the CA correctly affirmed the trial court's ruling, which considered the Verification in the Complaint as enough assurance that the matters therein had been alleged in good faith and were not merely speculative. Moreover, it properly found that Ramon Ilusorio, as a co-heir of respondents with respect to the Potenciano shares, share a common interest. [49] Therefore, the CA correctly considered the Verification and Certification against forum shopping as sufficient[50] under the rule of substantial compliance.[51]

The payment of the alleged
deficient filing fees is not a
ground for the dismissal of the
Complaint.

Petitioners Sylvia and Lin contend that respondents deliberately omitted all allegations with respect to the value of the Potenciano shares, which are the properties in litigation, with the end in view of paying lower filing fees.[52] The amount tendered as filing fees is therefore markedly insufficient in view of the fact that the Potenciano shares are worth P700,000 per share and add up to the total amount of P324,100,000. They insist that the filing fees should have been computed based on the latter amount. [53]

Petitioners fail to note that the Complaint for the annulment of sale or transfer of the Potenciano shares is an action that is incapable of pecuniary estimation.[54]

Here, the principal relief sought by the Complaint is nullification of the conveyance of the shares. This action has been considered by this Court as incapable of pecuniary estimation. [55] Therefore, the filing fees are not based on the value of the property in litigation, but are fixed amounts in Section 7(b)(l), Rule 141 of the Rules of Court. [56]

Assuming for the sake of argument that the filing fees paid were insufficient, We affirm the CA's ruling that the payment of this amount was not fatal to the action filed by respondents. The general rule is that the payment of the docket fees in full within the prescribed period is mandatory and jurisdictional.[57] However, the strict application of this rule has been relaxed by this Court, provided that the fees are paid within a reasonable time, and there is no intent to defraud the government.[58] Here, the CA found that in the course of the trial, respondents' admission of the value of those shares showed a lack of intent to defraud.[59] Moreover, it is not disputed that they paid the assessed filing fees,[60] further negating bad faith or fraudulent intent. As correctly ruled by the CA, the deficiency can be collected as a fee in lien upon the execution of the judgment in the case.[61] This interpretation is within the contemplation of Section 2, Rule 141 of the Rules of Court.[62]

We deem it proper for the rules to be reasonably and liberally construed to avoid a patent denial of substantial justice. We take into consideration the time that has elapsed since this case was instituted and the fact the resolution of the case on the merits has yet to commence.

We recognize and uphold the view that the ends of justice are better served when cases are determined on the merits. Such a determination occurs when a decision is arrived at after all the parties have been given full opportunity to ventilate their causes and defenses, rather than on the basis of technicality or some procedural imperfections. [63]

WHEREFORE, the Court of Appeals Decision[64] and Resolution[65] in CA-G.R. SP Nos. 88394, 88511, 88546, and its Decision[66] and Resolution[67] in G.R. SP No. 88575, upholding the trial court's denial of petitioners' Motions to Dismiss and Motions for Reconsideration in Civil Case No. 03-108667, are hereby AFFIRMED in all respects. The Regional Trial Court, Branch 45, Manila is hereby DIRECTED to proceed with dispatch with the trial on the merits of the case.

The Motion for Leave to File and to Admit Motion to Drop Erlinda K. Ilusorio as Party Respondent is GRANTED.

SO ORDERED.

