G.R. No. 191251 - Delicano vs. Pechaten Corporation

Case Summary (G.R. No. 191251)

Factual Background

Respondent Pechaten Corporation owned the subject property under TCT No. 95052. In June 1993, respondent and the lessees—Teodoro Alberto, Honorata Salmorin, Aquilina Hizon, and Dalmacia Meneses—executed a lease contract over the property for a period of two years. The parties stipulated that the monthly rental would be P864 during the first year and would increase to P1,037 during the second year.

The lessees later executed a waiver of rights or interest in the lease in favor of Virgilio Meneses, the son of Dalmacia Meneses. When the lease expired on 30 June 1995, respondent offered Virgilio Meneses either to renew the lease or to purchase the property. Virgilio Meneses ignored the offer and failed to pay monthly rentals beginning July 1995.

On 6 October 1999, respondent sent a demand letter to Virgilio Meneses to vacate the premises and either pay accrued rent in the amount of P141,032 or pay reasonable compensation for use and occupation. When Virgilio Meneses refused, respondent filed with the Metropolitan Trial Court (MeTC) a case for unlawful detainer with damages, naming Virgilio Meneses as defendant.

MeTC and RTC Rulings in the Unlawful Detainer Case

Virgilio Meneses defended that the MeTC lacked jurisdiction because the ejectment suit was filed more than four (4) years from the contract’s expiration on 30 June 1995. He also argued that respondent’s proper remedy was accion publiciana rather than unlawful detainer. Further, he claimed he was not a party to the lease contract and therefore respondent had no cause of action against him.

On 12 February 2002, the Manila MeTC-Branch 2 rendered judgment for respondent. It ordered Virgilio Meneses and those claiming under him to vacate the premises and to pay P1,200.00 per month from July 1995 until actual vacation as reasonable compensation, as well as P8,000.00 attorney’s fees and costs.

On appeal, the Manila RTC-Branch 37 affirmed. In a Decision dated 30 May 2008, the RTC held that the one-year period for unlawful detainer should be reckoned from the time of the last demand to vacate. It found that the last demand occurred on 6 October 1999, and the complaint filed on 25 November 1999 was within the reglementary period.

The Expropriation Case and the Subsequent Motion for Reconsideration

While the unlawful detainer litigation was pending, the City of Manila filed on 12 August 2004 a complaint for expropriation involving the same property. The case was docketed as Civil Case No. 04-110675 and raffled to Manila RTC-Branch 11, which issued a Writ of Possession in favor of the City. On 27 March 2008, the Manila RTC-Branch 11 issued an Order of Expropriation in favor of the City of Manila.

After Virgilio Meneses died, petitioners were substituted as heirs. In light of the RTC-Branch 11 orders in the expropriation case, petitioners moved for reconsideration in the unlawful detainer case. They asked that the unlawful detainer be dismissed as moot and academic, asserting that the City had already turned over the property to them.

Respondent opposed, contending that the order of 27 March 2008 in the expropriation case was still under appeal before the Court of Appeals.

On 27 August 2008, the Manila RTC-Branch 37 issued an order partially reconsidering its 30 May 2008 decision. It set aside the order requiring appellant to vacate as moot and academic, but it directed payment of P1,200.00 per month from July 1995 up to February 9, 2005, plus P8,000.00 attorney’s fees, and costs.

Court of Appeals Proceedings and the Amended Decision

Respondent filed a petition for review before the Court of Appeals, seeking to annul the 27 August 2008 order. In its Decision dated 18 February 2009, the Court of Appeals dismissed respondent’s petition and affirmed the RTC-Branch 37 order. Respondent then sought reconsideration.

In a supplemental motion for reconsideration, respondent attached a copy of the Court of Appeals’ Decision dated 24 March 2009 in the related expropriation case entitled City of Manila v. Pechaten Corporation. That decision reversed the RTC-Branch 11 order and dismissed the complaint for eminent domain. Respondent argued that the finality of that appellate ruling constituted a supervening event justifying reconsideration of the Court of Appeals’ earlier decision in the unlawful detainer case. The expropriation decision became final and executory on 14 April 2009.

On 13 November 2009, the Court of Appeals issued an Amended Decision granting the motion for reconsideration and supplemental motion for reconsideration. It reconsidered and set aside its 18 February 2009 decision and dissolved the writ of possession issued by Branch 11 of the Manila RTC in favor of the City of Manila. The Court of Appeals explained that an order may be suspended or nullified when a supervening event results in a material change in the situation of the parties. It held that the finality of the expropriation appellate decision—dismissing the eminent domain case—served as such supervening event. It characterized the appellate decision reversing the expropriation order as a judgment on the merits whose finality required the revocation of the writ of possession. It further reasoned that, because the writ had placed the City and then petitioners in possession, possession had to revert back to the legal owner, respondent, since the expropriation case had been conclusively dismissed.

The Issue Presented

The principal issue was whether petitioners remained entitled to retain possession of the subject property despite the dismissal of the expropriation case on appeal.

