LA NAVAL DRUG CORPORATION vs COURT OF APPEALS and WILSON the arbitration issue and separate trial for his

ue and separate trial for his claim for damages is

TOPIC: Courts and their jurisdiction Invoking Section 5, Rule 16 of the Rules of Court, petitioner presented a
"Motion to Set Case for Preliminary Hearing" of its special and affirmative
FACTS: Yao is the present owner of a commercial building a portion of which defenses, which are grounds for a motion to dismiss.
is leased to petitioner under a contract of lease executed with the former
owner. Contract expired. Petitioner exercised its option to lease the same The respondent court announced that the two arbitrators chose Mrs. Eloisa
building for another five years. But petitioner and respondent disagreed on R. Narciso as the third arbitrator. And ordered the parties to submit their
the rental rate, and to resolve the controversy they agreed to resolve it in position papers on the issue as to whether or not respondent Yao's claim for
accordance with Republic Act 876, (Arbitration Law) as stipulated in their damages may be litigated upon in the summary proceeding for enforcement
lease contract. of arbitration agreement. In moving for reconsideration of the said Order,
petitioner argued that in Special Case No. 6024, the respondent court sits as
Yao appointed Domingo Alamarez, Jr. as his arbitrator. Petitioner chose Atty. a special court exercising limited jurisdiction and is not competent to act on
Casiano Sabile. The confirmation of the appointment of Aurelio Tupang, as respondent Yao's claim for damages, which poses an issue litigable in an
third arbitrator, was held in abeyance because petitioner instructed Atty. ordinary civil action. But the respondent court was not persuaded by
Sabile to defer the same until its Board of Directors could convene and petitioner's submission. It denied the motion for reconsideration.
approve Tupang's appointment. Respondent Yao theorizes that this was While the appellate court has agreed with petitioner that, under Section 6 of
petitioner's design to delay the arbitration proceedings, in violation of the Republic Act No. 876, a court, acting within the limits of its special
Arbitration Law, and the governing stipulation of their contract of lease. jurisdiction, may in this case solely determine the issue of whether the
litigants should proceed or not to arbitration, it, however, considered
petitioner in estoppel from questioning the competence of the court to
On the basis of the allegations, Yao prayed that after summary hearing
additionally hear and decide in the summary proceedings private
pursuant to Section 6 of the Arbitration Law, Atty. Casiano Sabile and
respondent's claim for damages, it (petitioner) having itself filed similarly its
Domingo Alamarez be directed to proceed with the arbitration in accordance
own counterclaim with the court a quo.
with Section 7 of subject Contract of Lease and the applicable provisions of
the Arbitration law, by appointing and confirming the appointment of the Third
Arbitrator; and that the Board of Three Arbitrators be ordered to immediately In moving for reconsideration, petitioner argued that in Special Case No.
convene and resolve the controversy. 6024, the respondent court sits as a special court exercising limited
jurisdiction and is not competent to act on respondent Yao's claim for
damages, which poses an issue litigable in an ordinary civil action. But the
Petitioner denied the averments of the petition theorizing that such petition is
respondent court was not persuaded by petitioner's submission.
premature since Yao has not yet formally required arbitrators Alamarez and
Sabile to agree on the third arbitrator, within ten days from notice, and that
the delay was due to Yao's failure to notify and require both arbitrators to ISSUE:
appoint the third member. According to petitioner, it actually gave arbitrators
Sabile and Alamarez a free hand in choosing the third arbitrator; therefore 1. Whether or not the court it has jurisdiction over the person
respondent Yao has no cause of action against petitioner.
2. Whether or not the court a quo has jurisdiction over the subject matter.
Yao filed an amended petition for "Enforcement of Arbitration Agreement with
Damages;" RATIO:

Petitioner answered contending that the amended petition should be 1. The lack of jurisdiction over the person of the defendant may be waived
dismissed on the ground of non-payment of the requisite filing fees and it either expressly or impliedly. When a defendant voluntarily appears, he is
being in the nature of an ordinary civil action, a full blown and regular trial, is deemed to have submitted himself to the jurisdiction of the court. If he so
necessary; so that respondent Yao's proposition for a summary hearing of wishes not to waive this defense, he must do so seasonably by motion for
the purpose of objecting to the jurisdiction of the court; otherwise, he shall be
deemed to have submitted himself to that jurisdiction. The decisions action is the situation that arises when a court, which ordinarily would have
promulgated heretofore by this Court would likewise seemingly apply the authority and competence to take a case, is rendered without it either
estoppel to bar the defendant from pursuing that defense by alleging in his because a special law has limited the exercise of its normal jurisdiction on a
answer any other issue for dismissing the action. particular matter or because the type of action has been reposed by law in
certain other courts or quasi-judicial agencies for determination.
Any ground for dismissal in a motion to dismiss, except improper venue, Nevertheless, it can hardly be questioned that the rules relating to the effects
may, as further set forth in Section 5 of the same rule, be pleaded as an of want of jurisdiction over the subject matter should apply with equal vigor to
affirmative defense and a preliminary hearing may be had thereon as if a cases where the court is similarly bereft of jurisdiction over the nature of the
motion to dismiss had been filed. An answer itself contains the negative, as action.
well as affirmative, defenses upon which the defendant may rely (Section 4,
Rule 6, Rules of Court). A negative defense denies the material facts averred In summary, it is our considered view, as we now so hereby express,
in the complaint essential to establish the plaintiff's cause of action, while an that —
affirmative defense in an allegation of a new matter which, while admitting
the material allegations of the complaint, would, nevertheless, prevent or bar (1) Jurisdiction over the person must be seasonably raised, i.e., that it
recovery by the plaintiff. Inclusive of these defenses are those mentioned in is pleaded in a motion to dismiss or by way of an affirmative defense in
Rule 16 of the Rules of Court which would permit the filing of a motion to an answer. Voluntary appearance shall be deemed a waiver of this
dismiss. defense. The assertion, however, of affirmative defenses shall not be
constructed as an estoppel or as a waiver of such defense.
In the same manner that the plaintiff may assert two or more causes of action
in a court suit, a defendant is likewise expressly allowed, under Section 2, (2) Where the court itself clearly has no jurisdiction over the subject
Rule 8, of the Rules of Court, to put up his own defenses alternatively or matter or the nature of the action, the invocation of this defense may be
even hypothetically. Indeed, under Section 2, Rule 9, of the Rules of Court, done at any time. It is neither for the courts nor the parties to violate or
defenses and objections not pleaded either in a motion to dismiss or in an disregard that rule, let alone to confer that jurisdiction, this matter
answer, except for the failure to state a cause of action, are deemed waived. being legislative in character. Barring highly meritorious and
We take this to mean that a defendant may, in fact, feel enjoined to set up, exceptional circumstances, such as hereinbefore exemplified, neither
along with his objection to the court's jurisdiction over his person, all other estoppel nor waiver shall apply.
possible defenses. It thus appears that it is not the invocation of any of such
defenses, but the failure to so raise them, that can result in waiver or In the case at bench, the want of jurisdiction by the court is indisputable,
estoppel. By defenses, of course, we refer to the grounds provided for in given the nature of the controversy. The arbitration law explicitly confines the
Rule 16 of the Rules of Court that must be asserted in a motion to dismiss or court's authority only to pass upon the issue of whether there is or there is no
by way of affirmative defenses in an answer. agreement in writing providing for arbitration. In the affirmative, the statute
ordains that the court shall issue an order "summarily directing the parties to
2. Lack of jurisdiction over the subject matter of the suit is yet another proceed with the arbitration in accordance with the terms thereof." If the
matter. Whenever it appears that the court has no jurisdiction over the court, upon the other hand, finds that no such agreement exists, "the
subject matter, the action shall be dismissed (Section 2, Rule 9, Rules of proceeding shall be dismissed." The proceedings are summary in nature.
Court). This defense may be interposed at any time, during appeal or even
after final judgment. Such is understandable, as this kind of jurisdiction is
conferred by law and not within the courts, let alone the parties, to
themselves determine or conveniently set aside.

Jurisdiction over the nature of the action, in concept, differs from jurisdiction
over the subject matter. Illustrated, lack of jurisdiction over the nature of the