Wilmon Auto Supply Corporation vs. Court of Appeals

The pendency of a separate action involving ownership of the property does not abate or suspend an unlawful detainer action, because the only issue in an ejectment case is physical possession or possession de facto, while the separate action involves ownership. The jurisdiction of the court in ejectment cases is determined by the allegations of the complaint, not by the defenses raised by the defendant.

The petitioners were lessees of a commercial building and bodegas in Iloilo City owned in common by Lucy A. Solinap, Fr. Jerry R. Locsin, Lourdes C. Locsin, Manuel C. Locsin, and Ester L. Jarantilla. The lease contracts contained fixed terms, a "reservation of lights" clause requiring the lessor to inform the lessee of any plan to sell the property, and a provision that the lessee must give 30 days' prior notice of intention to renew. The lessors sold the property to Star Group Resources and Development, Inc. after the leases expired, and the deed of sale provided that the vendee would deal with the lessees without any further warranty or obligation on the part of the vendors.

Wilmon Auto Supply Corporation (represented by Ramon Que), Iloilo Multi Parts Supply Corporation (represented by Ramon Que), Virgilio Ang, Henry Tan, Southern Sales Corporation, and Chang Liang, Jr. were lessees of a commercial building and bodegas standing on registered land in Iloilo City owned in common by Lucy A. Solinap, Fr. Jerry R. Locsin, Lourdes C. Locsin, Manuel C. Locsin, and Ester L. Jarantilla. The leases were embodied in uniformly worded deeds executed by the individual petitioners as lessees and Lourdes C. Locsin representing the lessors-co-owners. The lease contracts stipulated fixed terms from September 1, 1987 to August 30, 1989, provided for a deposit equal to two months' rents, required the lessee to give 30 days' prior notice of intention to terminate or renew, and contained a "reservation of lights" clause reserving to the lessor the right to sell, mortgage, hypothecate, or encumber the property so long as the purchaser or mortgage creditor respects the terms of the lease, provided that the lessee be duly informed of the lessor's plan to sell.

On September 18, 1989, after the expiration of the lease periods, the lessors executed a "Deed of Absolute Sale" selling the leased property to Star Group Resources and Development, Inc. The deed provided that the vendee shall deal with the lessees and occupants without any further warranty or obligation on the part of the vendors. On November 22, 1989, Star Group brought separate actions of unlawful detainer in the Municipal Trial Court In Cities of Iloilo City against the lessees, docketed as Civil Case No. 227 (89) against Virgilio Ang, Civil Case No. 230 (89) against Chang Liang, Jr., Civil Case No. 232 (89) against Henry Tan and Southern Sales Corporation, Civil Case No. 233 against Ramon Que (for premises occupied by Wilmon Auto Supply Corporation), and Civil Case No. 234 against Ramon Que (for premises occupied by Iloilo Multi Parts Supply Corporation).

The lessees refused to concede Star Group's right to eject them, arguing that the lessors and their buyer had violated their leasehold rights because (i) they were not accorded the right of preemption, (ii) the buyer was not required to honor the leases, and (iii) the lessees were denied the option to renew their leases upon expiration. These propositions were set forth in their answers with counterclaims in the unlawful detainer actions and as causes of action in a complaint filed on December 1, 1989 in the Regional Trial Court of Iloilo, docketed as Civil Case No. 18931, against Star Group, its President Juanito Sio, and the co-owners-vendors. The plaintiffs-lessees prayed that the sale be declared null and void ab initio, that they be allowed to exercise their right of pre-emption or redemption, that titles be conveyed to them, and that they be paid moral damages of P1.5 million, exemplary damages of P10,000.00, and attorney's fees of P200,000.00.

In the unlawful detainer actions, the Municipal Trial Court ruled that some cases should be tried under the summary procedure rules but not others. The lessees moved for reconsideration and additionally prayed for dismissal on grounds of litis pendentia and lack of jurisdiction, but their pleas were denied. Three lessees filed petitions for certiorari with the Supreme Court, which were referred to the Regional Trial Court of Iloilo City. The Executive Judge, Hon. Ricardo M. Ilarde, issued a restraining order enjoining proceedings in the unlawful detainer cases but later promulgated judgment dismissing the petitions and dissolving the injunction, ruling that the unlawful detainer cases fall within the jurisdiction of the Municipal Trial Court and that the pendency of Civil Case No. 18931 did not warrant suspension of the ejectment cases. Two other lessees filed a motion in the RTC for a writ of preliminary injunction to stop the Municipal Trial Court from hearing their ejectment cases, but the motion was denied; they then filed a petition for certiorari with the Court of Appeals, which ruled adversely to them, holding that the issues raised in the RTC were the same issues raised as defenses in the ejectment cases and that questions pertaining to the landlord-tenant relationship should be decided in the ejectment case.

