Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 125766 October 19, 1998

FELICIDAD L. ORONCE and ROSITA L. FLAMINIANO, petitioners,

vs.
HON. COURT OF APPEALS and PRICILIANO B. GONZALES DEVELOPMENT
CORPORATION, respondent.

ROMERO, J.:

The issue of whether or not a Metropolitan or Municipal Trial Court may resolve the
issue of ownership of the property involved in an unlawful detainer case has been
discussed by this Court in a number of cases, the more recent of which is that of Hilario
v. Court of Appeals.1 Jurisprudence on the matter has in fact been reflected in the
1997 Rules of Civil Procedure under Rule 70, to wit:

Sec. 16. Resolving defense of ownership. — When the defendant

raises the defense of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of
ownership, the issue of ownership shall be resolved only to
determine the issue of possession. (4a)

These developments in the law notwithstanding, there remains some

misconceptions on the issue of jurisdiction of inferior courts in ejectment
cases where ownership is raised as a defense that the Court deems proper
to clarify in this petition.

Private respondent Priciliano B. Gonzales Development Corporation was the

registered owner of a parcel of land with an area of 2,000 square meters. The land
with improvements, covered by Transfer Certificate of Title No. RT-54556
(383917), is situated at No. 52 Gilmore Street, New Manila, Quezon City.

In June 1988, private respondent obtained a four million peso -(P4,000,000.00)

loan from the China Banking Corporation. To guarantee payment of the loan,
private respondent mortgaged the Gilmore property and all its improvements to
said bank. Due to irregular payment of amortization, interests and penalties on
the loan accumulated through the years.
On April 13, 1992, private respondent, through its president, Antonio B. Gonzales,
signed and executed a Deed of Sale with Assumption of Mortgage covering the
Gilmore property and its improvements, in favor of petitioners Rosita Flaminiano
and Felicidad L. Oronce.2 The deed, which states that the sale was in
consideration of the sum of P5,400,000.00,3 provided inter alia that

. . . the VENDOR (PBGDC) also guarantees the right of the VENDEES

(petitioners) to the possession of the property subject of this
contract without the need of judicial action; and possession of said
premises shall be delivered to the VENDEES by the VENDOR at the
expiration of one (1) year from the date of the signing and execution
of this Deed of Sale with Assumption of Mortgage.

On the other hand, petitioners bound themselves to pay private

respondent's indebtedness with China Banking Corporation.

In fulfillment of the terms and conditions embodied in the Deed of Sale with
Assumption of Mortgage, petitioners paid private respondent's indebtedness with
the bank. However, private respondent reneged on its obligation to deliver
possession of the premises to petitioners upon the expiration of the one-year
period from April 13, 1992. Almost six months later since the execution of the
instrument or on October 2, 1992, petitioners caused the registration of the Deed
of Sale with Assumption of Mortgage with the Register of Deeds. Simultaneously,
they obtained a new title, TCT No. 67990, consistent with the fact that they are the
new owners of the property.4 Sometime in July 1993, they paid the real estate
taxes on the property for which they were issued Tax Declarations Nos. C-061-
02815 and C-061-02816.5

On November 12, 1993, petitioners sent private respondent a demand letter

asking it to vacate the premises. Said letter, just like three other consecutive
notices sent through the Quezon City post office, was unclaimed. Hence, on April
11, 1994, petitioners filed before the Metropolitan Trial Court of Quezon City, a
complaint for unlawful detainer against private respondent. The complaint,
docketed as Civil Case No. 8638 was raffled to Branch 41. Petitioners alleged that
by virtue of the Deed of Sale with Assumption of Mortgage, they acquired from
private respondent the Gilmore property and its improvements, for which reason
they were issued TCT No. 67990. However, they added, in violation of the terms of
that document, specifically Sec. 3 (c) thereof, private respondent refused to
surrender possession of the premises. Consequently, they demanded that private
respondent vacate the premises through notices sent by registered mail that
were, however, returned to them unclaimed.

In its answer to the complaint, private respondent raised the issue of ownership
over the property. It impugned petitioners' right to eject, alleging that petitioners
had no cause of action against it because it was merely a mortgagee of the
property. It argued that when the parties executed the Deed of Sale with
Assumption of Mortgage, its real intention was to forge an equitable mortgage
and not a sale. It pointed out three circumstances indicative of an equitable
mortgage, namely: inadequacy of the purchase price, continued possession by
private respondent of the premises, and petitioners' retention of a portion of the
purchase price.

During the preliminary conference on the case, the parties agreed to

stipulate on the following: (a) the existence and due execution of the Deed
of Sale with Assumption of Mortgage, and (b) the issue of whether or not
the premises in litis are being unlawfully detained by private respondent.6

On March 24, 1995, the MTC7 decided the case in favor of petitioners. It ruled that
petitioners are the owners of the Gilmore property on account of the following
pieces of evidence: (a) TCT No. 67990; (b) petitioners' payment to the China
Banking Corporation of P8,500,000.00, the amount of the mortgage entered into
between private respondent and said bank; (c) payment of real estate taxes for
1993, and (d) Tax Declaration No. 02816 in petitioners' names. The MTC further
held that private respondent's possession of the premises was merely tolerated
by petitioners and because it refused to vacate the premises despite demand to
do so, then its possession of the same premises had become illegal. Thus, the
MTC decreed as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering

defendant and all persons claiming rights under it to vacate the premises-in-litis
located at No. 52 Gilmore St., New Manila, Quezon City, and to peacefully
surrender possession thereof to the plaintiffs; to pay plaintiffs the sum of
P20,000.00 a month as compensation for the unjust occupation of the same from
April 11, 1994 (the date of filing of this case) until defendant fully vacates the said
premises; to pay plaintiffs the amount of P20,000.00 as and for attorney's fees
plus costs of suit.

Counterclaim is dismissed for lack of merit.

SO ORDERED.8

On April 25, 1995, private respondent interposed an appeal to the Regional Trial
Court, Branch 219, of Quezon City that docketed it as Civil Case No. Q-95-23697.
Private respondent stressed in its appeal that it was not unlawfully withholding
possession of the premises from petitioners because the latter's basis for
evicting it was the Deed of Sale with Assumption of Mortgage that did not reflect
the true intention of the parties to enter into an equitable mortgage. Clearly in
pursuance of that allegation, private respondent filed a motion questioning the
jurisdiction of the RTC to entertain its appeal. On the other hand, petitioners filed
a motion for the immediate execution of the appealed decision. The RTC granted
the motion on September 21, 1995 and the corresponding writ of execution was
issued on September 25, 1995. The following day, the sheriff served upon private
respondent the writ of execution and a notice to vacate the premises within five
(5) days from receipt thereof.

Meanwhile, during the pendency of its appeal, private respondent filed an action
for reformation of instrument with the RTC. It was docketed as Civil Case No. Q-
95-24927 and assigned to Branch 227.

