650 Phil.

372

THIRD DIVISION

[ G.R. No. 157479, November 24, 2010 ]

PHILIP TURNER AND ELNORA TURNER, PETITIONERS, VS. LORENZO

SHIPPING CORPORATION, RESPONDENT.

DECISION

BERSAMIN, J.:

This case concerns the right of dissenting stockholders to demand payment of the value of their
shareholdings.

In the stockholders' suit to recover the value of their shareholdings from the corporation, the Regional
Trial Court (RTC) upheld the dissenting stockholders, herein petitioners, and ordered the corporation,
herein respondent, to pay. Execution was partially carried out against the respondent. On the
respondent's petition for  certiorari, however, the Court of Appeals (CA) corrected the RTC and
dismissed the petitioners' suit on the ground that their cause of action for collection had not yet
accrued due to the lack of unrestricted retained earnings in the books of the respondent.

Thus, the petitioners are now before the Court to challenge the CA's decision promulgated on March
4, 2003 in C.A.-G.R. SP No. 74156 entitled Lorenzo Shipping Corporation v. Hon. Artemio S. Tipon,
in his capacity as Presiding Judge of Branch 46 of the Regional Trial Court of Manila, et al.[1]

Antecedents

The petitioners held 1,010,000 shares of stock of the respondent, a domestic corporation engaged
primarily in cargo shipping activities. In June 1999, the respondent decided to amend its articles of
incorporation to remove the stockholders' pre-emptive rights to newly issued shares of stock. Feeling
that the corporate move would be prejudicial to their interest as stockholders, the petitioners voted
against the amendment and demanded payment of their shares at the rate of P2.276/share based on the
book value of the shares, or a total of P2,298,760.00.

The respondent found the fair value of the shares demanded by the petitioners unacceptable. It insisted
that the market value on the date before the action to remove the pre-emptive right was taken should
be the value, or P0.41/share (or a total of P414,100.00), considering that its shares were listed in the
Philippine Stock Exchange, and that the payment could be made only if the respondent had
unrestricted retained earnings in its books to cover the value of the shares, which was not the case.

The disagreement on the valuation of the shares led the parties to constitute an appraisal committee
pursuant to Section 82 of the  Corporation Code, each of them nominating a representative, who
together then nominated the third member who would be chairman of the appraisal committee. Thus,
the appraisal committee came to be made up of Reynaldo Yatco, the petitioners' nominee; Atty.
Antonio Acyatan, the respondent's nominee; and Leo Anoche of the Asian Appraisal Company, Inc.,
the third member/chairman.

On October 27, 2000, the appraisal committee reported its valuation of P2.54/share, for an aggregate
value of P2,565,400.00 for the petitioners.[2]

Subsequently, the petitioners demanded payment based on the valuation of the appraisal committee,
plus 2%/month penalty from the date of their original demand for payment, as well as the
reimbursement of the amounts advanced as professional fees to the appraisers.[3]

In its letter to the petitioners dated January 2, 2001,[4] the respondent refused the petitioners' demand,
explaining that pursuant to the  Corporation Code, the dissenting stockholders exercising their
appraisal rights could be paid only when the corporation had unrestricted retained earnings to cover
the fair value of the shares, but that it had no retained earnings at the time of the petitioners' demand,
as borne out by its Financial Statements for Fiscal Year 1999 showing a deficit of P72,973,114.00 as
of December 31, 1999.