• Right of Preemption: Petitioners argued that the lessors and the buyer violated their leasehold rights because they were not accorded the right of preemption, the buyer was not required to honor the leases, and the lessees were denied the option to renew their leases upon expiration.
• Suspension of Ejectment Proceedings: Petitioners argued that the unlawful detainer actions should be suspended until adjudgment of the cases in the RTC involving the sale, ownership, and physical possession of the property, citing Quiambao vs. Osorio and Orellano vs. Alvestir.
• Jurisdiction of the Municipal Trial Court: Petitioners argued that the Municipal Trial Court lacks jurisdiction over the actions which are real in nature and involve interpretation of lease contracts over immovables, citing Vda. de Murga vs. Chan and Valderama Lumber Manufacturers Co., Inc. vs. L.S. Sarmiento Co..
• Deviation from Doctrine: Petitioners argued that the Court of Appeals deviated from the doctrine laid down in Vda. de Legaspi vs. Avendaño.

• Summary Procedure: Respondent Star Group insisted that the Rule on Summary Procedure applies in the ejectment cases, and that the applicability of the rule could easily be thwarted by a defendant through the simple expedient of filing an action in the RTC contesting the plaintiff's ownership over the property.
• No Suspension of Ejectment: Respondent argued that the pendency of an action involving ownership does not stay proceedings in the ejectment case, as the only issue in the ejectment suit is physical possession or possession de facto.

• Abatement of Ejectment Suit: Whether an action of unlawful detainer filed in the Municipal Trial Court against a lessee, grounded on the expiration of the latter's lease, should be abated or suspended by an action filed in the Regional Trial Court by the defendant lessee claiming entitlement to a right of preemption over the premises.
• Jurisdiction of the Municipal Trial Court: Whether the Municipal Trial Court has jurisdiction over the unlawful detainer actions which are real in nature and involve interpretation of lease contracts over immovables.
• Application of Precedents: Whether the precedents cited by the petitioners, including Vda. de Murga vs. Chan, Valderama Lumber Manufacturers Co., Inc. vs. L.S. Sarmiento Co., Vda. de Legaspi vs. Avendaño, Quiambao vs. Osorio, Orellano vs. Alvestir, and Dante vs. Sison, apply to the present cases.

• Abatement of Ejectment Suit: No. The unlawful detainer suits in the Municipal Trial Court are not abated by the actions filed in the Regional Trial Court based on the lessees' claim of a right of preemption. The only issue in the ejectment cases is physical possession or possession de facto, while the issue in the RTC action is basically one of ownership.
• Jurisdiction of the Municipal Trial Court: Yes. The Municipal Trial Court has jurisdiction over the unlawful detainer actions, as the jurisdiction of the court in ejectment cases is determined by the allegations of the complaint, not by the defenses raised by the defendant.
• Application of Precedents: No. The precedents invoked by the petitioners do not represent current and prevailing doctrine; they might at most be deemed exceptions justifying the general rule, and the facts in the rulings invoked by them are quite readily distinguishable from the numerous precedents upholding the general rule.

• Abatement of Ejectment Suit: The Court held that the question of whether an unlawful detainer suit should be abated by a separate action involving ownership has been resolved in numerous cases with a negative answer invariably given. The underlying reasons for these rulings were that the actions in the Regional Trial Court did not involve physical or de facto possession and, on not a few occasions, that the case in the Regional Trial Court was merely a ploy to delay disposition of the ejectment proceeding, or that the issues presented in the former could quite as easily be set up as defenses in the ejectment action and there resolved. The Court cited Leopoldo Sy vs. Court of Appeals, which stated that if the theory that a question of ownership in another case suspends ejectment proceedings were adopted, the applicability of the Rule on Summary Procedure in ejectment cases could easily be thwarted by the defendant through the simple expedient of filing an action in the regional trial court contesting the plaintiff's ownership over the property from which defendant is sought to be evicted.

• Jurisdiction of the Municipal Trial Court: The Court held that in ejectment cases, the jurisdiction of the court is determined by the allegations of the complaint, not by the defense raised by the defendant. The Court cited the principle that the judgment rendered in an ejectment case shall not bar an action between the same parties respecting title to the land or building, nor shall it be held conclusive of the facts therein found in a case between the same parties upon a different cause of action involving possession. The Court also noted that as the law now stands, even when the defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without deciding that issue of ownership, the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Trial Courts nevertheless have the undoubted competence to resolve the issue of ownership only to determine the issue of possession.

• Application of Precedents: The Court distinguished each precedent cited by the petitioners. Vda. de Legaspi vs. Avendaño was distinguished on equitable grounds, as execution of the decision in that ejectment case would have meant demolition of the premises. Vda. de Murga vs. Chan was not in point because the essential requisite of an unequivocal demand to vacate had not been fulfilled, and the defendant's lease had been automatically renewed. Valderrama Lumber Manufacturers Co., Inc. vs. L.S. Sarmiento Co. was not in point because the ejectment complaint failed to allege prior possession by the plaintiff. Quiambao vs. Osorio was distinguishable because the contract on which the plaintiff's cause of action for ejectment was founded had been cancelled by the proper administrative authority. Orellano vs. Alvestir involved a special law (Republic Act 1162 as amended by Republic Act No. 1599) which was a necessary factor in the controversy, and even assuming irreconcilable conflict, the overwhelming weight of authority is decidedly contrary to Orellano.

