G.R. No. 125066 - Reodica vs. Court of Appeals

On April 26, 2005, Sps. Jovellanos entered into a Contract to Sell with Palmera Homes, Inc. for a residential house and lot in Block 3, Lot 14, Villa Alegria Subdivision, Caloocan City, for a total consideration of P1,015,000.00.
Under the contract, Sps. Jovellanos made a down payment of P91,500.00 and agreed to pay the remaining balance through equal monthly installments of P13,107.00 for a period of 10 years starting June 12, 2005.

On August 22, 2006, Palmera Homes assigned its rights, title, and interest under the Contract to Sell to petitioner Optimum Development Bank via a Deed of Assignment.
Due to the failure of Sps. Jovellanos to pay the monthly installments, Optimum issued a Notice of Delinquency and Cancellation on April 10, 2006, and subsequently sent a final Demand Letter on May 25, 2006, requiring them to vacate the property.

When Sps. Jovellanos failed to vacate the premises after repeated demands, Optimum filed a complaint for unlawful detainer on November 3, 2006, before the Metropolitan Trial Court (MeTC), Branch 53, Caloocan City.
Sps. Jovellanos, despite being served with summons and a copy of the complaint, did not file their timely answer, leading to a motion for the rendition of judgment. They later attempted to challenge the court’s jurisdiction and filed motions for reopening which were denied.

The MeTC, in its Decision dated June 8, 2007, ordered Sps. Jovellanos to vacate the property and pay compensation for its use, holding that their possession derived from a contract that had been cancelled due to non-payment, thus rendering their continued possession unlawful.
Dissatisfied, Sps. Jovellanos appealed to the Regional Trial Court (RTC) arguing that (a) delayed filing of their answer was the result of misleading advice by Optimum’s counsel, and (b) the case involved issues beyond mere possession, implicating contractual rights. The RTC, in its Decision dated December 27, 2007, affirmed the MeTC ruling, emphasizing that the action pertained to recovery of possession following a default.
After a motion for reconsideration was denied at the RTC, the Court of Appeals (CA) reversed the RTC’s decision in an Amended Decision dated May 29, 2009, ruling that the case involved questions on the validity of the contract cancellation and was thus beyond the jurisdiction of the MeTC. This decision was later reaffirmed by a Resolution dated August 10, 2009.

Optimum, aggrieved by the CA ruling, petitioned for review on certiorari, asserting that the case is one for unlawful detainer—a remedy under the exclusive original jurisdiction of the municipal trial courts.
The controversy centered on whether the determination of possession in an unlawful detainer case should disregard the contract’s interpretation and cancellation aspects, and instead rely on the complaint’s allegations.

Whether the Metropolitan Trial Court (MeTC) had jurisdiction over the unlawful detainer action despite the presence of contractual issues regarding the cancellation of the Contract to Sell.
Whether the alleged issues on the validity of the contract cancellation, which involved matters incapable of pecuniary estimation, should have shifted the case to the Regional Trial Court (RTC).

Whether Optimum’s cancellation of the Contract to Sell was valid and in accordance with the terms stipulated in Republic Act No. 6552 (Realty Installment Buyer Protection Act or the Maceda Law).
Whether the procedural requirements—specifically the grant of a 60-day grace period and the subsequent 30-day period after the issuance of a notarial notice—were properly complied with.

Whether the complaint, based on the allegation that Sps. Jovellanos continued to unlawfully possess the property following cancellation of their right to possession, sufficed to invoke the remedy of unlawful detainer irrespective of the underlying contractual disputes.