De Los Santos vs. Lucenio

An appellate court has no jurisdiction to resolve an issue not raised before the trial court, and a party may not change the theory of his case on appeal. The theory under which a controversy is heard and decided in the lower court must be the same theory under which appellate review is conducted; otherwise, the judgment is extrajudicial and invalid, and the adverse party suffers prejudice in violation of fair play, justice, and due process.

The dispute centered on possession of a residential property in Juana I Complex, Biñan, Laguna, originally awarded by the Government Service Insurance System (GSIS) to Beaulah L. Aguillon (respondent Joel Lucenio's sister) through a housing loan in 1985. After Aguillon fell into arrears and eventually ceased payments, GSIS sold the property to petitioner Teresita de los Santos under a Deed of Conditional Sale dated May 12, 2010. Teresita had lent her name as an accommodation party for her daughter and son-in-law, petitioner spouses Analyn de los Santos-Lopez and Raphael Lopez. Respondent Joel and his family had been occupying the property since the 1990s under a Deed of Transfer of Rights executed by Aguillon in 2005. When respondent refused to vacate despite demand, petitioners filed an ejectment complaint.

• The Property and Original Award: The subject property, located at Block 8, Lot 14, Juana I Complex, Biñan, Laguna, covered by TCT No. T-129136 in the name of GSIS, was originally awarded to Beaulah L. Aguillon — respondent Joel Lucenio's sister — through a GSIS housing loan. Aguillon's monthly amortizations were deducted from her salary from 1985 to 2000.

• Alleged Default and Transfer to Respondent Joel: Aguillon became delinquent. In 2005, she executed a Deed of Transfer of Rights over the subject property in favor of respondent Joel. Respondent Joel thereafter availed of the GSIS condonation or amnesty program, paid a ten percent (10%) down payment, and applied for loan restructuring. He claimed, however, that he could not pay subsequent amortizations because GSIS failed to recompute the total balance despite repeated requests.

• GSIS Sale to Petitioners: In December 2009, petitioner Teresita de los Santos lent her name and credit standing as an accommodation party for her daughter and son-in-law (petitioner spouses) to purchase a property from GSIS, formalized through a Deed of Assignment dated August 31, 2010. On January 19, 2010, GSIS approved petitioner Teresita's application. On March 5, 2010, petitioner spouses paid the deposit (P87,255.00) and front-end service fee (P7,852.97). On May 12, 2010, GSIS executed a Deed of Conditional Sale over the subject property in favor of petitioner Teresita.

• Demand and Ejectment Suit: Petitioners demanded that respondent Joel vacate the premises. Respondent refused. Barangay conciliation proceedings failed. On October 1, 2010, petitioners filed an ejectment/unlawful detainer complaint before the MTC. Respondent Joel's Answer raised, as defenses: (a) his sister had already acquired ownership through long-term amortization payments; (b) the Deed of Conditional Sale in favor of his sister could not be unilaterally terminated without due process; (c) he was deprived of due process because GSIS sold to petitioners without acting on his own offer to purchase; and (d) petitioners acted in bad faith. Compliance with the Maceda Law was never alleged.

• Lower Courts' Factual Findings: Both the MTC and RTC found that petitioners held a better right of possession as successors-in-interest of GSIS under the Deed of Conditional Sale. The RTC specifically noted that respondent Joel never made any payment on delinquencies from the time the Deed of Transfer of Rights was executed in 2005.

• Change of Theory on Appeal: Petitioners contended that respondent Joel raised the issue of GSIS' non-compliance with the Maceda Law for the first time before the CA, which is a prohibited change of theory under the Rules of Court and prevailing jurisprudence. Neither his Answer before the MTC nor his appeal brief before the RTC invoked the Maceda Law.

• Denial of Due Process: Petitioners argued that the CA's consideration of the Maceda Law issue violated their constitutional right to due process, as they were never afforded the opportunity to present evidence on that matter before the lower courts.

• Inapplicability of the Maceda Law Between Co-Buyers: Petitioners maintained that the Maceda Law applies only between a real estate seller and buyer; both petitioners and respondent Joel were buyers from GSIS at different times, rendering the law inapplicable to their dispute.

• Compliance with Maceda Law Even If Applicable: Assuming arguendo that the law applied, petitioners asserted that GSIS had in fact sent a notarized letter of cancellation, and that respondent Joel failed to show his sister had filed a claim for cash surrender value with GSIS.

• Judicial Notice of the Maceda Law: Respondent Joel faulted the MTC and RTC for failing to take judicial notice of the Maceda Law in deciding the case, implying that the courts had an obligation to apply it sua sponte.

• Validity of Prior Conditional Sale: Respondent maintained that the conditional sale in favor of his sister remained valid due to GSIS' failure to refund the cash surrender value of the payments made on the property, as supposedly required by the Maceda Law. Consequently, petitioners acquired no possessory right.

• Change of Theory / Appellate Jurisdiction: Whether the Court of Appeals gravely erred in allowing respondent Joel to raise the issue of GSIS' compliance with the Maceda Law for the first time on appeal, and whether the CA thereby exceeded its jurisdiction.