In a resolution dated December 7, 1995, RTC Branch 219 asserted jurisdiction

over the appeal. It ruled that the issue of whether or not an action for reformation
of a deed of sale and an unlawful detainer case can proceed independently of
each other has been resolved by this Court in Judith v. Abragan.9 In said case,
this Court held that the fact that defendants had previously filed a separate action
for the reformation of a deed of absolute sale into one of pacto de retro sale or
equitable mortgage in the same Court of First Instance is not a valid reason to
frustrate the summary remedy of ejectment afforded by law to the plaintiff.

On December 12, 1995, private respondent filed in the Court of Appeals a petition
for certiorari with prayer for a temporary restraining order and writ of preliminary
injunction against petitioners and RTC Branch 219. It assailed the September 21,
1995 order granting the issuance of a writ of execution pending appeal, the writ of
execution and the notice to vacate served upon private respondent (CA-G.R. SP-
39227).

On December 13, 1995, RTC Branch 21910 rendered the decision affirming in toto
that of the Metropolitan Trial Court. Stating that in ejectment proceedings, the
only issue for resolution is who is entitled to physical or material possession of
the premises involved, RTC Branch 219 held that

. . . the plaintiffs (petitioners herein) are vendees of the defendant

(PBGDC) by virtue of a deed of sale where the extent of its right to
continue holding possession was stipulated. In the agreement, the
existence and due execution of which the defendant had admitted
(Order, December 16, 1994, Rollo, p. 111), it was clearly stated that
the defendant shall deliver the possession of the subject premises to
the plaintiffs at the expiration of one (1) year from the execution
thereof, April 12, 1992. The defendant failed to do so. From then on, it
could be said that the defendant has been unlawfully withholding
possession of the premises from the plaintiffs.

In any case, this ruling on the matter of possession de facto is

without prejudice to the action for reformation. This is because "the
judgment rendered in an action for forcible entry or detainer shall be
effective with respect to the possession only and in no wise bind the
title or effect the ownership of the land or building nor shall it be held
conclusive of the facts therein found in case between the same
parties upon a different cause of action not involving possession"
 (Ang Ping v. Regional Trial Court, 154 SCRA 153; Section 7, Rule 70,
Rules of Court).11

On that same date, December 13, 1995, the Court of Appeals issued a temporary
restraining order enjoining RTC Branch 219 from enforcing the writ of execution
and the notice to vacate the premises and on January 15, 1996, the same court
granted private respondent's application for a writ of preliminary injunction
enjoining the implementation of both the writ of execution pending appeal and
the decision of RTC Branch 219.

Around six months later or on July 2, 1996, RTC Branch 22712 issued an order
declaring private respondent non-suited for failure to appear at the pre-trial and,
therefore, dismissing the action for reformation of instrument in Civil Case No. Q-
95-24927. Private respondent, not having sought reconsideration of said order,
the same court issued a resolution on August 15, 1996 directing the entry of
judgment in the case.13 The Clerk of Court accordingly issued the final entry of
judgment thereon. 14

In the meantime, on July 24, 1996, the Court of Appeals rendered the herein
questioned Decision.15 It set aside the December 13, 1995 decision of RTC
Branch 219 and declared as null and void for want of jurisdiction, the March 24,
1995 decision of the Metropolitan Trial Court of Quezon City, Branch 41. It made
permanent the writ of preliminary injunction enjoining petitioners from
implementing the decision of RTC Branch 219, the writ of execution and the
notice to vacate. In so holding, the Court of Appeals said:

It is quite evident that, upon the pleadings, the dispute between the
parties extended beyond the ordinary issues in ejectment cases. The
resolution of the dispute hinged on the question of ownership and
for that reason was not cognizable by the MTC. (See: General
Insurance and Surety Corporation v. Castelo, 13 SCRA 652 (1965).

Respondent judge was not unaware of the pendency of the action for
reformation. However, despite such knowledge, he proceeded to
discuss the merits of the appeal and rendered judgment in favor of
respondents on the basis of the deed of sale with assumption of
mortgage which was precisely the subject of the action for
reformation pending before another branch of the court. Prudence
dictated that respondent judge should have refused to be drawn into
a discussion as to the merits of the respective contentions of the
parties and deferred to the action of the court before whom the issue
was directly raised for resolution.

On whether or not private respondent was in estoppel from questioning the

jurisdiction of the MTC since it voluntarily submitted thereto the question of the
validity of its title to the property, the Court of Appeals said:
This is not so. As earlier pointed out, petitioner (private respondent
here) had, in its answer to the complaint for unlawful detainer,
promptly raised the issue of jurisdiction by alleging that what was
entered into by the parties was just an equitable mortgage and not a
sale. Assuming the truth of this allegation, it is fairly evident that
respondents would not have had a cause of action for ejectment. In
other words, petitioner, since the start of the case, presented a
serious challenge to the MTC's jurisdiction but, unfortunately, the
court ignored such challenge and proceeded to decide the case
simply on the basis of possession.

The operation of the principle of estoppel on the

question of jurisdiction seemingly depends upon
whether the lower court actually had jurisdiction or not,
if it had no jurisdiction, but the case was tried and
decided upon the theory that it had jurisdiction, the
parties are not barred, on appeal, from assailing such
jurisdiction, for the same must exist as a matter of law,
and may not be conferred by consent of the parties or
by estoppel (5 C.J.S., 861-863). (La Naval Drug
Corporation v. Court of Appeals, 236 SCRA 78 [19941]).

Contrary to respondents' pretense, the filing by petitioner of an

action for the reformation of contract may not really be an
afterthought. As we understand it, petitioner, to support its allegation
that the contract was a mere equitable mortgage, cites the fact that
the price was inadequate; it remained in possession of the premises;
it has retained a part of the purchase price; and, in any case, the real
intention of the parties was that the transaction shall secure the
payment by petitioner of its loan, adverting to Article 1602 of the Civil
Code. Under Article 1604 of the same code, it is provided that the
presence of only one circumstance defined in Article 1602, such as
those cited above, is sufficient for a contract of sale with right to
repurchase to be presumed an equitable mortgage. Without in any
way preempting the decision of the court in the action for
reformation, it is our considered view that, under the factual milieu,
the action was initiated for the proper determination of the rights of
the parties under the contract, and not just an afterthought.

No derogatory inference can arise from petitioner's admission of the

existence of the deed of sale with assumption of mortgage. The
admission does not necessarily dilute its claim that the same does
not express the true intent of the parties.

Verily, since the case at bench involves a controverted right, the

parties are required to preserve the status quo and await the
 decision of the proper court on the true nature of the contract. It is
but just that the person who has first acquired possession should
remain in possession pending decision on said case, and the parties
cannot be permitted meanwhile to engage in petty warfare over
possession of property which is the subject of dispute. To permit
this will be highly dangerous to individual security and disturbing to
the social order. (Manlapaz v. Court of Appeals, 191 SCRA 795
[199]).16

Hence, the present petition for review on certiorari where petitioners raise the
following assigned errors allegedly committed by respondent Court of Appeals:

I.