---

[1] Rollo (G.R. Nos. 178964 & 178980-81), pp. 10-30; CA Decision in CA-G.R. SP Nos. 88394, 88511, and 88546 dated 21 March 2007, penned by Associate Justice Noel G. Tijam and concurred in by Associate Justices Vicente S. E. Veloso and Sesinando E. Villon; rollo (G.R. No. 198296), pp. 48-57; CA Decision in CA-G.R. SP No. 88575 dated 13 April 2011, penned by Associate Justice Florito S. Macalino and concurred in by Associate Justices Juan Q. Enriquez, Jr. and Ramon M. Bato, Jr.
[2] Rollo (G.R. Nos. 178964 & 178980-81), pp. 112-117; Rollo (G.R. No. 198296), pp. 59-60.
[3] Rollo (G.R. Nos. 178964& 178980-81), pp. 191-197; the RTC Order dated 11 May 2004 in Civil Case No. 03-108667 was penned by Judge Marcelino L. Sayo, Jr., Presiding Judge of RTC-Manila (Branch 45).
[4] Rollo (G.R. Nos. 178964 & 178980-81), pp. 12-15.
[5] Id.
[6] Id.
[7] Id. at 160-182; rollo (G.R. No. 178995-97), pp. 69-75.
[8] Rollo (G.R. Nos. 178964 & 178980-81), p. 45.
[9] Rollo (G.R. No. 198296), pp. 123-125.
[10] Id.
[11] Rollo (G.R. Nos. 178964 & 178980-81), pp. 191-197.
[12] Id. at 217-247.
[13] Id at 16.
[14] Id. at 11.
[15] Id. at 10-30.
[16] Id.
[17] Id. at 32-37.
[18] Rollo (G.R. No. 198297), pp. 223-249.
[19] Rollo (G.R, No. 198296), pp. 48-57.
[20] Id. at 59-60.
[21] Rollo (G.R. Nos. 178964 & 178980-81); as per Resolution dated 20 January 2016
[22] Id. at 569-575.
[23] Id. at 575.
[24] Id. at 66.
[25] Id. at 156;
[26] Zuniga-Santos v. Santos-Gran, G. R. No. 197380, 8 October 2014.
[27] Id.
[28] Id.
[29] Id.
[30] Heirs of Dolleton v. Fil-Estate Management, Inc., 602 Phil. 781 (2009).
[31] Rollo (G.R. Nos. 178964 & 178980-81), pp. 21-22.
[32] Id. at 66.
[33] Id. at 60.
[34] Id.
[35] Id. at 61.
[36] Supra note 26.
[37] Pioneer Concrete Philippines, Inc. v. Todaro, 551 Phil. 589 (2007).
[38] Rollo (G.R. Nos. 178964 & 178980-81), pp. 72-73.
[39] 666 Phil. 452 (2011).
[40] Id. at 468-469.
[41] Rollo (G.R. Nos. 178964 & 178980-81), pp. 156-158.
[42] The exceptions are as follows:

1. When the determination is for purposes of their inclusion or exclusion from the inventory to be submitted by the administrator, in which case its determination shall only be provisional;
    
2. When the interested parties are all heirs of the decedent;
3. When the question is one of collation or advancement;
    
4. When the parties consent to the assumption of jurisdiction by the probate court and the rights of third parties are not impaired. (Aranas v. Mercado, 724 Phil. 174 [2014])

[43] Rollo (G.R. No. 198297), pp. 71-79
[44] These are the essential conditions for res judicata to apply: (1) the judgment sought to bar the new action must be final; (2) the decision must have been rendered by a court of competent jurisdiction over the subject matter and the parties; (3) the disposition of the case must be a judgment or an order on the merits; and (4) there must be, between the first and second actions identity of parties, identity of subject matter, and identity of causes of action. (Dapar v. Biascan. 482 Phil. 385 [2004]).
[45] Rollo (G.R. Nos. 178964 & 178980-81), pp. 19-20.
[46] Rollo (G.R. No. 198297), p. 41.
[47] G.R. No. 197486, 10 September 2014, 743 SCRA 672, citing Iglesia ni Cristo v. Judge Ponferrada 563 Phil.705 (2006).
[48] Id.
[49] Rollo (G.R. Nos. 178964 & 178980-81), p. 108.
[50] Id.
[51] Rollo (G.R. No. 198297), p. 41.
[52] Id. at 25-26
[53] Id.
[54] The Court stressed in Russel v. Vesti (364 Phil. 392 [1999]) that in determining whether an action is one the subject matter of which is incapable of pecuniary estimation, the test is the nature of the principal action or remedy sought. If it is primarily for the recovery of a sum of money, it is capable of pecuniary estimation. Where the basic issue, however, is something other than the right to recover a sum of money, or the money claim is merely incidental to the principal relief, it is incapable of pecuniary estimation.
[55] Lu v. Lu, 658 Phil. 156(2011).
[56] Spouses De Leon v. CA, 350 Phil. 535 (1998); See also Olivarez Realty Corp. v. Castillo, G.R. 196251, 9 July, 2014, 729 SCRA 544.
[57] Manchester Development Corp. v. CA, 233 Phil. 579 (1987).
[58] Sun Insurance Office v. Asuncion, 252 Phil. 280 (1989); see also Unicapital Inc. v. Consing, G.R. Nos. 175277, 175285, & 192073, 11 September 2013, 705 SCRA 511 and Heirs ofReinoso v. CA, 669 Phil. 272 (2011).
[59] Rollo (G.R. No. 198297), pp. 41-42.
[60] Id. at 25.
[61] Fedman Development Corp. v. Agcaoili, 672 Phil. 20 (2011).
[62] Id.; Rule 141, Section 2 of the Rules of Court provides: "Where the court in its final judgment awards a claim not alleged, or a relief different from, or more than that claimed in the pleading, the party concerned shall pay the additional fees which shall constitute a lien on the judgment in satisfaction of said lien. The clerk of court shall assess and collect the corresponding fees."
[63] Vda. de Melencion v. Court of Appeals, 560 Phil. 334 (2007).
[64] Dated 21 March 2007.
[65] Dated 25 July 2007.
[66] Dated 13 April 2011.
[67] Dated 18 August 2011.