Title
Mercado vs. Court of Appeals
Case
G.R. No. L-44001
Decision Date
Jun 10, 1988
Long-time lessees lost stalls after sub-leasing; trial court ruled in their favor, but Supreme Court upheld finality of judgment, dismissing certiorari as improper remedy.
dispute
lessees
public market

Case Summary (G.R. No. L-44001)

Parties, Setting, and Governing Legal Framework

For many years, members of the Bulaong Group were individual lessees of stalls in the Baliuag public market from 1956 to 1972. On February 17, 1956, the market was destroyed by fire. The Bulaong Group thereafter constructed new stalls at their own expense and paid rentals on them to the Municipality of Baliuag.

In 1972, the Bulaong Group sub-leased its stalls to others, who became the Mercado Group. After the Mercado Group took possession for some months, municipal officials cancelled the Bulaong Group’s long-standing leases and declared the Mercado Group as the rightful lessees in substitution. The municipal authorities relied on Municipal Ordinance No. 14 dated December 14, 1964, which prohibited sub-leasing, and on an Office of the President directive contained in a letter of Executive Secretary R. Zamora dated May 29, 1973 enforcing that ordinance. Their recognition of Mercado Group’s rights later appeared in Municipal Ordinance No. 49, approved July 5, 1973.

The litigation invoked the Civil Code provisions governing rights of builders and improvers—particularly the distinction between builders in good faith under Articles 525 and 526 and the rules applicable to a lessee who makes useful improvements under Article 1678. Procedurally, the decisive question turned on the interaction between Rule 41 (ordinary appeal from final judgments) and Rule 65 (certiorari when no appeal, or no plain, speedy, adequate remedy exists), together with the timeliness requirements for perfecting an appeal.

Factual Background Leading to the Suits

The Bulaong Group sued by filing several individual complaints with the Court of First Instance, seeking recovery of the stalls from the Mercado Group and damages. The Bulaong Group’s theory was anchored on its asserted status as having constructed the stalls at its expense and its claimed ownership of the improvements, with the alleged right, as owners, to recover possession from those who withheld it.

The Mercado Group filed seasonable answers, including the Municipality of Baliuag as a party in all cases except Civil Case No. 431-B. A pre-trial was held in which the parties stipulated on practically all facts. Afterward, the Mercado Group moved for summary judgment, contending that admissions made at pre-trial and in the pleadings left no genuine issue under controversion.

The Bulaong Group opposed the motion. While the opposition generally invoked other material allegations requiring proof, it identified only one issue of fact requiring formal submission of evidence—namely, the claim for actual damages, stating that the exact amount should be proven at trial. The Bulaong Group further filed a motion to accept affidavits and photographs as annexes to its opposition. Those affidavits and photographs were submitted to establish the character and value of the improvements the Bulaong Group had introduced. On the records described, the Mercado Group did not object to the admission of those annexes.

Crucially, the Mercado Group did not ask—either in its summary judgment motion or after receiving the motion to accept affidavits and photographs—that a hearing be scheduled specifically for reception of evidence on damages.

Trial Court Proceedings and the Summary Judgment

On October 24, 1975, the trial court rendered a summary judgment in all cases. It rejected the Municipality of Baliuag’s contention that it automatically acquired ownership of the new stalls after the old stalls were razed by fire. It declared members of the Bulaong Group to be builders in good faith, entitled to retain possession of the stalls they had erected until reimbursed for the value thereof.

The judgment also held that both the Bulaong and Mercado Groups had executed the sub-letting agreements with awareness that they violated Ordinance No. 14, rendering them in part delicto, and thereby barring each against the other any right to recover what each had given or requested performance of anything undertaken. On that basis, the judgment decreed (1) the annulment of the leases between the Municipality and the individuals comprising the Mercado Group, and (2) an award to the Bulaong Group of the stated, adjudicated value of the stalls, with specified interest conditions and contingencies linked to whether and how the Municipality and the private defendants might seek to eject the plaintiffs.

Motions for Reconsideration and the Failure to Timely Perfect an Appeal

The Mercado Group and the Municipality filed motions for reconsideration on November 14, 1975, which were served on them on November 3, 1975. The trial court denied the motions, and the Mercado Group received notice of the denial on December 18, 1975.

