G.R. No. 174436 - Ermitano vs. Paglas

Case Summary (G.R. No. 174436)

Relevant Dates and Transactions

Lease executed: November 5, 1999 (one-year lease from November 4, 1999) at P13,500.00 monthly; security deposit P27,000.00.
Respondent purchased foreclosed property from Yap: June 1, 2000, for P950,000.00 (Deed of Sale acknowledged that petitioner’s right of redemption remained).
Registration of sheriff’s provisional certificate of sale: February 22, 2000.
Expiration of redemption period: February 23, 2001.
MTCC decision dismissing unlawful detainer and awarding fees to respondent: November 26, 2001.
RTC decision (February 14, 2003) affirmed dismissal but ordered respondent to pay ten months’ unpaid rentals (P135,000) and deleted MTCC award of attorney’s fees.
CA decision (September 8, 2004) affirmed with modifications: deleted RTC award of P135,000, reinstated attorney’s fees and litigation expenses (totaling P10,000).
Supreme Court final disposition modified awards and ordered respondent to pay P108,000 as unpaid rentals and deleted award of attorney’s fees and litigation expenses to respondent.

Applicable Law and Constitutional Basis

Primary procedural and substantive rules applied include the Rules of Court (Rule 131 Section 2(b); Rule 39 Section 32), Act No. 3135 (regulating sale of property under powers in mortgages, including Section 7 concerning possession during redemption), and settled jurisprudence on extrajudicial foreclosure and redemption rights. Because the decision date is after 1990, analysis proceeds under the 1987 Constitution as the governing constitutional framework (not invoked substantively in the Court’s reasoning, but noted per instruction).

Procedural Posture

Petitioner filed an unlawful detainer action in MTCC after respondent refused demands to pay rent and to vacate. MTCC dismissed and awarded fees to respondent. RTC affirmed dismissal but modified to delete attorney’s fees and awarded petitioner unpaid rents for ten months. CA reversed the RTC award for unpaid rents and reinstated attorneys’ fees to respondent. The Supreme Court reviewed the CA decision by certiorari under Rule 45.

Core Legal Issue Presented

Which party was entitled to physical possession of the premises during and after the redemption period, and whether respondent’s purchase during the redemption period excused nonpayment of rentals or entitled her to possess without compliance with statutory requirements; and whether respondent was a buyer in good faith and whether attorney’s fees awarded to respondent were proper.

Unlawful Detainer: Scope Limited to Possession

The Court reiterates the settled rule that unlawful detainer proceedings determine entitlement to physical possession (possession de facto), not title. Where ownership is raised, adjudication is provisional and does not bar a separate action on title. Thus the resolution focuses on which party had the right to physical possession pending final disposition of the title dispute.

Estoppel of Tenant under Rule 131 Section 2(b)

Rule 131 Section 2(b) estops a tenant from denying the landlord’s title only as of the commencement of the landlord-tenant relation. The Court held that this estoppel does not apply when the tenant’s asserted title was acquired subsequent to the commencement of the tenancy. Here respondent’s asserted title (purchase from Yap) was acquired after the lease began; thus the estoppel provision did not preclude respondent from denying petitioner’s title.

Effect of Purchase during Redemption Period: Inchoate Right of Purchaser

The Court applied established doctrine that a purchaser at a foreclosure sale has only an inchoate right during the statutory redemption period; the mortgagor (or redemptioner) remains the owner until the redemption period expires without redemption. Accordingly, the purchaser’s certificate of sale alone does not confer full ownership or an automatic right to possession during redemption.

Requirement of Petition and Bond under Act No. 3135 Section 7

Act No. 3135, as amended, permits a purchaser at foreclosure to petition the court for possession during the redemption period, but only upon filing an indemnity bond equivalent to the use of the property for twelve months, to protect the mortgagor in case the sale violated statutory requirements. The Court emphasized that in the absence of such petition and bond, the purchaser has no right to possession during the redemption period. There was no allegation or evidence that respondent filed the required petition and bond.

Rent Liability during Redemption Period

While respondent could challenge petitioner’s title, respondent’s acquisition of rights from Yap during the redemption period did not excuse nonpayment of rent. The mortgagor retained ownership and entitlement to rents during the redemption period; Rule 39 Section 32 (rents pending redemption) provides that rents, earnings and income belong to the judgment obligor (i.e., mortgagor) until expiration of redemption. The Court therefore held respondent liable for rentals from May 2000 (when she acquired purchase rights) until February 23, 2001 (expiration of redemption), a ten-month period.