Legal Basis and Reasoning

The Supreme Court applied Section 11, Rule 67 (Expropriation) of the Rules of Civil Procedure, which provides that the plaintiff’s right to enter upon the property and appropriate it for public use or purpose is not delayed by appeal; however, if the appellate court determines that plaintiff has no right of expropriation, the appellate court must order the RTC to forthwith enforce the restoration to the defendant of possession and to determine damages the defendant sustained due to the possession taken.

The Court noted that in the related expropriation case, the Court of Appeals’ Special Sixth Division held that the expropriation was not for public use. It found that the expropriation under City Ordinance No. 7984 was intended for the sole benefit of the family of Virgilio Meneses, and it dismissed the eminent domain complaint. The City of Manila did not appeal, and the Special Sixth Division’s decision became final and executory on 14 April 2009.

Given this finality, the Supreme Court held that respondent should be restored to rightful possession in accordance with Section 11, Rule 67, because the appellate determination removed the basis for the City’s taking and continued possession under the writ of possession.

Ruling of the Court

The Supreme Court denied the petition and affirmed the Court of Appeals’ 13 November 2009 Amended Decision in CA-G.R. SP No. 105360. It reinstated the Decision dated 30 May 2008 of the Manila Regional Trial Court, Branch 37,

Case Syllabus (G.R. No. 191251)

Parties and Procedural Posture

Pechaten Corporation was the registered owner and plaintiff in the ejectment controversy that began in the Metropolitan Trial Court (MeTC).
Virgilio Meneses was the original defendant in the unlawful detainer case, and he was later substituted by his heirs who became the petitioners.
The petitioners filed a motion for reconsideration in the Manila Regional Trial Court (RTC), Branch 37 following developments in a related expropriation case.
The Court of Appeals initially affirmed the RTC ruling in a decision dated 18 February 2009, then later issued an Amended Decision dated 13 November 2009 granting the respondent’s motion for reconsideration.
The present petition sought review of the Court of Appeals’ 13 November 2009 Amended Decision.

Key Factual Allegations

Pechaten Corporation owned the property at 852 Vicente Cruz Street, Sampaloc, Manila, covered by TCT No. 95052.
In June 1993, the respondent and Teodoro Alberto, Honorata Salmorin, Aquilina Hizon, and Dalmacia Meneses entered into a two-year lease contract over the property with monthly rentals of P864 for the first year and P1,037 for the second year.
The lessees executed a waiver of their rights or interest in the lease contract in favor of Virgilio Meneses.
After the lease expired on 30 June 1995, Virgilio Meneses ignored the respondent’s offer to renew or purchase and failed to pay rentals beginning July 1995.
On 6 October 1999, the respondent demanded Virgilio Meneses to vacate and to pay P141,032 in accrued rent or reasonable compensation.
When Virgilio Meneses refused, the respondent filed an unlawful detainer case with the MeTC.
Virgilio Meneses argued that the MeTC lacked jurisdiction because the case was filed more than four (4) years from the contract expiration, that the proper remedy was accion publiciana, and that he was not a party to the lease contract.
The respondent obtained a MeTC judgment ordering the defendant and those claiming under him to vacate and to pay monthly compensation, attorney’s fees, and costs.
On appeal, the RTC, Branch 37 affirmed the MeTC and computed timeliness by reckoning the period from the last demand, which was held to have been made on 6 October 1999.
A related expropriation complaint was later filed by the City of Manila on 12 August 2004, raffled to RTC Branch 11, which issued a Writ of Possession.
On 27 March 2008, RTC Branch 11 issued an order of expropriation in favor of the City of Manila.
After Virgilio Meneses’ death, his heirs pursued reconsideration in the RTC Branch 37, alleging that the unlawful detainer case had become moot and academic because the City already took possession through the expropriation process.
The RTC Branch 37 later partially reconsidered by setting aside the ejectment order as moot and academic and retaining liability for monthly compensation and attorney’s fees up to a cutoff.
The Court of Appeals ultimately dissolved the writ of possession in the unlawful detainer context after the Court of Appeals in the expropriation appeal reversed the order of expropriation.

Issues Submitted

The central issue was whether the petitioners were still entitled to retain possession of the subject property despite the dismissal of the expropriation case.
The issue required determining the effect of a final and executory appellate ruling in the expropriation case on possession granted through the writ of possession issued by RTC Branch 11.

Statutory and Procedural Framework

Rule 67 (Expropriation), Section 11 of the Rules of Civil Procedure governed the restoration of possession when the appellate court determines that the plaintiff had no right of expropriation.
Section 11, Rule 67 provided that the right to enter and appropriate property is not delayed by appeal, but it required that if appellate review finds no right of expropriation, the court must order the forthwith restoration of possession to the defendant and determine damages.
The Court of Appeals relied on the general procedural principle that a court may suspend or nullify an order when a supervening event occurring after the order produces a material change in the parties’ situation.
The analysis also proceeded from the characterization that a writ of possession is an order commanding the sheriff to place a party in possession of property pending the expropriation process.

Lower Courts’ Rulings

The MeTC, Manila Branch 2