Upon the respondent's refusal to pay, the petitioners sued the respondent for collection and damages in
the RTC in Makati City on January 22, 2001. The case, docketed as Civil Case No. 01-086, was
initially assigned to Branch 132.[5]

On June 26, 2002, the petitioners filed their motion for partial summary judgment, claiming that:

7) xxx the defendant has an accumulated unrestricted retained earnings of ELEVEN

MILLION NINE HUNDRED SEVENTY FIVE THOUSAND FOUR HUNDRED
NINETY (P11,975,490.00) PESOS, Philippine Currency, evidenced by its Financial
Statement as of the Quarter Ending March 31, 2002; xxx

8) xxx the fair value of the shares of the petitioners as fixed by the Appraisal Committee is
final, that the same cannot be disputed xxx

9) xxx there is no genuine issue to material fact and therefore, the plaintiffs are entitled, as
a matter of right, to a summary judgment. xxx [6]

The respondent opposed the motion for partial summary judgment, stating that the determination of
the unrestricted retained earnings should be made at the end of the fiscal year of the respondent, and
that the petitioners did not have a cause of action against the respondent.

During the pendency of the  motion for partial summary judgment, however, the Presiding Judge of
Branch 133 transmitted the records to the Clerk of Court for re-raffling to any of the RTC's special
commercial courts in Makati City due to the case being an intra-corporate dispute. Hence, Civil Case
No. 01-086 was re-raffled to Branch 142.

Nevertheless, because the principal office of the respondent was in Manila, Civil Case No. 01-086 was
ultimately transferred to Branch 46 of the RTC in Manila, presided by Judge Artemio Tipon,
[7]  pursuant to the  Interim Rules of Procedure on Intra-Corporate Controversies  (Interim Rules)
requiring intra-corporate cases to be brought in the RTC exercising jurisdiction over the place where
the principal office of the corporation was found.

After the conference in Civil Case No. 01-086 set on October 23, 2002, which the petitioners' counsel
did not attend, Judge Tipon issued an order,[8]  granting the petitioners'  motion for partial summary
judgment, stating:

As to the motion for partial summary judgment, there is no question that the 3-man
committee mandated to appraise the shareholdings of plaintiff submitted its
recommendation on October 27, 2000 fixing the fair value of the shares of stocks of the
plaintiff at P2.54 per share. Under Section 82 of the Corporation Code:

"The findings of the majority of the appraisers shall be final, and the award
shall be paid by the corporation within thirty (30) days after the award is
made."

"The only restriction imposed by the Corporation Code is-"

"That no payment shall be made to any dissenting stockholder unless the

corporation has unrestricted retained earning in its books to cover such
payment."

The evidence submitted by plaintiffs shows that in its quarterly financial statement it
submitted to the Securities and Exchange Commission, the defendant has retained earnings
of P11,975,490 as of March 21, 2002. This is not disputed by the defendant. Its only
argument against paying is that there must be unrestricted retained earning at the time the
demand for payment is made.

This certainly is a very narrow concept of the appraisal right of a stockholder. The law
does not say that the unrestricted retained earnings must exist at the time of the demand.
Even if there are no retained earnings at the time the demand is made if there are retained
earnings later, the fair value of such stocks must be paid. The only restriction is that there
must be sufficient funds to cover the creditors after the dissenting stockholder is paid. No
such allegations have been made by the defendant.[9]

On November 12, 2002, the respondent filed a motion for reconsideration.

On the scheduled hearing of the  motion for reconsideration  on November 22, 2002, the petitioners
filed a motion for immediate execution and a motion to strike out motion for reconsideration.  In the
latter motion, they pointed out that the motion for reconsideration was prohibited by Section 8 of the
Interim Rules.  Thus, also on November 22, 2002, Judge Tipon denied the  motion for
reconsideration and granted the petitioners' motion for immediate execution.[10]

Subsequently, on November 28, 2002, the RTC issued a writ of execution.[11]

Aggrieved, the respondent commenced a special civil action for certiorari in the CA to challenge the
two aforecited orders of Judge Tipon, claiming that:

A.

