Oronce v. Court of Appeals
REITERATIONFacts
1. The Antecedents: Priciliano B. Gonzales Development Corporation (PBGDC) was the registered owner of a parcel of land with improvements at 52 Gilmore Street, Quezon City. In June 1988, PBGDC mortgaged this property to China Banking Corporation to secure a P4,000,000.00 loan. On April 13, 1992, PBGDC executed a Deed of Sale with Assumption of Mortgage in favor of Felicidad L. Oronce and Rosita L. Flaminiano (petitioners) for P5,400,000.00. The deed stipulated that PBGDC would deliver possession of the property to petitioners one year after execution, and petitioners would assume PBGDC's mortgage obligation. Petitioners fulfilled their obligation by paying PBGDC's debt to China Banking Corporation. However, PBGDC failed to deliver possession of the property as agreed. Petitioners subsequently registered the deed, obtained a new title (TCT No. 67990), and paid real estate taxes. After PBGDC refused to vacate the premises despite demand, petitioners filed an unlawful detainer case. 2. Procedural History: Petitioners filed an unlawful detainer complaint against PBGDC before the Metropolitan Trial Court (MTC) of Quezon City. PBGDC raised the issue of ownership, alleging the deed was an equitable mortgage, not a sale. The MTC ruled in favor of petitioners, ordering PBGDC to vacate and pay damages. PBGDC appealed to the Regional Trial Court (RTC), which affirmed the MTC decision. Meanwhile, PBGDC filed a separate action for reformation of instrument with the RTC. The Court of Appeals (CA) later set aside the RTC decision and nullified the MTC decision, ruling that the MTC lacked jurisdiction because the dispute extended beyond ordinary ejectment issues and hinged on ownership. The CA made permanent a writ of preliminary injunction enjoining petitioners from enforcing the lower courts' decisions. The RTC later dismissed PBGDC's action for reformation of instrument due to non-suit. 3. The Petition: Petitioners seek review on certiorari of the Court of Appeals' decision. They argue that the CA erred in holding that the MTC lacked jurisdiction, asserting that under Section 33(2) of the Judiciary Reorganization Act of 1980 (BP 129) and subsequent jurisprudence, inferior courts have the authority to resolve ownership issues solely to determine possession in ejectment cases. Petitioners contend that the CA's decision is contrary to prevailing doctrines that allow MTCs to pass upon ownership as an incident to ejectment proceedings. They also argue that PBGDC's filing of a reformation case was a ploy to delay, and its subsequent dismissal confirmed this, rendering the CA's decision inequitable. Petitioners further claim that the dismissal of the reformation case should have been considered a supervening event that resolved the issue of ownership in their favor.
Issue(s)
Whether the Metropolitan Trial Court (MTC) has jurisdiction to resolve the issue of ownership in an unlawful detainer case. Whether the Deed of Sale with Assumption of Mortgage executed between the parties was a contract of sale or an equitable mortgage. Whether the Court of Appeals erred in setting aside the MTC and RTC decisions and nullifying the MTC decision for want of jurisdiction.
Ruling
The petition is denied, and the decision of the Court of Appeals is affirmed. The temporary restraining order issued on October 13, 1997, is made permanent. Petitioners and their agents are directed to turn over possession of the property to private respondent. Petitioner Rosita L. Flaminiano is found guilty of contempt of court and fined P20,000.00. Her counsel and husband, Atty. Eduardo B. Flaminiano, is ordered to pay a fine of P25,000.00 for contumacious acts.
Ratio Decidendi
On the jurisdiction of MTCs in unlawful detainer cases involving ownership: The Court reiterated that Metropolitan, Municipal, and Municipal Circuit Trial Courts retain jurisdiction over ejectment cases even if the question of possession cannot be resolved without passing upon the issue of ownership. However, this is subject to the qualification that the issue of ownership shall be resolved only for the purpose of determining the issue of possession. The Court emphasized that any pronouncement made affecting ownership in an ejectment case is merely provisional and does not bar or prejudice a separate action involving title to the land. The MTC, in this case, erred by not examining the Deed of Sale with Assumption of Mortgage to provisionally determine the issue of possession, instead stating the issue of ownership should not be raised. On whether the Deed of Sale with Assumption of Mortgage was an equitable mortgage: The Court found that two circumstances enumerated in Article 1602 of the Civil Code were manifest in the Deed of Sale with Assumption of Mortgage: (a) the vendor (PBGDC) would remain in possession of the property for one year, and (b) the vendees (petitioners) retained a part of the purchase price. The Court noted that the MTC found petitioners paid P8,500,000.00 to the bank, and P5,400,000.00 to PBGDC, totaling P13,900,000.00 out of a P14,000,000.00 purchase price, leaving P100,000.00 unpaid. The Court concluded that on its face, the document was an equitable mortgage, not a sale, and that the MTC should have examined this aspect to determine possession. The issuance of a new title to petitioners did not conclusively prove ownership, as equity looks through the form and considers the substance of the agreement. On the Court of Appeals' decision: The Court agreed with the Court of Appeals that the dispute extended beyond ordinary issues in ejectment cases and that the resolution hinged on the question of ownership, which was not cognizable by the MTC for definitive resolution. The CA correctly noted that the MTC should have deferred to the action for reformation of instrument or at least made a provisional determination of ownership to resolve possession. The Court also affirmed the CA's ruling that PBGDC was not estopped from questioning the MTC's jurisdiction because it promptly raised the issue of jurisdiction in its answer, alleging the contract was an equitable mortgage. The filing of the reformation case was not an afterthought but a proper step to determine the true nature of the contract.
Main Doctrine
Metropolitan Trial Courts (MTCs) may resolve the issue of ownership in unlawful detainer cases solely for the purpose of determining the issue of possession, but their pronouncements on ownership are provisional and do not bind the title or affect ownership in a separate action.