• Doctrine of Non-Abatement of Ejectment Suits — The pendency of a separate action involving ownership of the property does not abate or suspend an unlawful detainer action. The only issue in an ejectment case is physical possession or possession de facto, while the separate action involves ownership. This doctrine applies to injunction suits, consignation of rentals, accion publiciana, writ of possession cases, actions for quieting of title, suits for specific performance with damages, actions for reformation of instrument, actions for reconveyance, and suits for annulment of sale, title, or document.

• Jurisdiction Determined by Allegations of the Complaint — In ejectment cases, the jurisdiction of the court is determined by the allegations of the complaint, not by the defense raised by the defendant. The defendant cannot oust the court of jurisdiction by raising questions of ownership in his pleadings.

• Resolution of Ownership Issue in Ejectment Cases — Under Section 33(2) of Batas Pambansa Bilang 129, even when the defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without deciding that issue of ownership, the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Trial Courts have the undoubted competence to resolve the issue of ownership only to determine the issue of possession.

• "We apprehend that if this theory is adopted, the applicability of the Rule on Summary Procedure in ejectment cases could easily be thwarted by the defendant through the simple expedient of filing an action in the regional trial court contesting the plaintiff's ownership over the property from which defendant is sought to be evicted." — This passage from Leopoldo Sy v. Court of Appeals articulates the policy rationale for refusing to suspend ejectment proceedings merely because a separate ownership action is pending.

• "The pendency of the action for reconveyance does not constitute a compelling reason to delay the termination of an ejectment case for it gives rise merely to an expectancy that the documents assailed therein may be nullified and the subject properties may be ordered reconveyed to private respondents, as compared to the clear, actual and existing legal right of petitioner to the possession of the subject property as the registered owner." — This passage from Galgala v. Benguet Consolidated, Inc. explains why a mere expectancy of ownership does not outweigh the clear, actual, and existing legal right to possession in an ejectment case.

• "The underlying reasons for the above rulings were that the actions in the Regional Trial Court did not involve physical or de facto possession and, on not a few occasions, that the case in the Regional Trial Court was merely a ploy to delay disposition of the ejectment proceeding, or that the issues presented in the former could quite as easily be set up as defenses in the ejectment action and there resolved." — This passage states the ratio decidendi for the doctrine that separate actions involving ownership do not abate ejectment suits.

• Leopoldo Sy vs. Court of Appeals, G.R. No. 95818, August 2, 1991 — Controlling precedent cited for the proposition that the applicability of the Rule on Summary Procedure in ejectment cases could easily be thwarted by a defendant filing an action in the RTC contesting ownership, and that the pendency of an action for reconveyance does not delay termination of an ejectment case.
• Vda. de Legaspi vs. Avendaño, 79 SCRA 135 (1977) — Distinguished as an exception to the general rule based on strong reasons of equity, where execution of the ejectment decision would have meant demolition of the premises.
• Vda. de Murga vs. Chan, 25 SCRA 441 (1968) — Distinguished as not in point because the essential requisite of an unequivocal demand to vacate had not been fulfilled and the lease had been automatically renewed.
• Valderama Lumber Manufacturers Co., Inc. vs. L.S. Sarmiento Co., 5 SCRA 287 (1962) — Distinguished as not in point because the ejectment complaint failed to allege prior possession by the plaintiff.
• Quiambao vs. Osorio, 158 SCRA 674 (1988) — Distinguished because the contract on which the plaintiff's cause of action for ejectment was founded had been cancelled by the proper administrative authority.
• Orellano vs. Alvestir, 76 SCRA 536 (1977) — Distinguished because a special law (Republic Act 1162 as amended by Republic Act No. 1599) was a necessary factor in the controversy; the overwhelming weight of authority is decidedly contrary to this case.
• Salinas vs. Navarro, 126 SCRA 167 (1983) — Cited for the observation that the exception in Vda. de Legaspi is based on strong reasons of equity not found in other cases.
• Galgala vs. Benguet Consolidated, Inc., 177 SCRA 288 (1989) — Cited for the proposition that the pendency of an action for reconveyance does not constitute a compelling reason to delay termination of an ejectment case.

• Section 33(2), Batas Pambansa Bilang 129 — The Judiciary Reorganization Act of 1980, which empowers Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Trial Courts to resolve the issue of ownership in forcible entry and detainer cases only to determine the issue of possession.
• Section 1, Rule 72, Rules of Court — Referenced in the discussion of Valderrama Lumber Manufacturers Co., Inc. vs. L.S. Sarmiento Co. regarding the requirement that the complaint allege prior possession by the plaintiff or deprivation thereof by any of the means set forth in the rule.
• Section 88, Republic Act No. 296 (Judiciary Act of 1948) — Cited in the footnote as empowering courts of the first level in forcible entry and detainer proceedings to receive evidence upon the question of title solely for the purpose of determining the character and extent of possession and damages for detention.
• Section 3(c), Republic Act No. 5967 — Cited in the footnote as granting City Courts jurisdiction in ejection cases where the question of ownership is brought in issue in the pleadings, to resolve said issue of ownership in conjunction with the issue of possession.

Cruz, Griño-Aquino, Medialdea, and Bellosillo, JJ., concurred.