JUDGE TIPON GRAVELY ABUSED HIS DISCRETION IN GRANTING SUMMARY

JUDGMENT TO THE SPOUSES TURNER, BECAUSE AT THE TIME THE
"COMPLAINT" WAS FILED, LSC HAD NO RETAINED EARNINGS, AND THUS
WAS COMPLYING WITH THE LAW, AND NOT VIOLATING ANY RIGHTS OF THE
SPOUSES TURNER, WHEN IT REFUSED TO PAY THEM THE VALUE OF THEIR
LSC SHARES. ANY RETAINED EARNINGS MADE A YEAR AFTER THE
"COMPLAINT" WAS FILED ARE IRRELEVANT TO THE SPOUSES TURNER'S
RIGHT TO RECOVER UNDER THE "COMPLAINT", BECAUSE THE WELL-
SETTLED RULE, REPEATEDLY BROUGHT TO JUDGE TIPON'S ATTENTION, IS
"IF NO RIGHT EXISTED AT THE TIME (T)HE ACTION WAS COMMENCED THE
SUIT CANNOT BE MAINTAINED, ALTHOUGH SUCH RIGHT OF ACTION MAY
HAVE ACCRUED THEREAFTER.

B.

JUDGE TIPON IGNORED CONTROLLING CASE LAW, AND THUS GRAVELY

ABUSED HIS DISCRETION, WHEN HE GRANTED AND ISSUED THE
QUESTIONED "WRIT OF EXECUTION" DIRECTING THE EXECUTION OF HIS
PARTIAL SUMMARY JUDGMENT IN FAVOR OF THE SPOUSES TURNER,
BECAUSE THAT JUDGMENT IS NOT A FINAL JUDGMENT UNDER SECTION 1
OF RULE 39 OF THE RULES OF COURT AND THEREFORE CANNOT BE SUBJECT
OF EXECUTION UNDER THE SUPREME COURT'S CATEGORICAL HOLDING
IN PROVINCE OF PANGASINAN VS. COURT OF APPEALS.

Upon the respondent's application, the CA issued a temporary restraining order (TRO), enjoining the
petitioners, and their agents and representatives from enforcing the  writ of execution. By then,
however, the writ of execution had been partially enforced.

The TRO lapsed without the CA issuing a writ of preliminary injunction to prevent the execution.
Thereupon, the sheriff resumed the enforcement of the writ of execution.

The CA promulgated its assailed decision on March 4, 2003,[12] pertinently holding:

However, it is clear from the foregoing that the Turners' appraisal right is subject to the
legal condition that no payment shall be made to any dissenting stockholder unless the
corporation has unrestricted retained earnings in its books to cover such payment. Thus,
the Supreme Court held that:

The requirement of unrestricted retained earnings to cover the shares is based

on the trust fund doctrine which means that the capital stock, property and other
assets of a corporation are regarded as equity in trust for the payment of
corporate creditors. The reason is that creditors of a corporation are preferred
over the stockholders in the distribution of corporate assets. There can be no
distribution of assets among the stockholders without first paying corporate
creditors. Hence, any disposition of corporate funds to the prejudice of creditors
is null and void. Creditors of a corporation have the right to assume that so long
as there are outstanding debts and liabilities, the board of directors will not use
the assets of the corporation to purchase its own stock.

In the instant case, it was established that there were no unrestricted retained earnings
when the Turners filed their Complaint. In a letter dated 20 August 2000, petitioner
informed the Turners that payment of their shares could only be made if it had unrestricted
earnings in its books to cover the same. Petitioner reiterated this in a letter dated 2 January
2001 which further informed the Turners that its Financial Statement for fiscal year 1999
shows that its retained earnings ending December 31, 1999 was at a deficit in the amount
of P72,973,114.00, a matter which has not been disputed by private respondents. Hence, in
accordance with the second paragraph of sec. 82, BP 68 supra, the Turners' right to
payment had not yet accrued when they filed their Complaint on January 22, 2001, albeit
their appraisal right already existed.

In Philippine American General Insurance Co. Inc. vs. Sweet Lines, Inc., the Supreme
Court declared that:

Now, before an action can properly be commenced all the essential elements of
the cause of action must be in existence, that is, the cause of action must be
complete. All valid conditions precedent to the institution of the particular
action, whether prescribed by statute, fixed by agreement of the parties or
implied by law must be performed or complied with before commencing the
action, unless the conduct of the adverse party has been such as to prevent or
waive performance or excuse non-performance of the condition.