THE DECISION OF THE RESPONDENT COURT OF APPEALS IS

CONTRARY TO THE PROVISIONS OF SEC. 33 (2) OF THE JUDICIARY
REORGANIZATION ACT OF 1980 CONFERRING EXCLUSIVE
ORIGINAL JURISDICTION ON THE METROPOLITAN TRIAL COURT IN
EJECTMENT CASES AND VESTING IT WITH AUTHORITY, INDEED
MANDATORILY, TO RESOLVE ISSUES OF OWNERSHIP TO
DETERMINE ISSUES OF POSSESSION.

II.

THE DECISION OF THE RESPONDENT COURT IS CONTRARY TO

CURRENT AND PREVAILING DOCTRINE AS ENUNCIATED IN
WILMON AUTO SUPPLY CORP. VS. COURT OF APPEALS, 208 SCRA
108; SY VS. COURT OF APPEALS, 200 SCRA 117; AND ASSET
PRIVATIZATION TRUST VS. COURT OF APPEALS, 229 SCRA 627.

III.

THE FILING OF THE REFORMATION CASE CONFIRMS THE

JURISDICTION OF THE METROPOLITAN TRIAL COURT OVER THE
EJECTMENT CASE; THE DISMISSAL OF THE REFORMATION CASE
CONFIRMS THE FACT THAT IT WAS FILED MERELY AS A PLOY TO
DELAY DISPOSITION OF EJECTMENT PROCEEDINGS, AND BARES
NOT JUST THE ERROR BUT THE UTTER INEQUITY OF THE
RESPONDENT COURT'S DECISION ANNULLING THE EJECTMENT
DECREE AND SETTING ASIDE THE REGIONAL TRIAL COURT
DECISION OF AFFIRMANCE.

Petitioners argue that the precedent laid down in Ching v. Malaya 17 relied upon
by the Court of Appeals, was based on the old law, Republic Act No. 296
(Judiciary Act of 1948), as amended, which vested in the city courts original
jurisdiction over forcible entry and unlawful detainer proceedings and the
corresponding power to receive evidence upon the question of ownership for the
only purpose of determining the character and extent of possession. 18 They
claim that since the original complaint for unlawful detainer was filed on April 13,
1992, then the applicable law should have been Section 33 (2) of the Judiciary
Reorganization Act of 1980 (Batas Pambansa Blg. 129). That law vests in the city
courts exclusive original jurisdiction over forcible entry and unlawful detainer
cases and the corresponding power to receive evidence upon questions of
ownership and to resolve the issue of ownership to determine the issue of
possession. 19

The history of the law vesting Municipal and Metropolitan Trial Courts with
jurisdiction over ejectment cases has invariably revolved upon the assumption
that the question of ownership may be considered only if necessary for the
determination of the issue as to who of the parties shall have the right to possess
the property in litigation. 20 Thus, under the Judiciary Act of 1948, as amended,
Section 88 vested municipal and city courts with authority to "receive evidence
upon the question of title therein, whatever may be the value of the property,
solely for the purpose of determining the character and extent of possession and
damages for detention." Section 3 of Republic Act No. 5967 that was enacted on
June 21, 1969, provided that city courts shall have concurrent jurisdiction with
Courts of First Instance over "ejection cases where the question of ownership is
brought in issue in the pleadings" and that the issue of ownership shall be
"resolved in conjunction with the issue of possession." Expounding on that
provision of law, in Pelaez v. Reyes, 21 this Court said:

. . . We are of the considered opinion that the evident import of

Section 3 above is to precisely grant to the city courts concurrent
original jurisdiction with the courts of first instance over the cases
enumerated therein, which include "ejection cases where the
question of ownership is brought in issue in the pleadings." To
sustain petitioner's contention about the meaning of the last phrase
of paragraph (c) of said section regarding the resolution of the issue
of ownership "in conjunction with the issue of possession" is to
disregard the very language of the main part of the section which
denotes unmistakably a conferment upon the city courts of
concurrent jurisdiction with the courts of first instance over ejection
cases in which ownership is brought in issue in the pleadings. It is to
Us quite clear that the fact that the issue of ownership is to be
resolved "in conjunction with the issue of possession" simply means
that both the issues of possession and ownership are to be resolved
by the city courts. And the jurisdiction is concurrent with the Courts
of First Instance precisely because usually questions of title are
supposed to be resolved by superior courts. In other words, this
grant of special jurisdiction to city courts is to be distinguished from
the power ordinarily accorded to municipal courts to receive
 evidence of title only for the purpose of determining the extent of the
possession in dispute.

Upon the approval on August 14, 1981 of Batas Pambansa Blg. 129 or the
Judiciary Reorganization Act of 1980, however, the power of inferior courts,
including city courts, to resolve the issue of ownership in forcible entry and
unlawful detainer cases was modified. Resolution of the issue of ownership
became subject to the qualification that it shall be only for the purpose of
determining the issue of possession. In effect, therefore, the city courts lost the
jurisdiction to determine the issue of ownership per se that was theretofore
concurrent with the then Courts of First Instance. Thus, Section 33 of B.P. Blg.
129 provides that Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts shall exercise:

Exclusive original jurisdiction over cases of forcible entry and

unlawful detainer: Provided, That when in such cases, the defendant
raises the question of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of
ownership, the issue of ownership shall be resolved only to
determine the issue of possession.

Accordingly, the Interim Rules and Guidelines in the implementation of

Batas Pambansa Blg. 129 provides as follows:

10. Jurisdiction in ejectment cases. — Metropolitan trial courts,

municipal trial courts, and municipal circuit trial courts, without
distinction, may try cases of forcible entry and detainer even if the
question of ownership is raised in the pleadings and the question of
possession could not be resolved without deciding the issue of
ownership, but the question of ownership shall be resolved only to
determine the issue of possession.

Explaining these provisions of law, in Sps. Refugia v. Court of

Appeals, 22 the Court said:

These issuances changed the former rule under Republic Act No.
296 which merely allowed inferior courts to receive evidence upon
the question of title solely for the purpose of determining the extent
and character of possession and damages for detention, which
thereby resulted in previous rulings of this Court to the effect that if
it appears during the trial that the principal issue relates to the
ownership of the property in dispute and any question of possession
which may be involved necessarily depends upon the result of the
inquiry into the title, then the jurisdiction of the municipal or city
courts is lost and the action should be dismissed. With the
enactment of Batas Pambansa Blg. 129, the inferior courts now
 retain jurisdiction over an ejectment case even if the question of
possession cannot be resolved without passing upon the issue of
ownership, with the express qualification that such issue of
ownership shall be resolved only for the purpose of determining the
issue of possession. In other words, the fact that the issues of
ownership and possession de facto are intricately interwoven will
not cause the dismissal of the case for forcible entry and unlawful
detainer on jurisdictional grounds.

