G.R. No. L-27823 March 20, 1970
ILAYA TEXTILE MARKET, INC., plaintiff-appellant, vs. FELIX OCAMPO, INC., MARIA YAP, HON. JOSE B. HERRERA, THE REGISTER OF DEEDS OF MANILA and THE SHERIFF OF MANILA AND HIS DEPUTIES, defendants-appellees.

FACTS

Plaintiff Ilaya Textile Market, Inc. commenced an action in the Court of First Instance of Manila. It alleged that defendant Felix Ocampo, Inc. (Ocampo) is the registered owner of two parcels of land. In November 1962, plaintiff and Ocampo entered into a contract whereby Ocampo leased the land to plaintiff for ten years, with plaintiff obligated to construct a building worth not less than P150,000.00. To conceal this agreement, the deed of lease was placed in the name of defendant Maria Yap (Mrs. Yap) as lessee, making it a simulated contract, and the agreement between Ocampo and plaintiff was made to appear as a sublease between Mrs. Yap and plaintiff. Ocampo also collected P75,000.00 from plaintiff. Plaintiff constructed the Ilaya Textile Market Building on the land with Ocampo’s knowledge and approval. Plaintiff complied with the terms, paying monthly rentals to Mrs. Yap for delivery to Ocampo.
Ocampo and Mrs. Yap conspired to annotate a memorandum of their “lease” contract on the back of TCT No. 36387. Mrs. Yap then purportedly failed to deliver to Ocampo P30,000.00 in rentals from July to December 1965, which plaintiff had given her. Invoking this default, Ocampo petitioned the Court of First Instance of Manila, without notifying plaintiff, to order the building recorded as its property in the title. The court granted the petition. Ocampo also filed an ejectment case (Civil Case No. 14425) in the City Court against Mrs. Yap. Summons was served by publication upon Ocampo’s claim that Mrs. Yap’s whereabouts were unknown. Mrs. Yap filed a motion to dismiss on a ground other than lack of jurisdiction. Plaintiff intervened. The City Court rendered a decision against Mrs. Yap by default, ordering her to vacate. The dispositive part was later amended to include “her assigns and successors in interest.” Plaintiff’s motion to dismiss the ejectment case, challenging the court’s jurisdiction, was denied, and its complaint in intervention was dismissed. The court found the decision enforceable against plaintiff as a sublessee.
Plaintiff alleged the lease period had not expired and it had not violated the contract. It claimed Ocampo and Mrs. Yap conspired to deprive it of the building and its leasehold rights. Plaintiff sought a writ of preliminary injunction, which was issued. Ocampo moved to dissolve the injunction and dismiss the complaint, arguing it was insufficient in form and substance, the injunction caused great damage, and the issues could be resolved in the ejectment or land registration cases. The trial court granted the motion and dismissed the complaint. Plaintiff appealed.

ISSUE

Whether the Court of First Instance of Manila erred in dismissing plaintiff’s complaint.

RULING

Yes. The Supreme Court set aside the orders of dismissal and remanded the case for further proceedings. The trial court’s grounds for dismissal were untenable. The complaint sufficiently stated a cause of action by alleging a conspiracy between Ocampo and Mrs. Yap to defraud plaintiff of its building and leasehold rights through simulated contracts and court proceedings lacking due process. The claim for damages exceeding the city court’s jurisdiction and the allegation of a conspiracy to circumvent Article 1678 of the Civil Code presented substantial legal questions warranting adjudication. The alleged inadequacy of the injunction bond should have been addressed by requiring an increase, not by dismissal. Plaintiff’s stockholders were not indispensable parties. If Branch XI could not annul orders of other branches, the proper remedy was to reassign the case, not dismiss it. Plaintiff’s failure to attach certified copies of the assailed judgments was a mere formal defect that should have been corrected by ordering their submission. The Rules of Court should be liberally construed to promote justice.