It bears restating that a right of action is the right to presently enforce a cause of
action, while a cause of action consists of the operative facts which give rise to
such right of action. The right of action does not arise until the performance of
 all conditions precedent to the action and may be taken away by the running of
the statute of limitations, through estoppel, or by other circumstances which do
not affect the cause of action. Performance or fulfillment of all conditions
precedent upon which a right of action depends must be sufficiently alleged,
considering that the burden of proof to show that a party has a right of action is
upon the person initiating the suit.

The Turners' right of action arose only when petitioner had already retained earnings in the
amount of P11,975,490.00 on March 21, 2002; such right of action was inexistent on
January 22, 2001 when they filed the Complaint.

In the doctrinal case of Surigao Mine Exploration Co. Inc., vs. Harris, the Supreme Court
ruled:

Subject to certain qualifications, and except as otherwise provided by law, an

action commenced before the cause of action has accrued is prematurely
brought and should be dismissed. The fact that the cause of action accrues after
the action is commenced and while it is pending is of no moment. It is a rule of
law to which there is, perhaps, no exception, either at law or in equity, that to
recover at all there must be some cause of action at the commencement of the
suit. There are reasons of public policy why there should be no needless haste
in bringing up litigation, and why people who are in no default and against
whom there is as yet no cause of action should not be summoned before the
public tribunals to answer complaints which are groundless. An action
prematurely brought is a groundless suit. Unless the plaintiff has a valid and
subsisting cause of action at the time his action is commenced, the defect
cannot be cured or remedied by the acquisition or accrual of one while the
action is pending, and a supplemental complaint or an amendment setting up
such after-accrued cause of action is not permissible.

The afore-quoted ruling was reiterated in Young vs Court of Appeals and Lao vs. Court of
Appeals.

The Turners' apprehension that their claim for payment may prescribe if they wait for the
petitioner to have unrestricted retained earnings is misplaced. It is the legal possibility of
bringing the action that determines the starting point for the computation of the period of
prescription. Stated otherwise, the prescriptive period is to be reckoned from the accrual of
their right of action.

Accordingly, We hold that public respondent exceeded its jurisdiction when it entertained
the herein Complaint and issued the assailed Orders. Excess of jurisdiction is the state of
being beyond or outside the limits of jurisdiction, and as distinguished from the entire
absence of jurisdiction, means that the act although within the general power of the judge,
is not authorized and therefore void, with respect to the particular case, because the
 conditions which authorize the exercise of his general power in that particular case are
wanting, and hence, the judicial power is not in fact lawfully invoked.

We find no necessity to discuss the second ground raised in this petition.

WHEREFORE, upon the premises, the petition is GRANTED. The assailed Orders and the
corresponding Writs of Garnishment are NULLIFIED. Civil Case No. 02-104692 is hereby
ordered DISMISSED without prejudice to refiling by the private respondents of the action
for enforcement of their right to payment as withdrawing stockholders.

SO ORDERED.

The petitioners now come to the Court for a review on certiorari of the CA's decision, submitting that:

I.

THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW WHEN IT

GRANTED THE PETITION FOR CERTIORARI WHEN THE REGIONAL TRIAL
COURT OF MANILA DID NOT ACT BEYOND ITS JURISDICTION AMOUNTING
TO LACK OF JURISDICTION IN GRANTING THE MOTION FOR PARTIAL
SUMMARY JUDGMENT AND IN GRANTING THE MOTION FOR IMMEDIATE
EXECUTION OF JUDGMENT;

II.

THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW WHEN IT

ORDERED THE DISMISSAL OF THE CASE, WHEN THE PETITION FOR
CERTIORARI MERELY SOUGHT THE ANNULMENT OF THE ORDER GRANTING
THE MOTION FOR PARTIAL SUMMARY JUDGMENT AND OF THE ORDER
GRANTING THE MOTION FOR IMMEDIATE EXECUTION OF THE JUDGMENT;

III.

