University of Santo Tomas v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner University of Santo Tomas (UST) leased Room 203 of its hospital to Dr. Librado Canicosa for a period of two years, renewable for another two years. The lease agreement contained a restriction that lessees shall not maintain ancillary services offered by UST, except upon special written arrangement. In March 1979, UST acquired diagnostic machines similar to one used by Dr. Canicosa and requested its removal. Dr. Canicosa refused, asserting the machine was essential to his practice and located within his leased room. UST filed an ejectment complaint on May 17, 1979, for violation of the lease agreement. Procedural History: Dr. Canicosa filed a counterclaim for damages, alleging illegal dismissal as personnel health officer, a criminal complaint for falsification filed against him, and that the ejectment suit was motivated by malice and revenge. While the case was pending, Dr. Canicosa died and was substituted by his wife, Priscilla Tiongco Canicosa. The Regional Trial Court (RTC) dismissed UST's complaint and granted Canicosa's counterclaim on the first and third causes of action, awarding damages and attorney's fees. The Court of Appeals (CA) affirmed the RTC decision. UST appealed to the Supreme Court. The Petition: UST argued that the CA erred in not dismissing the first cause of action of the counterclaim for lack of jurisdiction and in affirming the award of moral damages and attorney's fees.
Issue(s)
Whether the trial court had jurisdiction over the counterclaim for damages arising from alleged illegal dismissal, considering the promulgation of PD 1691 during the pendency of the case. Whether the counterclaim should have been dismissed due to the death of Dr. Canicosa before final judgment. Whether the award of moral damages and attorney's fees was proper.
Ruling
The petition is GRANTED. The decision of the Court of Appeals is REVERSED and SET ASIDE.
Ratio Decidendi
On the jurisdiction over the counterclaim for damages due to alleged illegal dismissal: The Court ruled that PD 1691, which restored exclusive jurisdiction to the NLRC over all money claims and other claims arising from employer-employee relations, should be given retroactive application. Although the ejectment case was filed during the effectivity of PD 1367, which vested regular courts with jurisdiction over such damages, PD 1691 amended PD 1367 during the pendency of the case. Citing Atlas Fertilizer Corporation vs. Navarro and Victorias Milling Co., Inc. vs. Intermediate Appellate Court, the Court held that PD 1691 is a curative statute intended to correct conflicts of jurisdiction and thus applies retroactively to pending proceedings. Therefore, the trial court was bereft of jurisdiction to grant damages on the first cause of action of the counterclaim. On the dismissal of the counterclaim due to the death of Dr. Canicosa: The Court held that Rule 3, Section 21 of the Revised Rules of Civil Procedure, which mandates dismissal when a defendant dies before final judgment in an action for recovery of money, was not applicable. While Dr. Canicosa was the defendant in the ejectment complaint, he was the plaintiff in his counterclaim. The rule applies only when the defendant dies. In cases where the plaintiff dies, as in this instance with respect to the counterclaim, the proper procedure is substitution of the heirs or legal representative, as provided in Rule 3, Section 17. A valid substitution was effected, and thus the counterclaim could not be dismissed on this ground. On the award of moral damages and attorney's fees: The Court found that the award of moral damages was improper because Dr. Canicosa died before he could testify on the mental anguish or anxiety he allegedly suffered. Moral damages are personal, and the burden of proof rests on the claimant to establish entitlement. Due to his death, no evidence was presented to justify the award. Similarly, the award of attorney's fees based on the alleged malicious filing of the suit was deleted. The Court found no evidence of deliberate intent to cause prejudice or malice on the part of UST, which was merely asserting its perceived rights under the lease agreement. The right to litigate is precious, and penalties should not be imposed without clear proof of malice and lack of probable cause.
Main Doctrine
A curative statute, such as PD 1691 which amended PD 1367, should be given retroactive application to pending proceedings to correct a conflict of jurisdiction between regular courts and labor agencies, thereby vesting jurisdiction over claims arising from employer-employee relations in the labor arbiter and the NLRC.