Another development in the law has emphasized the fact that inferior courts shall
not lose jurisdiction over ejectment cases solely because the issue of ownership
is interwoven with the issue of possession. Under the 1983 Rules on Summary
Procedure, as amended by a resolution of this Court that took effect on
November 15, 1991, all forcible entry and unlawful detainer cases shall be tried
pursuant to the Revised Rules on Summary Procedure, regardless of whether or
not the issue of ownership of the subject property is alleged by a party. 23 In
other words, even if there is a need to resolve the issue of ownership, such fact
will not deprive the inferior courts of jurisdiction over ejectment
cases 24 that shall be tried summarily.

When the jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts was expanded, thereby amending Batas Pambansa
Blg. 129, by virtue of Republic Act No. 7691 that took effect on April 15, 1994, the
jurisdiction of said courts over ejectment cases was retained. Thus, in Hilario v.
Court of Appeals this Court said:

. . . . As the law now stands, inferior courts retain jurisdiction over

ejectment cases even if the question of possession cannot be
resolved without passing upon the issue of ownership; but this is
subject to the same caveat that the issue posed as to ownership
could be resolved by the court for the sole purpose of determining
the issue of possession.

Thus, an adjudication made therein regarding the issue of ownership

should be regarded as merely provisional and, therefore, would not
bar or prejudice an action between the same parties involving title to
the land. The foregoing doctrine is a necessary consequence of the
nature of forcible entry and unlawful detainer cases where the only
issue to be settled is the physical or material possession over the
real property, that is, possession de facto and not possession de
jure.

In other words, inferior courts are now "conditionally vested with adjudicatory
power over the issue of title or ownership raised by the parties in an ejectment
suit." 25 These courts shall resolve the question of ownership raised as an
incident in an ejectment case where a determination thereof is necessary for a
proper and complete adjudication of the issue of possession. Considering the
difficulties that are usually encountered by inferior courts as regards the extent of
their power in determining the issue of ownership, in Sps. Refugia v. Court of
Appeals, the Court set out guidelines to be observed in the implementation of the
law which, as stated at the outset, has recently been restated in the 1997 Rules of
Civil Procedure. The guidelines pertinent to this case state:

1. The primal rule is that the principal issue must be that of

possession, and that ownership is merely ancillary thereto, in which
case the issue of ownership may be resolved but only for the
purpose of determining the issue of possession. Thus, . . ., the legal
provision under consideration applies only where the inferior court
believes and the preponderance of evidence shows that a resolution
of the issue of possession is dependent upon the resolution of the
question of ownership.

2. It must sufficiently appear from the allegations in the complaint

that what the plaintiff really and primarily seeks is the restoration of
possession. Consequently, where the allegations of the complaint as
well as the reliefs prayed for clearly establish a case for the recovery
of ownership, and not merely one for the recovery of possession de
facto, or where the averments plead the claim of material possession
as a mere elemental attribute of such claim for ownership, or where
the issue of ownership is the principal question to be resolved, the
action is not one for forcible entry but one for title to real property.

x x x           x x x          x x x

5. Where the question of who has the prior possession hinges on the
question of who the real owner of the disputed portion is, the inferior
court may resolve the issue of ownership and make a declaration as
to who among the contending parties is the real owner. In the same
vein, where the resolution of the issue of possession hinges on a
determination of the validity and interpretation of the document of
title or any other contract on which the claim of possession is
premised, the inferior court may likewise pass upon these issues.
This is because, and it must be so understood, that any such
pronouncement made affecting ownership of the disputed portion is
to be regarded merely as provisional, hence, does not bar nor
prejudice an action between the same parties involving title to the
land. Moreover, Section 7, Rule 70 of the Rules of Court expressly
provides that the judgment rendered in an action for forcible entry or
unlawful detainer shall be effective with respect to the possession
only and in no wise bind the title or affect the ownership of the land
or building. 26 (Emphasis supplied.)
In the case at bar, petitioners clearly intended recovery of possession over the
Gilmore property. They alleged in their complaint for unlawful detainer that their
claim for possession is buttressed by the execution of the Deed of Sale with
Assumption of Mortgage, a copy of which was attached as Annex "A" to the
complaint and by the issuance of TCT No. 67990 that evidenced the transfer of
ownership over the property. 27 Because metropolitan trial courts are authorized
to look into the ownership of the property in controversy in ejectment cases, it
behooved MTC Branch 41 to examine the bases for petitioners' claim of
ownership that entailed interpretation of the Deed of Sale with Assumption of
Mortgage.

However, while it quoted paragraph (c) of the Deed of Sale with Assumption of
Mortgage that embodies the agreement of the parties that possession of the
Gilmore property and its improvements shall remain with the vendor that was
obliged to transfer possession only after the expiration of one year, 28 MTC
Branch 41 apparently did not examine the terms of the deed of sale. Instead, it
erroneously held that the issue of whether or not the document was in fact an
equitable mortgage "should not be properly raised in this case." Had it examined
the terms of the deed of sale, which, after all is considered part of the allegations
of the complaint having been annexed thereto, that court would have found that,
even on its face, the document was actually one of equitable mortgage and not of
sale. The inferior court appears to have forgotten that all documents attached to a
complaint, the due execution and genuineness of which are not denied under
oath by the defendant, must be considered as part of the complaint without need
of introducing evidence thereon. 29

Art. 1602 of the Civil Code provides that a contract shall be presumed to be an
equitable mortgage by the presence of any of the following:

(1) When the price of a sale with right to repurchase is unusually

inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase

another instrument extending the period of redemption or granting a
new period is executed;

(4) When the purchaser retains for himself a part of the purchase
price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
Art. 1604 of the same Code provides that the provisions of Article 1602 "shall also
apply to a contract purporting to be an absolute sale." The presence of even one
of the circumstances in Article 1602 is sufficient basis to declare a contract as
one of equitable mortgage. 30 The explicit provision of Article 1602 that "any" of
those circumstances would suffice to construe a contract of sale to be one of
equitable mortgage is in consonance with the rule that the law favors the least
transmission of property rights.

