FACTS:

This case involves the jurisdiction of courts in relation to the provisions of Section 6 of Republic Act No. 876, and the applicability of the doctrine of estoppel. The events leading to this case are as follows:

Respondent Yao is the present owner of a commercial building, a portion of which is leased to the petitioner under a contract of lease executed on December 23, 1983. The lease contract expired on April 30, 1989, but the petitioner exercised its option to lease the same building for another five years. However, the petitioner and respondent Yao disagreed on the rental rate.

In order to resolve the controversy, respondent Yao expressed his intention to submit the disagreement to arbitration, in accordance with the Arbitration Law (Republic Act No. 876) and paragraph 7 of their lease contract. Paragraph 7 provided that in case the parties fail to agree on the rate of rentals, the matter shall be submitted to a group of arbitrators composed of three members, with one arbitrator appointed by the lessor, another by the lessee, and the third to be agreed upon by the two arbitrators previously chosen.

Respondent Yao appointed Domingo Alamarez, Jr. as his arbitrator, while the petitioner chose Atty. Casiano Sabile as its arbitrator. The confirmation of the appointment of the third arbitrator, Aurelio Tupang, was held in abeyance by petitioner. Respondent Yao alleged that this was a delay tactic by the petitioner in violation of the Arbitration Law and the lease contract.

Respondent Yao filed a petition seeking a summary hearing and the direction for the arbitrators to proceed with the arbitration in accordance with the lease contract and the Arbitration Law. The respondent prayed for the appointment and confirmation of the third arbitrator and for the immediate resolution of the dispute by the Board of Three Arbitrators.

The petitioner, in its answer with counterclaim, specifically denied the allegations in the petition below.

The case involves a dispute between petitioner Southwest Industrial Gases, Inc. and respondent Teresito Yao. Petitioner denied the allegations in respondent's petition, arguing that the petition was premature and that respondent failed to notify and require the appointed arbitrators to choose a third member for the Board of Arbitrators. Petitioner also filed a counterclaim for damages. Respondent filed an amended petition seeking the enforcement of the arbitration agreement and damages. Despite petitioner's opposition, the court admitted the amended petition. Petitioner argued that a full-blown trial is necessary for the amended petition and that it should be dismissed due to non-payment of filing fees. Petitioner also filed a motion to set the case for a preliminary hearing of its defenses. The court announced that the arbitrators chose a third arbitrator and ordered the submission of position papers regarding respondent's claim for damages. In its order, the court ruled that it has jurisdiction over respondent's claim for damages. Petitioner filed a motion for reconsideration, arguing that the court lacks jurisdiction over the damages claim. The court denied the motion, stating that petitioner is estopped from questioning the court's competence to hear the damages claim since petitioner also filed a counterclaim. The court emphasized that a court with limited jurisdiction cannot exceed its authority and must focus only on matters within its jurisdiction. The court discussed the distinction between lack of jurisdiction over the person and lack of jurisdiction over the subject matter, stating that lack of jurisdiction over the person can be waived, but lack of jurisdiction over the subject matter cannot be. The court cited previous decisions to support this argument.

ISSUES:

1. • Whether the submission of other issues in a motion to dismiss or an affirmative defense in an answer would result in the waiver of the right to raise lack of jurisdiction over the person of the defendant.
2. • Whether the lack of jurisdiction over the person of the defendant can be cured by voluntary appearance.

3. Whether a defendant may raise multiple defenses alternatively or hypothetically.

4. Whether lack of jurisdiction over the nature of the action is akin to lack of jurisdiction over the subject matter.

5. Whether the defense of lack of jurisdiction over the nature of the action can be raised at any time.

RULING:

1. • The submission of other issues in a motion to dismiss or an affirmative defense in an answer does not necessarily waive the right to raise lack of jurisdiction over the person of the defendant.
2. • Lack of jurisdiction over the person of the defendant can be cured by voluntary appearance.

3. A defendant is allowed, under Section 2, Rule 8, of the Rules of Court, to put up his own defenses alternatively or even hypothetically.

4. Lack of jurisdiction over the nature of the action is similar to lack of jurisdiction over the subject matter. The rules relating to the effects of want of jurisdiction over the subject matter should apply with equal vigor to cases where the court lacks jurisdiction over the nature of the action.

5. The defense of lack of jurisdiction over the nature of the action may be raised at any time, except in highly meritorious and exceptional circumstances. Estoppel and waiver shall not apply unless such circumstances are present.

PRINCIPLES:

• Lack of jurisdiction over the person of the defendant can be waived either expressly or impliedly by voluntary appearance.

• A defendant who voluntarily appears is deemed to have submitted himself to the jurisdiction of the court.

• The right to raise lack of jurisdiction over the person of the defendant must be raised seasonably by motion to dismiss or else it will be deemed waived.

• The doctrine of estoppel is based on equity and should only be applied in highly exceptional and justifiable cases.

• Section 1, Rule 16 of the Rules of Court provides the grounds for a motion to dismiss, including lack of jurisdiction over the person or subject matter of the action.

• A defendant is expressly allowed to put up his own defenses alternatively or even hypothetically (Section 2, Rule 8, Rules of Court).

• Any ground for dismissal in a motion to dismiss, except improper venue, may be pleaded as an affirmative defense (Section 5, Rule 16, Rules of Court).

• A negative defense denies the material facts averred in the complaint essential to establish the plaintiff's cause of action, while an affirmative defense is an allegation of a new matter which, while admitting the material allegations of the complaint, would prevent or bar recovery by the plaintiff.

• Defenses and objections not pleaded in a motion to dismiss or in an answer, except for the failure to state a cause of action, are deemed waived (Section 2, Rule 9, Rules of Court).

• Lack of jurisdiction over the subject matter of the suit is a defense that may be interposed at any time.

• Jurisdiction over the subject matter is conferred by law and not within the courts or the parties to determine or set aside.

• Lack of jurisdiction over the nature of the action is akin to lack of jurisdiction over the subject matter.

• Jurisdiction over the person must be raised seasonably, but the assertion of affirmative defenses does not waive the defense of lack of jurisdiction over the person.

• The defense of lack of jurisdiction over the nature of the action may be raised at any time, except in highly meritorious and exceptional circumstances.

• Estoppel and waiver shall not apply in cases of lack of jurisdiction over the nature of the action, unless highly meritorious and exceptional circumstances are present.

• Arbitration proceedings under the arbitration law are summary in nature and the court's authority is limited to determining the existence of an agreement in writing providing for arbitration.

End of digest.