The Mercado Group then filed a notice of appeal, an appeal bond, and a motion for extension of time on January 7, 1976. However, by order dated January 9, 1976, the trial court directed execution of its judgment, concluding that the judgment had become final because the appeal documents had not been seasonably filed. A writ issued; the Mercado Group moved to quash the writ and to reopen the case, but the motion was denied.

Proceedings in the Court of Appeals Through Certiorari and Prohibition

Instead of prosecuting the appeal as perfected (or addressing the consequences of its untimeliness), the Mercado Group instituted in the Court of Appeals a special civil action of certiorari and prohibition. It sought to annul that portion of the summary judgment awarding damages to the Bulaong Group and to restrain the trial judge and provincial sheriff from enforcing it.

On May 14, 1976, the Court of Appeals sustained the trial court. It held that the summary judgment was properly rendered because the trial judge merely adhered to the procedure under the Rule governing summary judgments, and that any error in appreciation of affidavits and counter-affidavits was error of judgment rather than error of jurisdiction. It further ruled that the Mercado Group was not denied due process despite the absence of a formal trial on damages because the parties were afforded the right to speak through affidavits and counter-affidavits in connection with the summary judgment motion. Finally, the Court of Appeals ruled that certiorari could not be used as a substitute for a lost right of appeal, because the Mercado Group attempted to perfect an appeal but filed its papers beyond the reglementary period.

The Mercado Group moved for reconsideration, but the Court of Appeals denied it.

Issues Raised Before the Supreme Court

On further appeal by the Mercado Group, the central issue was whether certiorari could properly be used to reverse a final summary judgment that had already become final due to failure to appeal within the prescribed time, on the asserted theory that the trial court committed grave errors, including alleged denial of due process in awarding damages without receiving evidence through a formal hearing.

The Mercado Group maintained that the judgment was void because the trial court had granted “exorbitant damages” without reliable proof and without affording the chance to prove that the Bulaong Group was not entitled to damages or, at least, that the damages should have been lower than those awarded. They contended that when damages involved a clearly controverted factual issue, the trial court had no jurisdiction to determine it based solely on affidavits.

The Supreme Court’s Ruling on Timeliness and the Availability of Certiorari

The Supreme Court affirmed the Court of Appeals and dismissed the petition for lack of merit.

First, the Court held that the Mercado Group failed to perfect an appeal from the summary judgment within the reglementary period fixed by the Rules. Relying on the Court of Appeals’ factual computation, the Supreme Court noted that the Mercado Group received the copy of the summary judgment on November 3, 1975. It filed its motion for reconsideration on November 14, 1975, received notice of denial on December 18, 1975, and filed the notice of appeal, appeal bond, and motion for extension only on January 7, 1976, which was beyond the deadline by one day. The Court ruled that the computation was correct in light of Section 3, Rule 41, which provides for the deduction from the thirty-day period of the time during which a motion for new trial or to set aside judgment was pending.

The Court emphasized that the petitioners made no serious effort to explain the tardiness. Instead, they insisted that certiorari was the proper remedy because the judgment was void.

Jurisdiction vs. Error of Judgment

The Supreme Court rejected the “void judgment” theory. It acknowledged the general principles that a court validly acquires jurisdiction over the parties and subject matter when it properly assumes authority, and jurisdiction once acquired is not lost by error in the exercise of that jurisdiction. It reasoned that where a court has jurisdiction over the persons and the subject matter, errors committed in exercising that jurisdiction remain errors of judgment, correctible only by appeal.

In that framework, the Court characterized the Mercado Group’s allegations as imputations of error in the exercise of jurisdiction rather than absence of jurisdiction. It held that, even assuming error in awarding damages based on unopposed affidavits and photographs, such error was not one that rendered the judgment void under the circumstances.

The Court stressed that the Mercado Group itself had moved for summary judgment. The parties understood that under the governing rule, a summary judgment may be granted when pleadings, admissions, depositions, and affidavits show no genuine issue except as to damages, and that judgment may be rendered as a matter of law. The Bulaong Group had opposed by indicating that the issue of actual damages required proof at trial, and it filed affidavits and photographs to show the improvements’ value. The Mercado Group did not request a hearing for damages

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