• Change of Theory / Appellate Jurisdiction: The CA decision was set aside because it resolved an issue — GSIS' compliance with the Maceda Law — that was never raised before the MTC or the RTC. Section 15, Rule 44 of the Rules of Court permits only questions of law or fact "raised in the court below and which is within the issues framed by the parties." The settled rule is that an issue not alleged in the complaint nor raised before the trial court cannot be raised for the first time on appeal, as this offends the basic rules of fair play, justice, and due process. A defense not pleaded in the answer similarly cannot be raised for the first time on appeal. The theory under which a controversy is heard and decided in the trial court must be the same theory under which appellate review is conducted. A judgment that goes beyond the issues and purports to adjudicate something on which the court did not hear the parties is not only irregular but extrajudicial and invalid. Respondent Joel's contention that the MTC and RTC should have taken judicial notice of the Maceda Law was untenable because compliance with that law is a factual matter requiring allegation and proof — matters he failed to raise in his Answer. The belated allegations before the CA would have required the presentation of additional evidence by petitioners, further demonstrating the prejudice caused by the change of theory. Because the CA acted without jurisdiction in resolving an unraised issue, its Decision was reversed and the RTC Judgment affirming the MTC Decision was reinstated. The subsidiary substantive issues concerning the Maceda Law's applicability and its alleged violation were not reached.

• Theory of the Case Doctrine (Change of Theory on Appeal) — A party is bound by the theory he adopts in the lower court and may not change it on appeal. The legal theory under which the controversy was heard and decided in the trial court must be the same theory under which review on appeal is conducted. Points of law, theories, issues, and arguments not adequately brought to the attention of the lower court will not be ordinarily considered by a reviewing court, as they cannot be raised for the first time on appeal. A judgment that goes beyond the issues and purports to adjudicate something on which the court did not hear the parties is not only irregular but also extrajudicial and invalid. The rule rests on fair play, justice, and due process; prejudice otherwise results to the adverse party who had no opportunity to present evidence on the new issue. In this case, the doctrine operated to bar respondent Joel from asserting, for the first time before the CA, that GSIS failed to comply with the notice and refund requirements of the Maceda Law — a factual assertion never pleaded in his Answer or argued before the MTC and RTC.

• Appellate Jurisdiction Limited to Issues Raised Below — An appellate court has no jurisdiction or power to decide a question not in issue. Its review is confined to questions of law or fact "raised in the court below and which is within the issues framed by the parties," pursuant to Section 15, Rule 44 of the Rules of Court. Application here: The CA acted without jurisdiction when it dismissed the ejectment complaint based on Maceda Law compliance.

• "x x x a party cannot change his theory of the case or his cause of action on appeal. This rule affirms that 'courts of justice have no jurisdiction or power to decide a question not in issue.' Thus, a judgment that goes beyond the issues and purports to adjudicate something on which the court did not hear the parties is not only irregular but also extrajudicial and invalid." — Quoting Peña v. Spouses Tolentino, this excerpt encapsulates the ratio decidendi and the consequence of a violation of the doctrine.

• "The legal theory under which the controversy was heard and decided in the trial court should be the same theory under which the review on appeal is conducted. Otherwise, prejudice will result to the adverse party. We stress that points of law, theories, issues, and arguments not adequately brought to the attention of the lower court will not be ordinarily considered by a reviewing court, inasmuch as they cannot be raised for the first time on appeal. This would be offensive to the basic rules of fair play, justice, and due process." — A frequently cited articulation of the rule against changing theory on appeal, linking procedural regularity to constitutional due process guarantees.

• Peña v. Spouses Tolentino, 657 Phil. 352 (2011) — The controlling precedent on which the Court heavily relied. It defined the rule against changing theory on appeal and established that a judgment exceeding the issues framed is extrajudicial and invalid. Followed and applied.

• Bole v. Spouses Veloso, 700 Phil. 78 (2012) — Cited for the definition of "theory of the case" from Black's Law Dictionary, providing the doctrinal vocabulary for the ruling.

• Carinan v. Spouses Cueto, 745 Phil. 186 (2014) — Cited for the rule that a defense not pleaded in the answer cannot be raised for the first time on appeal. Followed.

• Ramos v. Intermediate Appellate Court, 256 Phil. 521 (1989) — Cited for the principle that an issue not alleged in the complaint nor raised before the trial court cannot be raised for the first time on appeal. Followed.

• Nacar v. Gallery Frames, 716 Phil. 267 (2013) — Applied in the dispositive portion solely for the imposition of the legal rate of interest on the monetary awards.

• Section 15, Rule 44, Rules of Court — Governs questions that may be raised on appeal in cases before the Court of Appeals: the appellant may include in his assignment of errors "any question of law or fact that has been raised in the court below and which is within the issues framed by the parties." Applied to hold that the CA should not have entertained the Maceda Law issue, as it was never raised in the lower courts.

• Republic Act No. 6552 (Maceda Law) — The Realty Installment Buyer Protection Act. Though central to respondent Joel's belated argument before the CA, its substantive provisions were never applied by the Supreme Court because the procedural bar precluded reaching the merits.

• Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799, Series of 2013 — Referenced only in conjunction with Nacar v. Gallery Frames for the imposition of legal interest rates on the monetary awards.

Associate Justice Teresita J. Leonardo-De Castro (Acting Chairperson), Associate Justice Francis H. Jardeleza, and Associate Justice Noel G. Tijam concurred. Chief Justice Maria Lourdes P.A. Sereno was on leave.