THE HONORABLE COURT OF APPEALS HAS DECIDED QUESTIONS OF

SUBSTANCE NOT THEREFORE DETERMINED BY THIS HONORABLE COURT
AND/OR DECIDED IT IN A WAY NOT IN ACCORD WITH LAW OR WITH
JURISPRUDENCE.

Ruling

The petition fails.

The CA correctly concluded that the RTC had exceeded its jurisdiction in entertaining the petitioners'
complaint in Civil Case No. 01-086, and in rendering the summary judgment and issuing writ of
execution.

A.
Stockholder's Right of Appraisal, In General

A stockholder who dissents from certain corporate actions has the right to demand payment of the fair
value of his or her shares. This right, known as the right of appraisal, is expressly recognized in
Section 81 of the Corporation Code, to wit:

Section 81. Instances of appraisal right. - Any stockholder of a corporation shall have the
right to dissent and demand payment of the fair value of his shares in the following
instances:

1. In case any amendment to the articles of incorporation has the effect of changing or
restricting the rights of any stockholder or class of shares, or of authorizing preferences in
any respect superior to those of outstanding shares of any class, or of extending or
shortening the term of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets as provided in the Code; and

3. In case of merger or consolidation. (n)

Clearly, the right of appraisal may be exercised when there is a fundamental change in the charter or
articles of incorporation substantially prejudicing the rights of the stockholders. It does not vest unless
objectionable corporate action is taken.[13] It serves the purpose of enabling the dissenting stockholder
to have his interests purchased and to retire from the corporation.[14]

Under the common law, there were originally conflicting views on whether a corporation had the
power to acquire or purchase its own stocks. In England, it was held invalid for a corporation to
purchase its issued stocks because such purchase was an indirect method of reducing capital (which
was statutorily restricted), aside from being inconsistent with the privilege of limited liability to
creditors.[15] Only a few American jurisdictions adopted by decision or statute the strict English rule
forbidding a corporation from purchasing its own shares. In some American states where the English
rule used to be adopted, statutes granting authority to purchase out of surplus funds were enacted,
while in others, shares might be purchased even out of capital provided the rights of creditors were not
prejudiced.[16] The reason underlying the limitation of share purchases sprang from the necessity of
imposing safeguards against the depletion by a corporation of its assets and against the impairment of
its capital needed for the protection of creditors.[17]

Now, however, a corporation can purchase its own shares, provided payment is made out of surplus
profits and the acquisition is for a legitimate corporate purpose.[18] In the Philippines, this new rule is
embodied in Section 41 of the Corporation Code, to wit:

Section 41. Power to acquire own shares.  - A stock corporation shall have the power to
purchase or acquire its own shares for a legitimate corporate purpose or purposes,
including but not limited to the following cases: Provided, That the corporation has
unrestricted retained earnings in its books to cover the shares to be purchased or acquired:

1. To eliminate fractional shares arising out of stock dividends;

2. To collect or compromise an indebtedness to the corporation, arising out of unpaid

subscription, in a delinquency sale, and to purchase delinquent shares sold during said sale;
and

3. To pay dissenting or withdrawing stockholders entitled to payment for their shares under
the provisions of this Code. (n)

The Corporation Code defines how the right of appraisal is exercised, as well as the implications of
the right of appraisal, as follows:

1. The appraisal right is exercised by any stockholder who has voted against the
proposed corporate action by making a written demand on the corporation within 30
days after the date on which the vote was taken for the payment of the fair value of
his shares. The failure to make the demand within the period is deemed a waiver of
the appraisal right.[19]

2. If the withdrawing stockholder and the corporation cannot agree on the fair value of
the shares within a period of 60 days from the date the stockholders approved the
corporate action, the fair value shall be determined and appraised by three
disinterested persons, one of whom shall be named by the stockholder, another by the
corporation, and the third by the two thus chosen. The findings and award of the
majority of the appraisers shall be final, and the corporation shall pay their award
within 30 days after the award is made. Upon payment by the corporation of the
agreed or awarded price, the stockholder shall forthwith transfer his or her shares to
the corporation.[20]

