"They are an inexpensive remedy"
Do you have a friend, neighbor or office mate who has approached you for a loan? They give us reasons such as an urgent need to pay for an amortization of a house or a car, meet the tuition deadline of a child, meet a deadline for a good investment, meet unforeseen business reverses, or address cash flow problems.
After loaning the amount, you call the borrower to remind him to return it, but he does not answer your phone calls. Nor can he be reached. You learn that he has changed his address without informing you. You want to be paid but you do not want to seek the assistance of a lawyer. For you, engaging the services of a lawyer to collect your money will be an additional expense.
Knowledge of the Rules of Procedure for Small Claims Cases (Rules on Small Claims) may help you with your collection problems. The Rules is an effective tool in providing a simplified and inexpensive recourse for litigants to assert their small claims. The Rules were drafted to protect and advance the constitutional rights of persons to a speedy disposition of their cases, and to introduce innovations and best practices for the benefit of the underprivileged (Section 3, Rules of Procedure for Small Claims Cases).
The Rules on Small Claims shall govern the procedure for recovery of money where the value of the claim does not exceed three hundred thousand pesos outside of Metro Manila and four hundred thousand pesos in Metro Manila exclusive of interest and costs (OCA Circular No. 45-2019). The action shall be filed before the Metropolitan Trial Courts and Municipal Trial Courts (Section 2, Rules of Procedure for Small Claims Cases).
The actions covered by the Rules on Small Claims are purely civil in nature where the claim or relief sought by the plaintiff is solely for payment or reimbursement of a sum of money. The claim or demand may be for money owed under any of the following: (a) Contract of Lease; (b) Contract of Loan; (c) Contract of Services; (d) Contract of Sale; or (e) Contract of Mortgage (Section 5, Rules of Procedure for Small Claims Cases).
Also covered are claims for liquidated damages arising from contracts, and enforcement of an amicable barangay settlement or an arbitration award involving a money claim covered by this Rule pursuant to Sec. 417 of Republic Act 7160, otherwise known as The Local Government Code of 1991. The Rules has excluded the civil aspect arising from a criminal case (Section 5, Rules of Procedure for Small Claims Cases).
Unlike an ordinary civil action which is commenced by filing a formal complaint with the assistance of a lawyer, the small claims action may be commenced without or with limited assistance of a lawyer. The court submissions like the Statement of Claim (Complaint) and the Response (Answer) are in the forms provided in the Rules on Small Claims which can be accomplished by the parties themselves.
The verified Statement of Claim must have two duly certified photocopies of the actionable document, as well as the affidavits of witnesses and other evidence to support the claim. The actionable document is the source or basis of the claim or obligation to pay like promissory notes, loan agreements, lease contracts, service contracts, or sales contracts (Section 6, Rules of Procedure for Small Claims Cases).
It is imperative for the plaintiff or claimant lending company or bank to allege in the Statement of Claim that it is engaged in the business of lending, banking and similar activities including the number of small claims cases filed within the calendar year. No evidence shall be allowed during the hearing which was not attached to or submitted together with the Statement of Claim (Section 6, Rules of Procedure for Small Claims Cases).
The court may, from an examination of the allegations of the Statement of Claim and the attached evidence, dismiss the case outright. The order of dismissal shall state if it is with or without prejudice. Further, if the plaintiff misrepresents not to be engaged in the business of banking or lending, the case shall be dismissed with prejudice and the plaintiff shall be meted the appropriate sanctions, such as direct contempt (Section 11, Rules of Procedure for Small Claims Cases).
Once the defendant receives the summons and the Statement of Claim, a verified Response must be filed within a non-extendible period of ten (10) days. The Response shall be accompanied by certified photocopies of documents, as well as affidavits of witnesses and other evidence. No evidence shall be allowed during the hearing which was not attached to or submitted together with the Response (Section 13, Rules of Procedure for Small Claims Cases).
Should the defendant fail to file a Response within the required period, and likewise fail to appear on the date set for hearing, the court shall render judgment on the same day. The defendant who fails to file a Response but appears on the date set for the hearing may offer his defenses in court which shall constitute the Response, and the court shall proceed to hear or adjudicate the case on the same day as if a Response has been filed (Section 14, Rules of Procedure for Small Claims Cases).
The venue of the action for reimbursement of money, being primarily a personal action, is instituted in the residence of the plaintiff or the defendant, at the option of the plaintiff (Section 2, Rule 4, Rules of Civil Procedure). If the plaintiff is a lending company or bank, and has a branch within the municipality or city where the defendant resides, the action shall be filed where that branch is located (Section 7, Rules of Procedure for Small Claims Cases).
On the day of the hearing, the judge shall read aloud a short statement explaining the nature, purpose and the rule of procedure of small claims cases (Section 22, Rules of Procedure for Small Claims Cases). The judge shall first exert efforts to bring the parties to an amicable settlement of their dispute. If efforts at settlement fail, the hearing shall immediately proceed in an informal and expeditious manner and be terminated within the same day (Section 23, Rules of Procedure for Small Claims Cases).
A unique feature of the Rule on Small Claims is that no attorney shall appear in behalf of or represent a party at the hearing, unless the attorney is the plaintiff or defendant. If the court determines that a party cannot properly present his or her claim or defense, the court may allow another individual who is not an attorney to assist that party (Section 19, Rules of Procedure for Small Claims Cases).
The failure of the plaintiff to appear during the hearing shall be cause for the dismissal of the claim without prejudice and the defendant will be entitled to judgment on a permissive counterclaim (Section 20, Rules of Procedure for Small Claims Cases). The failure of the defendant to appear shall cause the court to render judgment on the same day (Section 14, Rules of Procedure for Small Claims Cases).
After the hearing, the court shall render its decision based on the facts established by the evidence within twenty-four (24) hours from termination of the hearing. The decision shall be final, executory and unappealable (Section 24, Rules of Procedure for Small Claims Cases). Since the decision is not appealable and a Motion for Reconsideration is a prohibited pleading, the only remedy available to the losing party is a Petition for Certiorari if the decision is tainted with grave abuse of discretion amounting to lack or excess of jurisdiction (Rule 65, Rules of Civil Procedure).
It is evident that the Supreme Court passed the Rules on Small Claims to make the judicial system accessible to non-lawyers, to be able to unclog the dockets of the first level courts (Metropolitan and Municipal Trial Courts), and limit the legal cost of the litigants. However, this remedy must not be abused by banks and lending companies by splitting their claims to make it fall within the coverage of the Small Claims Rules.