G.R. No. 125766 - Oronce vs. Court of Appeals

Case Digest (G.R. No. 125766)
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Facts:

Parties, property, and registration
Priciliano B. Gonzales Development Corporation (private respondent) was the registered owner of a parcel of land with an area of 2,000 square meters located at No. 52 Gilmore Street, New Manila, Quezon City.
The land, with improvements, was covered by Transfer Certificate of Title No. RT-54556 (383917).
Rosita L. Flaminiano and Felicidad L. Oronce (petitioners) acquired the property through a transaction later presented by them as a deed of sale with assumption of mortgage.

Loan, mortgage, and execution of the “Deed of Sale with Assumption of Mortgage”
In June 1988, private respondent obtained a P4,000,000.00 loan from the China Banking Corporation.
To guarantee payment, private respondent mortgaged the Gilmore property and improvements to the bank.
On April 13, 1992, private respondent, through its president Antonio B. Gonzales, signed and executed a Deed of Sale with Assumption of Mortgage in favor of petitioners.
The deed stated a consideration of P5,400,000.00 and included a stipulation that private respondent would:

guarantee petitioners’ right to possession “without the need of judicial action,” and
deliver possession at the expiration of one (1) year from April 13, 1992.

Performance, attempted transfer of title, and tax payments
Petitioners paid private respondent’s indebtedness to China Banking Corporation.
Private respondent refused to deliver possession at the end of the one-year period.
Almost six months after execution, on October 2, 1992, petitioners registered the deed with the Register of Deeds.
Simultaneously, petitioners obtained a new title: TCT No. 67990, consistent with their claim as new owners.
In July 1993, petitioners paid real estate taxes and were issued Tax Declarations Nos. C-061-02815 and C-061-02816.

Demand to vacate and filing of unlawful detainer
On November 12, 1993, petitioners sent a demand letter for private respondent to vacate; it was returned unclaimed after being sent through the Quezon City post office.
On April 11, 1994, petitioners filed with the Metropolitan Trial Court of Quezon City a complaint for unlawful detainer, docketed as Civil Case No. 8638, raffled to Branch 41.
Petitioners alleged that by virtue of the deed, they acquired ownership and thus had the right to eject private respondent for refusing to surrender possession despite demand.

Private respondent’s answer and the equitable mortgage theory
In its answer, private respondent raised the issue of ownership.
Private respondent argued that petitioners had no cause of action because private respondent was merely a mortgagee.
Private respondent contended that the parties’ real intention was to forge an equitable mortgage, not a sale.
Private respondent relied on three circumstances indicative of an equitable mortgage:

inadequacy of purchase price,
continued possession by private respondent, and
retention of a portion of the purchase price by petitioners.

Stipulation at preliminary conference and MTC judgment
During preliminary conference, parties stipulated:

the existence and due execution of the Deed of Sale with Assumption of Mortgage, and
the issue whether the premises were being unlawfully detained by private respondent.

On March 24, 1995, the MTC decided in favor of petitioners.
The MTC ruled petitioners were owners based on:

TCT No. 67990,
petitioners’ payment to China Banking Corporation of P8,500,000.00 (the mortgage entered into between private respondent and the bank),
payment of real estate taxes for 1993, and
Tax Declaration No. 02816 in petitioners’ names.

The MTC further held private respondent’s possession was merely tolerated and became illegal when private respondent refused to vacate after demand.
The MTC ordered:

private respondent to vacate and surrender possession,
P20,000.00 a month as compensation from the filing date (April 11, 1994) until full vacatur,
P20,000.00 attorney’s fees plus costs,
dismissal of counterclaim for lack of merit.

Appeal to RTC, writ of execution pending appeal, and reformation case
On April 25, 1995, private respondent appealed to the Regional Trial Court, Branch 219, of Quezon City (Civil Case No. Q-95-23697).
Private respondent stressed it was not unlawfully withholding possession because the deed did not reflect the true intention of the parties and was actually an equitable mortgage.
Private respondent filed a motion questioning the RTC’s jurisdiction over the appeal.
Petitioners filed a motion for immediate execution of the appealed decision.
The RTC granted execution pending appeal on September 21, 1995, and the writ was issued on September 25, 1995.
On the next day, the sheriff served the writ of execution and a notice to vacate within five (5) days.
During pendency of the appeal, private respondent filed an action for reformation of instrument with the RTC, docketed as Civil Case No. Q-95-24927, assigned to Branch 227.
On December 7, 1995, RTC Branch 219 asserted jurisdiction over the appeal, relying on Judith v. Abragan that filing of a reformation action does not frustrate the summary ejectment remedy.

CA proceedings, RTC affirmance, and non-suit in the reformation case
On December 12, 1995, private respondent filed with the Court of Appeals a petition for certiorari with prayer for temporary restraining order and writ of preliminary injunction against petitioners and RTC Branch 219, assailing the September 21, 1995 order granting execution pending appeal, the writ of execution, and the notice to vacate (CA-G.R. SP-39227).
On December 13, 1995, RTC Branch 219 rendered a decision affirming the MTC.
RTC Branch 219 ruled that in ejectment proceedings the issue is who is entitled to physical or material possession and noted that its ruling on possession de facto was without prejudice to reformation, citing Ang Ping v. Regional Trial Court and Section 7, Rule 70 on ejectment judgments binding only as to possession.
On December 13, 1995, the Court of Appeals issued a temporary restraining order enjoining RTC Branch 219 from enforcing its writ and notice to vacate.
On January 15, 1996, the CA granted a writ of preliminary injunction enjoining implementation of the writ of execution pending appeal and the RTC decision.
Around six months later, on July 2, 1996, RTC Branch 227 issued an order declaring private respondent non-suited for failure to appear at pre-trial, thus dismissing the reformation case (Civil Case No. Q-95-24927).
Private respondent did not seek reconsideration.
On August 15, 1996, RTC Branch 227 directed entry of judgment, and the Clerk of Court issued the final entry.

Court of Appeals decision nullifying the MTC judgment
On July 24, 1996, the Court of Appeals rendered its questioned decision.
It set aside the MTC’s March 24, 1995 decision and declared it null and void for want of jurisdiction.
The CA made permanent the writ of preliminary injunction, enjoining petitioners from implementing RTC Branch 219’s decision, the writ of execution, and the notice to vacate.
The CA reasoned the dispute extended beyond ordinary ejectment issues because resolution hinged on ownership, which it held was not cognizable by the MTC (citing General Insurance and Surety Corporation v. Castelo).
The CA also held the RTC judge should have deferred to the court where reformation was pending.
On estoppel, the CA held private respondent was not barred from questioning MTC jurisdiction because it timely raised the equitable mortgage issue in its answer, and jurisdiction cannot be conferred by consent or estoppel if i...(Subscriber-Only)

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