3. All rights accruing to the withdrawing stockholder's shares, including voting and
dividend rights, shall be suspended from the time of demand for the payment of the
fair value of the shares until either the abandonment of the corporate action involved
or the purchase of the shares by the corporation, except the right of such stockholder
to receive payment of the fair value of the shares.[21]

4. Within 10 days after demanding payment for his or her shares, a dissenting
stockholder shall submit to the corporation the certificates of stock representing his
 shares for notation thereon that such shares are dissenting shares. A failure to do so
shall, at the option of the corporation, terminate his rights under this Title X of
the Corporation Code. If shares represented by the certificates bearing such notation
are transferred, and the certificates are consequently canceled, the rights of the
transferor as a dissenting stockholder under this Title shall cease and the transferee
shall have all the rights of a regular stockholder; and all dividend distributions that
would have accrued on such shares shall be paid to the transferee.[22]

5. If the proposed corporate action is implemented or effected, the corporation shall pay
to such stockholder, upon the surrender of the certificates of stock representing his
shares, the fair value thereof as of the day prior to the date on which the vote was
taken, excluding any appreciation or depreciation in anticipation of such corporate
action.[23]

Notwithstanding the foregoing, no payment shall be made to any dissenting stockholder unless the
corporation has unrestricted retained earnings in its books to cover the payment. In case the
corporation has no available unrestricted retained earnings in its books, Section 83 of the Corporation
Code provides that if the dissenting stockholder is not paid the value of his shares within 30 days after
the award, his voting and dividend rights shall immediately be restored.

The  trust fund doctrine  backstops the requirement of unrestricted retained earnings to fund the
payment of the shares of stocks of the withdrawing stockholders. Under the doctrine, the capital stock,
property, and other assets of a corporation are regarded as equity in trust for the payment of corporate
creditors, who are preferred in the distribution of corporate assets.[24] The creditors of a corporation
have the right to assume that the board of directors will not use the assets of the corporation to
purchase its own stock for as long as the corporation has outstanding debts and liabilities.[25]  There
can be no distribution of assets among the stockholders without first paying corporate debts. Thus, any
disposition of corporate funds and assets to the prejudice of creditors is null and void.[26]

B.

Petitioners' cause of action was premature

That the respondent had indisputably no unrestricted retained earnings in its books at the time the
petitioners commenced Civil Case No. 01-086 on January 22, 2001 proved that the respondent's legal
obligation to pay the value of the petitioners' shares did not yet arise. Thus, the CA did not err in
holding that the petitioners had no cause of action, and in ruling that the RTC did not validly render
the partial summary judgment.

A cause of action is the act or omission by which a party violates a right of another.[27] The essential
elements of a cause of action are: (a) the existence of a legal right in favor of the plaintiff; (b) a
correlative legal duty of the defendant to respect such right; and (c) an act or omission by such
defendant in violation of the right of the plaintiff with a resulting injury or damage to the plaintiff for
which the latter may maintain an action for the recovery of relief from the defendant.[28] Although the
first two elements may exist, a cause of action arises only upon the occurrence of the last element,
giving the plaintiff the right to maintain an action in court for recovery of damages or other
appropriate relief.[29]

Section 1, Rule 2, of the Rules of Court requires that every ordinary civil action must be based on a
cause of action. Accordingly, Civil Case No. 01-086 was dismissible from the beginning for being
without any cause of action.

The RTC concluded that the respondent's obligation to pay had accrued by its having the unrestricted
retained earnings after the making of the demand by the petitioners. It based its conclusion on the fact
that the Corporation Code did not provide that the unrestricted retained earnings must already exist at
the time of the demand.