The Deed of Sale with Assumption of Mortgage covering the 2,000-square-meter

lot located at No. 52 Gilmore Street, New Manila, Quezon City provides as follows:

3. That the total consideration for the sale of the above-

described property by the VENDOR to the VENDEES is
FOURTEEN MILLION (P14,000,000.00) PESOS, in
Philippine currency, payable as follows:

a) The VENDOR shall be paid by the VENDEE the sum of

FIVE MILLION FOUR HUNDRED THOUSAND
(P5,400,000.00) PESOS upon the signing and execution
of this Deed of Sale With Assumption of Mortgage after
computation of the mortgage obligation of the VENDOR
with CHINA BANKING CORPORATION in the amount of
_____________ which the VENDEES agree to assume as
part of the consideration of this sale. The VENDEES
hereby assume the mortgage obligation of the VENDOR
with the CHINA BANKING CORPORATION in the total
amount of ______________.

b) The VENDOR hereby undertakes and agrees with the

VENDEES that the first-named party shall warrant and
defend the title of said real property hereby conveyed in
favor of the VENDEES, their heirs, successors or
assigns, against all just claims of all persons or entities;
that the VENDOR also guarantees the right of the
VENDEES to the possession of the property subject of
this contract without the need of judicial action; and
furthermore, the VENDOR binds itself to execute any
additional documents to complete the title of the
VENDEES to the above-described property so that it
may be registered in the name of the VENDEES in
accordance with the provisions of the Land Registration
Act.

c) It is hereby expressly agreed and understood by and

between the VENDOR and the VENDEES that the house
and other improvements found in the premises are
included in this sale and that possession of said
premises shall be delivered to the VENDEES by the
VENDOR at the expiration of one (1) year from the date
of the signing and execution of this Deed of Sale with
Assumption of Mortgage.

d) It is furthermore expressly provided and agreed by

and between the VENDOR and the VENDEES that the
capital gains tax shall be paid by the VENDOR while any
and all fees and expenses incident to the registration
and transfer of the title to the aforementioned property
shall be defrayed and borne by the VENDEES.

e) Attached to this Deed of Sale with Assumption of

Mortgage as Annex "A" thereof is the Certificate of
ROSANA FLORES, Corporate Secretary of PRICILIANO
B. DEVELOPMENT CORPORATION, a corporation duly
organized and existing under Philippine Laws who
certified that at a special meeting of the Board of
Directors of said corporation held on December 3, 1991
at which meeting a quorum was present, the following
resolution was adopted and passed, to wit:

RESOLVED, AS IT IS HEREBY RESOLVED,

that the company, PRICILIANO B.
GONZALES DEVELOPMENT is (sic) hereby
authorized the President, Mr. Antonio B.
Gonzales to enter into and/or negotiate for
the sale of a property described as Transfer
Certificate of Title No. 383917 with an area
of TWO THOUSAND (2,000) SQUARE
METERS under the Registry of Deeds of
Quezon City;

RESOLVED FURTHER, that Mr. ANTONIO B.

GONZALES, is hereby authorized to sign,
execute any and all documents relative
thereto.

That aforesaid resolution is in full force and

effect.

(sgd.)

ROSA
NA
 FLOR
ES

Corpo
rate
Secre
tary

(SGD.)

f) Full title and possession over the above-described

property shall vest upon the VENDEES upon the full
compliance by the with all the terms and conditions
herein set forth. 31 (Emphasis supplied.)

That under the agreement the private respondent as vendor shall remain in
possession of the property for only one year, did not detract from the fact that
possession of the property, an indicium of ownership, was retained by private
respondent as the alleged vendor. That period of time may be deemed as actually
the time allotted to private respondent for fulfilling its part of the agreement by
paying its indebtedness to petitioners. This may be gleaned from paragraph (f)
that states that "full title and possession" of the property "shall vest upon the
VENDEES upon the full compliance by them with all the terms and conditions
herein set forth.

Paragraph (f) of the contract also evidences the fact that the agreed "purchase
price" of fourteen million pesos (P14,000,000.00) was not handed over by
petitioners to private respondent upon the execution of the agreement. Only
P5,400,000.00 was given by petitioners to private respondent, as the balance
thereof was to be dependent upon the private respondent's satisfaction of its
mortgage obligation to China Banking Corporation. Notably, the MTC found that
petitioners gave private respondent the amount of P8,500,000.00 that should be
paid to the bank to cover the latter's obligation, thereby leaving the amount of
P100,000.00 (P5,400,000.00 + P8,500,000.00 = P13,900,000.00) of the "purchase
price" still unpaid and in the hands of petitioners, the alleged "vendees."

Hence, two of the circumstances enumerated in Article 1602 are manifest in the
Deed of Sale with Assumption of Mortgage, namely: (a) the vendor would remain
in possession of the property (no. 2), and (b) the vendees retained a part of the
purchase price (no. 4). On its face, therefore, the document subject of
controversy, is actually a contract of equitable mortgage.

The denomination of the contract as a deed of sale is not binding as to its nature.
The decisive factor in evaluating such an agreement is the intention of the
parties, as shown, not necessarily by the terminology used in the contract, but by
their conduct, words, actions and deeds prior to, during and immediately after
executing the agreement. 32 Private respondent's possession over the property
was not denied by petitioners as in fact it was the basis for their complaint for
unlawful detainer.

Neither does the issuance of a new transfer certificate of title in petitioners' favor
import conclusive evidence of ownership or that the agreement between the
parties was one of sale. 33 In Macapinlac v. Gutierrez Repide, this Court said:

. . . it must be borne in mind that the equitable doctrine . . . to the

effect that any conveyance intended as security for a debt will be
held in effect to be a mortgage, whether so actually expressed in the
instrument or not, operates regardless of the form of the agreement
chosen by the contracting parties as the repository of their will.
Equity looks through the form and considers the substance; and no
kind of engagement can be adopted which will enable the parties to
escape from the equitable doctrine to which reference is made. In
other words, a conveyance of land, accompanied by registration in
the name of the transferee and the issuance of a new certificate, is
no more secured from the operation of the equitable doctrine than
the most informal conveyance that could be devised. 34

A closer look into the allegations of the complaint would therefore show that
petitioners failed to make out a case for unlawful detainer. By the allegations in
the complaint, private respondent as a mortgagor had the right to posses the
property. A mortgage is a real right constituted to secure an obligation upon real
property or rights therein to satisfy with the proceeds of the sale thereof such
obligation when the same becomes due and has not been paid or fulfilled. 35 The
mortgagor generally retains possession of the mortgaged property 36 because by
mortgaging a piece of property, a debtor merely subjects it to a lien but
ownership thereof is not parted with. 37 In case of the debtor's nonpayment of the
debt secured by the mortgage, the only right of the mortgagee is to foreclose the
mortgage and have the encumbered property sold to satisfy the outstanding
indebtedness. The mortgagor's default does not operate to vest in the mortgagee
the ownership of the encumbered property, for any such effect is against public
policy. 38 Even if the property is sold at a foreclosure sale, only upon expiration
of the redemption period, without the judgment debtor having made use of his
right of redemption, does ownership of the land sold become consolidated in the
purchaser. 39

Petitioners' tenuous claim for possession of the Gilmore property was

emasculated further by private respondent's answer to their complaint. The latter
claimed ownership of the property, alleging that the agreement was one of
mortgage and not of sale. Private respondent alleged therein that in March 1993
(sic), it borrowed money from petitioner Felicidad Oronce alone to redeem the
subject property from China Banking Corporation. She agreed to lend it the
amount on condition that the Gilmore property should be mortgaged to her to
guarantee payment of the loan. However, petitioner Flaminiano took the money
from petitioner Oronce and paid the mortgage obligation of private respondent to
the China Banking Corporation while claiming that 50% of the amount was hers.
Petitioner Flaminiano's husband, Atty. Eduardo Flaminiano, forthwith prepared
the Deed of Sale with Assumption of Mortgage and, without private respondent's
knowledge, had it registered for which reason a new certificate of title was issued
to petitioners. In claiming that the agreement was one of mortgage, private
respondent alleged in its answer, inter alia, that the actual total value of the
property was thirty million pesos (P30,000,000.00); that while it had possession of
the property, petitioners did not then attempt to repossess the same,
notwithstanding the lapse of one year from the execution of the document; that
petitioners did not pay the real estate taxes even after the transfer of title in their
favor, and that petitioners did not deliver to private respondent the alleged
purchase price.

