G.R. No. L-44001 - Mercado vs. Court of Appeals

The private respondents (later identified as the Bulaong Group) had been individual lessees of market stalls in Baliuag, Bulacan from 1956 to 1972.
After a fire destroyed the original market on February 17, 1956, the Bulaong Group reconstructed the stalls at their own expense and continued to pay rentals to the Municipality of Baliuag.
In or around 1972, the Bulaong Group sub‐leased their individually held stalls to other persons (collectively referred to as the Mercado Group).
Subsequent to the subleases, municipal officials cancelled the longstanding leases of the Bulaong Group and declared the Mercado Group as the rightful lessees on the basis of Municipal Ordinance No. 14 (dated December 14, 1964) and a directive from the Office of the President (letter of Executive Secretary R. Zamora dated May 29, 1973).
Municipal Ordinance No. 49, approved on July 5, 1973, subsequently confirmed and recognized the rights of the Mercado Group over the stalls.

The Bulaong Group instituted several individual complaints before the Court of First Instance seeking recovery of the market stalls and damages, basing their claim on their alleged ownership as builders who constructed the stalls at their own expense.
Answers were filed by the defendants, including the Municipality of Baliuag, and the parties stipulated to most of the facts during the pretrial phase.
The Mercado Group, as defendants, moved for summary judgment relying on the admissions in the pleadings and pretrial stipulations, asserting that no genuine issue of material fact existed.
The Bulaong Group opposed the summary judgment by arguing that while most facts were uncontested, the issue of actual damages required formal presentation of evidence, submitting affidavits and photographs to establish the value and nature of the improvements made.

It rejected the Municipality’s claim of automatic acquisition of ownership of new stalls.
It declared the Bulaong Group as builders in good faith, entitled to retain possession of the stalls until indemnified for their value.
It decreed the annulment of leases between the Municipality and the Mercado Group and ordered payment of the adjudicated value (with interest) to the Bulaong Group, along with provisions for their continued possession should payment not be effected.

Following the judgment, the Mercado Group and the Municipality filed motions for reconsideration, which were denied.
The Mercado Group subsequently filed a notice of appeal on January 7, 1976, along with an appeal bond and a motion for extension of time to file the record on appeal; however, these were filed beyond the reglementary period.
The Trial Court, by its Order dated January 9, 1976, directed the execution of the summary judgment, holding that the judgment had become final due to the late filing of appeal documents.

In response to the finality of the summary judgment, the Mercado Group filed a special civil action of certiorari and prohibition before the Court of Appeals aiming to annul the portion of the judgment which awarded damages to the Bulaong Group and to restrain further enforcement.
The Court of Appeals ruled on May 14, 1976, holding:

The summary judgment was properly rendered in accordance with the procedural rules (specifically Rule 34), and even if there had been errors in the appreciation of the evidentiary submissions, such errors were matters of judgment, not jurisdiction.
The Mercado Group was not denied due process since they had the right to present their side via affidavits and counter-affidavits during the summary judgment proceedings.
Their appeal was invalid because it was filed beyond the reglementary period, thereby converting the judgment into a final and executory one, which precluded the use of certiorari as an alternative remedy.

The petitioners (Mercado Group) contended that the Trial Court had applied the wrong provision of the Civil Code by treating the Bulaong Group as builders in good faith rather than as lessees making improvements.
They argued that the summary judgment, particularly the award of damages solely on the basis of affidavits and without a formal evidentiary hearing on damages, violated due process.
Despite these contentions, the issue was deemed to be an error in the exercise of jurisdiction—a matter that should have been corrected by appeal rather than through the special civil action of certiorari, especially given the availability of the ordinary remedy of appeal.

Whether a final summary judgment rendered without timely appeal can be challenged by a special civil action of certiorari, or whether the ordinary appeal is the exclusive remedy.
Whether the existence of a reglementary period for appeal, and its subsequent expiration, bars the use of certiorari in overturning errors committed by the Trial Court.

Whether the summary judgment’s determination of actual damages solely on affidavits (without a formal evidentiary hearing) constituted a deprivation of due process.
Whether the refusal to grant a hearing for the contested damages was proper under the procedural rules.

Whether the Trial Court erred in applying the provisions for builders in good faith (Article 526 of the Civil Code) to the case of the Bulaong Group, who were in fact lessees.
Whether such an error was substantive enough to render the judgment void or merely an error in judgment correctable by appeal.

Whether the Mercado Group’s failure to file its appeal within the prescribed period effectively rendered the judgment final and immune from review by certiorari.
How the computation of the reglementary period (as prescribed by Section 3, Rule 41, and pertinent provisions) affects the availability of remedies.