The RTC's construal of the Corporation Code was unsustainable, because it did not take into account
the petitioners' lack of a cause of action against the respondent. In order to give rise to any obligation
to pay on the part of the respondent, the petitioners should first make a valid demand that the
respondent refused to pay despite having unrestricted retained earnings. Otherwise, the respondent
could not be said to be guilty of any actionable omission that could sustain their action to collect.

Neither did the subsequent existence of unrestricted retained earnings after the filing of the complaint
cure the lack of cause of action in Civil Case No. 01-086. The petitioners' right of action could only
spring from an existing cause of action. Thus, a complaint whose cause of action has not yet accrued
cannot be cured by an amended or supplemental pleading alleging the existence or accrual of a cause
of action during the pendency of the action.[30] For, only when there is an invasion of primary rights,
not before, does the adjective or remedial law become operative.[31] Verily, a premature invocation of
the court's intervention renders the complaint without a cause of action and dismissible on such
ground.[32] In short, Civil Case No. 01-086, being a groundless suit, should be dismissed.

Even the fact that the respondent already had unrestricted retained earnings more than sufficient to
cover the petitioners' claims on June 26, 2002 (when they filed their  motion for partial summary
judgment) did not rectify the absence of the cause of action at the time of the commencement of Civil
Case No. 01-086. The motion for partial summary judgment, being a mere application for relief other
than by a pleading,[33]  was not the same as the complaint in Civil Case No. 01-086. Thereby, the
petitioners did not meet the requirement of the Rules of Court that a cause of action must exist at the
commencement of an action, which is "commenced by the filing of the original complaint in court."
[34]

The petitioners claim that the respondent's petition for  certiorari  sought only the annulment of the
assailed orders of the RTC (i.e., granting the motion for partial summary judgment and the motion for
immediate execution); hence, the CA had no right to direct the dismissal of Civil Case No. 01-086.

The claim of the petitioners cannot stand.

Although the respondent's petition for certiorari targeted only the RTC's orders granting the  motion
for partial summary judgment  and the  motion for immediate execution, the CA's directive for the
dismissal of Civil Case No. 01-086 was not an abuse of discretion, least of all grave, because such
dismissal was the only proper thing to be done under the circumstances. According to Surigao Mine
Exploration Co., Inc. v. Harris:[35]

Subject to certain qualification, and except as otherwise provided by law,  an action

commenced before the cause of action has accrued is prematurely brought and should
be dismissed. The fact that the cause of action accrues after the action is commenced and
while the case is pending is of no moment. It is a rule of law to which there is, perhaps no
exception, either in law or in equity, that to recover at all there must be some cause of
action at the commencement of the suit. There are reasons of public policy why there
should be no needless haste in bringing up litigation, and why people who are in no default
and against whom there is as yet no cause of action should not be summoned before the
public tribunals to answer complaints which are groundless. An action prematurely
brought is a groundless suit.  Unless the plaintiff has a valid and subsisting cause of
action at the time his action is commenced, the defect cannot be cured or remedied by
the acquisition or accrual of one while the action is pending, and a supplemental
complaint or an amendment setting up such after-accrued cause of action is not
permissible.

Lastly, the petitioners argue that the respondent's recourse of a special action for  certiorari  was the
wrong remedy,  in view of the fact that the granting of the  motion for partial summary
judgment constituted only an error of law correctible by appeal, not of jurisdiction.

The argument of the petitioners is baseless. The RTC was guilty of an error of jurisdiction, for it
exceeded its jurisdiction by taking cognizance of the complaint that was not based on an existing
cause of action.

WHEREFORE, the petition for review on certiorari is denied for lack of merit.

We affirm the decision promulgated on March 4, 2003 in C.A.-G.R. SP No. 74156 entitled Lorenzo
Shipping Corporation v. Hon. Artemio S. Tipon, in his capacity as Presiding Judge of Branch 46 of the
Regional Trial Court of Manila, et al.

Costs of suit to be paid by the petitioners.

SO ORDERED.