Considering these claims of private respondent, MTC Branch 41 should have

passed upon the issues raised on the ownership of the Gilmore property for the
purpose of determining who had the right to possess the same. As it turned out,
it simply accepted the allegations of petitioners without examining the supporting
documents. Had it closely analyzed the documents, it would have concluded that
petitioners could not have validly ousted private respondent from the property
since the basis for its claim of ownership, the Deed of Sale with Assumption of
Mortgage, was actually a document evidencing an equitable mortgage. It would
have accordingly dismissed the complaint for lack of cause of action.

In fine, had the MTC exercised its bounden duty to study the complaint, it would
have dismissed the same for lack of cause of action upon a provisional ruling on
the issue of ownership based on the allegations and annexes of the complaint.
Or, exercising caution in handling the case, considering petitioners' bare
allegations of ownership, it should have required the filing of an answer to the
complaint and, having been alerted by the adverse claim of ownership over the
same property, summarily looked into the issue of ownership over the property.
As this Court declared in Hilario v. Court of Appeals:

It is underscored, however, that the allegations in the complaint for

ejectment should sufficiently make out a case for forcible entry or
unlawful detainer, as the case may be; otherwise, jurisdiction would
not vest in the inferior court. Jurisdiction over the subject matter is,
after all, determined by the nature of the action as alleged or pleaded
in the complaint. Thus, even where the defendant alleges ownership
or title to the property in his or her answer, the inferior court will not
be divested of its jurisdiction. A contrary rule would pave the way for
the defendant to trifle with the ejectment suit, which is summary in
nature, as he could easily defeat the same through the simple
expedient of asserting ownership. 40
As discussed above, even a perusal of the complaint without going over the
claims of private respondent in his answer would have sufficed to arrive at a
provisional determination of the issue of ownership. The importance of such
provisional ruling on the issue of ownership is demanded by the fact that, in the
event that the claim of the plaintiff in an ejectment case is controverted as in this
case, any ruling on the right of possession would be shaky, meaningless and
fraught with unsettling consequences on the property rights of the parties. After
all, the right of possession must stand on a firm claim of ownership. Had the MTC
made a provisional ruling on the issue of ownership, the parties would have
availed of other remedies in law early on to thresh out their conflicting claims.

Private respondent's action for reformation of instrument was in fact a step in the
right direction. However, its failure to pursue that action 41 did not imply that
private respondent had no other remedy under the law as regards the issue of
ownership over the Gilmore property. There are other legal remedies that either
party could have availed of. Some of these remedies, such as an action for
quieting of title, have been held to coexist with actions for unlawful detainer. 42
There is a policy against multiplicity of suits but under the circumstances, only
the institution of proper proceedings could settle the controversy between the
parties in a definitive manner.

Hence, although the Court of Appeals resolved the appeal under the
misconception that the action for reformation of instrument was still viable, it
correctly held that the controversy between the parties was beyond the ordinary
issues in an ejectment case. Because of the opposing claims of the parties as to
the true agreement between them, the issue of ownership was in a sense a
prejudicial question that needed determination before the ejectment case should
have been filed. To reiterate, a decision reached in the ejectment case in favor of
any of the parties would have nonetheless spawned litigation on the issue of
ownership. At any rate, proceedings would have been facilitated had the inferior
courts made even a provisional ruling on such issue.

The contentious circumstances surrounding the case were demonstrated by an

occurrence during the pendency of this petition that cries out for the resolution of
the issue of ownership over the Gilmore property.

After the parties had filed their respective memoranda before this Court, private
respondent filed an urgent motion to cite petitioner Rosita L. Flaminiano and her
husband, Atty. Eduardo B. Flaminiano, in contempt of court. 43 The motion was
founded on an affidavit of Dr. Tadeo Gonzales who resided at the contested
property, deriving his right to do so from private respondent corporation that is
owned by his family. Gonzales alleged that on September 20, 1997, petitioner
Flaminiano and her husband entered the property through craftiness and
intimidation. At around 5:30 p.m. on that day, two (2) men knocked at the gate.
When the houseboy, Luis R. Fernandez, opened the gate for pedestrians
tentatively, the two men told him that they would like to visit Gonzales' mother
who was ailing.

Once inside, the two men identified themselves as policemen and opened the
gate for twenty (20) men, two (2) trucks and an L-300 van to enter. When Gonzales
went outside the house, he saw thirty (30) to forty (40) men and two (2) trucks
entering the driveway. The person he asked regarding the presence of those
people inside the property turned out to be the brother of petitioner Flaminiano.
That person said, "Kami ang may-ari dito. Matagal na kaming nagtitiis, kayo ang
dapat sa labas." After Gonzales had told him that the property was still under
litigation before this Court, the man said, "Walang Supreme Court — Supreme
Court." When Gonzales asked petitioner Flaminiano, who was inside the
premises, to order the people to leave, she said, "Papapasukin namin ito dahil sa
amin ito. Maglalagay ako ng tao diyan sa loob, sa harap, sa likod. Wala ng
pakiusap." When a power generator was brought inside the property and
Gonzales pleaded that it be taken out because the noise it would create would
disturb his ailing mother, Emiliana Gonzales, petitioner Flaminiano said, "Walang
awa-awa sa akin." Atty. Flaminiano butted in and, referring to Gonzales' mother,
said, "Ialis mo na, matanda na pala." When Gonzales prevented the switching on
of some lights in the house due to faulty wiring, Atty. Flaminiano suggested,
"Bakit hindi mo ipasunog ito? May insurance pa kayo 5 million, madali lang 'yan.
Short circuit." Since the Flaminianos and their crew were not about to leave the
property, Gonzales called up his brother, Atty. Antonio Gonzales, and informed
him of what happened. However, instead of confining themselves in the driveway,
the Flaminianos and their group entered the terrace, bringing in food.

