c1 Phil Japan vs. Habib

DOCTRINE: In order to determine whether the subject matter of an action is one which is
capable of pecuniary estimation, the nature of the principal action or remedy sought must be
considered. If it is primarily for recovery of a sum of money, then the claim is considered as
capable of pecuniary estimation, and the jurisdiction lies with the MTCs if the amount of the
claim does not exceed P300, 000.00 outside Metro Manila, and does not exceed P400, 000.00
within Metro Manila. However, where the basic issue is something other than the right to
recover sum of money, where the money claim is merely incidental to the principal relief
sought, then the subject matter of the action is not capable of pecuniary estimation, and is
within the jurisdiction of the RTC.
Philippine-Japan Active Carbon Corporation vs. Habib Borgaily

January 15, 2020 G.R. No. 197022
Facts:
Philippine-Japan Active Carbon Corporation (petitioner) leased two apartment units from Habib
Borgaily (respondent) for Php 15,000 each unit. The two lease contracts have a lease period
from August 1, 2002 to August 1, 2003. To secure faithful compliance of the obligations of
petitioner under the lease contracts, a security deposit was required, to wit:
Upon signing hereof, the LESSEE shall pay a deposit of Php 45,000 as a security for
the faithful performance by the LESSEE of his obligations herein provided, as well
as to answer for any liability or obligation that the LESSEE may incur to third
parties arising from or regarding the use of the subject premises. Accordingly, said
deposit may not be applied to any rental due under this contract and shall be
refunded to the LESSEE only upon termination hereof after ascertaining that the
latter has no further obligations under this contract or to any person or entity from
or regarding the use of the premises.
Petitioner deposited the amount of P 90,000 as security deposit for the two apartment units.
The lease contract was not renewed after the expiration of the lease on August 1, 2003.
However, petitioner still occupied the premises until October 31, 2003.
After vacating the premises, petitioner asked respondent to return the amount of P 90,000.
Petitioner alleged that it has no outstanding of obligation to any person or entity relative to the
use of the apartment units to which the security deposit may be held accountable.
Respondent alleged that petitioner failed to comply with its obligations in the lease contracts,
such as keeping the apartment units in good and tenantable condition, and that when petitioner
vacated the leased premises, the same was destroyed and rendered inhabitable. Since
respondent refused to return the security deposit, petitioner filed an action for collection of sum
of money equivalent to the amount of the security deposit against the respondent.
The MTCC of Davao City found that respondent had the obligation to return the security
deposit since under the lease agreement it is provided that the deposit shall be returned after
the expiration of the lease. The RTC ruled otherwise.
Since under the lease agreement, the security deposit is for the faithful performance by the
lessee of its obligations, respondent had the right to withhold the deposit until his claim for
damages to the units which were not caused by ordinary wear and tear have been
reimbursed.
However upon Petition for Review with the Court of Appeals (CA), the CA resolved the case
completely different from the raised errors by petitioner. The CA ruled that the allegations in
petitioner’s complaint make out a case for breach and therefore, an action for specific
performance is an available remedy. As such, the same is an action incapable of pecuniary
estimation. Thus, CA dismissed the case for lack of jurisdiction.
Issue:
Whether the MTCC has jurisdiction over the case.
Held:
Yes. The CA was mistaken in appreciating the facts of the case. Contrary to its ruling, a
perusal of the complaint filed by the petitioner makes out a case for collection of sum of
money and not for breach of contract. It is to be noted that the lease agreement had already
expired when petitioner filed an action for the return of security deposit. Since the lease had
already expired, there is no more contract to breach. The demand for the return of the
security deposit was merely a collection suit. What the petitioner prayed for before the MTCC
was the return of the amount of P90,000.00 and not to compel respondent to comply with his
obligation under the lease agreement. As such, the CA erred when it held that the MTCC has
no jurisdiction over the case and dismissed the same for lack of jurisdiction.

c1 Phil Japan vs. Habib

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DOCTRINE: In order to determine whether the subject matter of an action is one which is

Philippine-Japan Active Carbon Corporation vs. Habib Borgaily

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