Computation of Unpaid Rentals and Deposit Applicatio

Case Syllabus (G.R. No. 174436)

Facts of the Case

On November 5, 1999, petitioner (Juanita Ermitaao), represented by her attorney-in-fact Isabelo Ermitaao, executed a Contract of Lease in favor of respondent (Lailanie M. Paglas) for a 336 square meter residential lot and house located at No. 20 Columbia St., Phase 1, Doña Vicenta Village, Davao City.
The lease period was one (1) year commencing November 4, 1999, with a monthly rental rate of P13,500.00.
Pursuant to the lease contract, respondent paid petitioner a security deposit of P27,000.00 to answer for unpaid rentals and damages.
Respondent learned that sometime in March 1999 petitioner had mortgaged the property in favor of Charlie Yap and that the mortgage was foreclosed; the foreclosure sale was registered on February 22, 2000, with Yap as purchaser.
Yap’s brother later offered to sell the property to respondent; respondent purchased the property from Yap on June 1, 2000 for P950,000.00 by a Deed of Sale that expressly stated the property was subject to petitioner’s right of redemption.
Prior to respondent’s purchase, petitioner filed a suit for declaration of nullity of the mortgage in favor of Yap and of the sheriff’s provisional certificate of sale issued after foreclosure.
Petitioner sent a demand letter to respondent on May 25, 2000 to pay due rentals and vacate; a second demand letter was sent on March 25, 2001; respondent ignored both letters.
On August 13, 2001, petitioner filed an unlawful detainer case against respondent in the Municipal Trial Court in Cities (MTCC), Branch 6, Davao City.
The MTCC, in its Decision dated November 26, 2001, dismissed petitioner’s unlawful detainer case and awarded respondent P25,000.00 as attorney’s fees and P2,000.00 as appearance fee.
Petitioner appealed to the Regional Trial Court (RTC), which rendered Decision on February 14, 2003, affirming the MTCC’s dismissal but deleting the award of attorney’s fees to respondent and ordering respondent to pay petitioner the equivalent of ten months unpaid rentals of P135,000.00.
Petitioner then filed a petition for review with the Court of Appeals (CA); the CA rendered Decision on September 8, 2004 modifying the RTC decision by deleting respondent’s obligation to pay P135,000.00, and by awarding respondent attorney’s fees and litigation expenses in specified amounts. Petitioner’s motion for reconsideration with the CA was denied on August 16, 2006.
Petitioner filed a petition for review on certiorari under Rule 45 before the Supreme Court seeking reversal of the CA decisions and denial of respondent’s attorney’s fees awards.

Procedural History

MTCC (Branch 6, Davao City): Filed unlawful detainer case by petitioner; Decision (Nov. 26, 2001) dismissed the case and awarded respondent P25,000 attorney’s fees and P2,000 appearance fee.
RTC (Davao City, Branch 16): Appeal by petitioner; Decision (Feb. 14, 2003) affirmed dismissal but modified award—deleted attorney’s fees in favor of respondent and ordered respondent to pay petitioner P135,000.00 (ten months unpaid rentals).
CA (CA-G.R. SP No. 77617): Petition for review by petitioner; Decision (Sept. 8, 2004) affirmed RTC with modifications: deleted respondent’s obligation to pay P135,000.00; held attorney’s fees and litigation expenses were correctly awarded to respondent but adjusted amounts (litigation expenses P10,000.00; attorney’s fees reinstated P10,000.00 instead of P2,000.00). Motion for reconsideration denied (Aug. 16, 2006).
Supreme Court (G.R. No. 174436): Petition for review on certiorari filed by petitioner; Decision (Jan. 23, 2013) affirmed CA Decision and Resolution with modifications: ordered respondent to pay petitioner P108,000.00 as unpaid rentals and deleted the award of attorney’s fees and litigation expenses to respondent.

Issues Presented / Assignments of Error

Whether the Court of Appeals erred in dismissing the unlawful detainer case by ruling that a sheriff’s final certificate of sale was already issued, and whether that decision was based on evidence and applicable laws and jurisprudence.
Whether the Court of Appeals erred in ruling that respondent was a buyer in good faith even if informed by petitioner that the real estate mortgage contract was sham/fictitious and forged (purported signature falsified by Angela Celosia).
Whether the Court of Appeals erred when it awarded attorney’s fees to respondent which the RTC had deleted, despite the absence of explanation and/or justification in the RTC decision.

Relevant Statutes, Rules, and Doctrines Cited

Section 2(b), Rule 131, Rules of Court — the conclusive presumption (estoppel against tenants) that "The tenant is not permitted to deny the title of his landlord at the time of the commencement of the relation of landlord and tenant between them."
Act No. 3135 (An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed to Real Estate Mortgages), Section 7 — permits purchaser at foreclosure sale to petition for possession during redemption period upon filing an indemnity bond equivalent to the use of the property for twelve months; otherwise purchaser’s right is inchoate during redemption.
Section 32, Ru