Gonzales was all the while concerned about his 81-year-old mother who had just
been discharged from the hospital. However, the Flaminianos stayed until the
next day, September 22, 1997, using the kitchen, furniture and other fixtures in
the house. Gonzales took pictures of Flaminiano and his companions. When Atty.
Flaminiano arrived, he confronted Gonzales and told him, "Hindi ako natatakot
kahit kanino ka pa mag-report, kahit pa sa Supreme Court, gusto ko nga mag-
reklamo kayo para matapos ang kaso. Sa September 25, may shooting dito,
gagawin ko ang gusto ko dito." 44

The affidavits of Renato C. Mola, driver of Atty. Antonio Gonzales, and that of
Luis R. Fernandez, houseboy of Dr. Tadeo Gonzales, as well as the xerox copy of
the sworn statement dated September 21, 1997 of Pria B. Gonzales before the
Philippine National Police in Camp Crame where she filed a complaint against
Atty. Flaminiano for the illegal entry into teir house, support the affidavit of Dr.
Gonzales.

In its supplemental motion 45 to cite petitioner Flaminiano and her husband, Atty.
Flaminiano, in contempt of court, private respondent alleged that the Flaminianos
committed additional contumacious acts in preventing another member of the
family, Mrs. Cipriana Gonzales, from entering the property. In her affidavit, Mrs.
Gonzales said that the Flaminianos and their people used "the whole house,
except the bedrooms, for their filming activities." 46

Thereafter, private respondent filed an urgent motion for the issuance of a

temporary restraining order and/or writ of preliminary injunction with this Court
to enjoin petitioners, Atty. Flaminiano and their representatives and agents from
preventing private respondent, its agents and representatives from entering the
property and to cease and desist from occupying the property or from committing
further acts of dispossession of the property. 47 On October 13, 1997, this Court
issued the temporary restraining order prayed for. 48 In the motion it filed on
October 21, 1997, 49 private respondent informed the Court that the TRO could
not be served upon petitioners immediately because, Atty. Flaminiano, their
counsel of record, had changed address without informing the Court. It was
served upon said counsel only on October 15, 1997. However, instead of
complying with this Court's order, petitioners continued occupying the property.
On October 16, 1997, after receiving a copy of the TRO, petitioners put up a huge
billboard in front of the property stating that it is the national headquarters of the
People's Alliance for National Reconciliation and Unity for Peace and Progress
(PANRUPP).

In their comment on the motion for contempt, petitioners noticeably did not
controvert the facts set forth by private respondent in said motion. Instead, it
reasserted its claim of ownership over the property as evidenced by TCT No.
67990. They alleged that they had mortgaged the property to the Far East Bank
and Trust Company in the amount of thirty million pesos (P30,000,000.00) for
which they are paying a monthly interest of around P675,000.00 "without enjoying
the material possession of the subject property which has been unlawfully and
unjustly detained by private respondent for the last four (4) years as it was used
as the residence of the members of the family of its President ANTONIO B.
GONZALES without the said private respondent paying rentals thereon for the
period from January 1995 up to October 5, 1997 when the said property was
voluntarily vacated by the members of the President (sic) of respondent
corporation, ANTONIO B. GONZALES, who has since then been a fugitive from
justice having been convicted by final judgment of the crime of estafa through
falsification of public document and has succeeded in evading his sentence."

They averred that Tadeo Gonzales erroneously claimed that the rights of
ownership and possession over the property are still under litigation because
"the issue of ownership is no longer involved in this litigation when the complaint
for reformation of instrument with annulment of sale and title filed by private
respondent" was dismissed with finality by reason of non-suit. Hence, they
claimed that they "now stand to be the unquestionable registered and lawful
owners of the property subject of controversy" and that the July 24, 1996
Decision of the Court of Appeals "has already lost its virtuality and legal efficacy
with the occurrence of a 'supervening event' which is a superior cause
superseding the basis of the judgment" in CA-G.R. No. 39227 of respondent
court.

They informed the Court that they are now leasing the property to PANRUPP from
October 1, 1997 to September 30, 1998. They alleged, however, that the property
is in a "deplorable state of decay and deterioration" that they saw the need "to act
swiftly and decisively to prevent further destruction" of the property where they
"invested millions of pesos of their life-time savings to acquire the same." Hence,
they sought the assistance of barangay officials in Barangay Mariana, New Manila
who helped them effect "the peaceful entry into the property of the petitioners
without the use of strategy, force and intimidation contrary to what was alleged"
in the motion for contempt. They "peacefully took over" possession of the
property on September 20, 1997 but allowed the immediate members of the family
of private respondent's president to stay on. The family finally agreed to vacate
the premises on October 5, 1997 "upon the offer of the petitioners to shoulder
partially the expenses for the hospitalization of the ailing mother at the St. Luke
General Hospital where she was brought by an ambulance accompanied by a
doctor" at petitioners' expense.

Petitioners questioned the issuance by this Court of the TRO on October 13,
1997, asserting that when it was issued, there were "no more acts to restrain the
illegal occupants of the subject property (as they) had already peacefully vacated
the premises on October 5, 1997 or more than a week after the said TRO was
issued by the Third Division" of this Court. They prayed that the motion for
contempt be denied for lack of merit and that the TRO issued be lifted and set
aside "for the act or acts sought to be restrained have already been done and
have become a fait accompli before the issuance of the TEMPORARY
RESTRAINING ORDER on October 13, 1997." 50

As earlier discussed, petitioners' claim that the dismissal of the action for
reformation of instrument for non-suit had written finis to the issue of ownership
over the Gilmore property is totally unfounded in law. Petitioners should be
reminded that the instant petition stemmed from an unlawful detainer case, the
issue of which is merely possession of the property in question. The issue of
ownership has not been definitively resolved for the provisional determination of
that issue that should have been done by the MTC at the earliest possible time,
would only be for the purpose of determining who has the superior right to
possess the property. Inasmuch as this Court has resolved that the rightful
possessor should have been private respondent and its representatives and
agents, the TRO issued by this Court on October 13, 1997 should not be lifted.
That the TRO was issued days before private respondent left the property is
immaterial. What is in question here is lawful possession of the property, not
possession on the basis of self-proclaimed ownership of the property. For their
part, petitioners should cease and desist from further exercising possession of
the same property which possession, in the first place, does not legally belong to
them.
The conduct of petitioner Flaminiano in taking possession over the property as
alleged by private respondent through Tadeo Gonzales is deplorably high-
handed. On an erroneous assumption that she had been legally vested with
ownership of the properly, she took steps prior to the present proceedings by
illegally taking control and possession of the same property in litigation. Her act
of entering the property in defiance of the writ of preliminary injunction issued by
the Court of Appeals constituted indirect contempt under Section 3, Rule 71 of
the Rules of Court that should be dealt with accordingly.

Be that as it may, what is disturbing to the Court is the conduct of her husband,
Eduardo Flaminiano, a lawyer 51 whose actuations as an officer of the court
should be beyond reproach. His contumacious acts of entering the Gilmore
property without the consent of its occupants and in contravention of the existing
writ or preliminary injunction issued by the Court of Appeals and making
utterances showing disrespect for the law and this Court, are certainly
unbecoming of a member of the Philippine Bar. To be sure, he asserted in his
comment on the motion for contempt that petitioners "peacefully" took over the
property. Nonetheless, such "peaceful" take-over cannot justify defiance of the
writ of preliminary injunction that he knew was still in force. Notably, he did not
comment on nor categorically deny that he committed the contumacious acts
alleged by private respondent. Through his acts, Atty. Flaminiano has flouted his
duties as a member of the legal profession. Under the Code of Professional
Responsibility, he is prohibited from counseling or abetting "activities aimed at
defiance of the law or at lessening confidence in the legal system." 52

WHEREFORE, the instant petition for review on certiorari is hereby DENIED and
the questioned Decision of the Court of Appeals AFFIRMED without prejudice to
the filing by either party of an action regarding the ownership of the property
involved. The temporary restraining order issued on October 13, 1997 is hereby
made permanent. Petitioners and their agents are directed to turn over
possession of the property to private respondent.

Petitioner Rosita Flaminiano is hereby held guilty of contempt of court for

disobeying the writ of injunction issued by the Court of Appeals and accordingly
fined P20,000.00 therefor. Her counsel and husband, Atty. Eduardo B. Flaminiano,
is ordered to pay a fine of P25,000.00 for committing contumacious acts
unbecoming of a member of the Philippine Bar with a stern warning that a
repetition of the same acts shall be dealt with more severely. Let a copy of this
Decision be attached to his record at the Office of the Bar Confidant.

This Decision is immediately executory. Costs against petitioners.

SO ORDERED.

Narvasa, C.J., Kapunan and Purisima, JJ., concur.

Pardo, J., is on leave.

Footnotes

1 329 Phil. 202 (1996).

2 Rollo, pp. 171-173.

3 Ibid., p. 172.

4 Ibid., p. 278.

5 Ibid., p. 158.

6 Ibid., pp. 13-55.

7 Presided by Judge Rose Marie Alonzo-Legasto.

8 Rollo, p. 60.

9 L-41162, September 5, 1975, 66 SCRA 600.

10 President by Judge Jose Catral Mendoza.

11 Rollo, p. 64.

12 President by Judge Vicente Q. Roxas.

13 Rollo, p. 65.

14 Ibid., p. 66.

15 Penned by Associate Justice Oswaldo D. Agcaoili and concurred

by Associate Justices Jesus M. Elbinias and Eubulo G. Versola.

16 Rollo, pp. 45-46.

17 G.R. No. 56449, August 31, 1987, 153 SCRA 412.

18 Rollo, p. 23.

19 Ibid., p. 19.

20 Sps. Refugia v. Court of Appeals, 327 Phil. 982 (1996).

21 L-48168, August 31, 1978, 85 SCRA 233, 242.

22 Supra, at p. 999.

23 Hilario v. Court of Appeals, supra at p. 207-208.

24 Sps. Refugia v. Court of Appeals, supra at p. 1000.

25 Ibid at p. 1003.

26 Ibid., pp. 1004-1006.

27 MTC Decision, p. 2; Rollo, p. 50.

28 MTC Decision, pp. 78.

29 City of Cebu v. Court of Appeals, 327 Phil. 799, 808 (1996).

30 Oleo v. Court of Appeals, 317 Phil. 328, 338 (1995) citing Lizares v.
Court of Appeals, G.R. No. 98282, September 6, 1993, 226 SCRA 112.

31 Rollo, pp. 171-173.

32 Zamora v. Court of Appeals, G.R. No. 102557, July 30, 1996, 260
SCRA 10.

33 Olea v. Court of Appeals, supra at p. 336 citing Macapinlac v.

Gutierrez Repide, 43 Phil. 770 (1922).

34 Supra at p. 783.

35 PEÑA, REGISTRATION OF LAND TITLES AND DEEDS, 1988 ed., p.

250 quoting Sanchez Roman.

36 Ibid., p. 254.

37 Adlawan v. Torres, G.R. Nos. 65957-58, July 5, 1994, 233 SCRA

645, 655.

38 Guanzon v. Hon. Argel, 144 Phil. 418, 423 (1970) citing Art. 2088 of
the Civil Code.

39 Medida v. Court of Appeals, G.R. No. 98334, May 8, 1992, 208

SCRA 887, 897-898.

40 Supra, at pp. 210-211.

41 Private respondent corporation, through its officer(s), failed to
appear at the pre-trial in Civil Case No. Q-95-24927 on July 2, 1996,
several months after if had filed the action for reformation of
instrument, but its counsel was present. Judge Roxas of RTC
Quezon City Branch 227 even instructed said counsel to file a motion
for reconsideration of the July 2, 1996 order non-suiting private
respondent. The court also reset the pre-trial for September 24, 1996
but that was cancelled by the issuance of the order of August 15,
1996 declaring the order of dismissal as final and executory (Rollo, p,
65), Be that as it may, while under Section 2, Rule 20 of the Rules of
Court of 1964 a party who fails to appear at a pre-trial conference
may be non-suited or considered as in default, equity and the
circumstances obtaining when private respondent was non-suited
could not have demanded the application of Section 3, Rule 17
stating that the dismissal of the case shall have the effect of an
adjudication on the merits. Note should be taken of the fact that,
because the order of July 2, 1996 non-suiting private respondent
also reset the case for pre-trial, the dismissal was without prejudice.
Aside from that, private respondent is a corporation and therefore,
its officers must have presumed that appearance of its counsel
would have sufficed. The non-suit of a plaintiff has always been
subject to the discretion of the courts. Judgments of non-suit are
generally disfavored in the same manner that default judgments are
discouraged (Marahay v. Melicor, L-44980, February 6, 1990, 181
SCRA 811, 816). As Chief Justice Andres R. Narvasa once said, "(t)he
desideratum of a speedy disposition of cases should not, if at all
possible, result in the precipitate loss of a party's right to present
evidence and either in plaintiff's being non-suited or the defendant's
being pronounced liable under an ex parte judgment" (Padua v.
Ericta, L-38570, May 24, 1988, 161 SCRA 458).

42 In Hilario v. Court of Appeals (supra at pp. 209-210), the Court

enumerated the cases catalogued in Wilmon Auto Supply
Corporation v. Court of Appeals (G.R. No. 97637, April 10, 1992, 208
SCRA 108) that should not be regarded as prejudicial to an ejectment
case as follows: (1) injunction suits: (2) accion publiciana; (3) writ of
possession case; (4) action for quieting of title; (5) suits for specific
performance with damages; (6) action for reformation of instrument;
(7) accion reinvindicatoria, and (8) suits for annulment of sale, or title
or document.

43 Rollo, p. 200.

44 Ibid., pp. 207-210.

45 Ibid., p. 221.
46 Ibid., pp. 226-228.

47 Ibid., p. 232.

48 Ibid., p. 251.

49 Ibid., p. 253.

50 Rollo, pp. 267-274.

51 He was admitted to the Philippine Bar in 1958.

52 Rule 1.02.