G.R. No. 72686 March 8, 1989
SPOUSES JAIME RAMOS and NILDA ILANO RAMOS, petitioners, vs. INTERMEDIATE APPELLATE COURT, HON. ANDRES R. MATIAS, etc., and Spouses RESTITUTO MELO and NELLY J. MELO, respondents.

FACTS

The private respondents, Spouses Melo, sold a house and lot to the petitioners, Spouses Ramos, through a “Deed of Absolute Sale With Assumption of Mortgage” in 1977. The title was transferred to the Ramoses. However, the Melos refused to vacate the property. The Ramoses filed an ejectment case (Civil Case No. 226) before the Municipal Court of Imus in January 1978. The Melos moved to dismiss, claiming the deed was an equitable mortgage, not a sale, thus placing the subject matter beyond the Municipal Court’s jurisdiction. Their motion was denied. Instead of presenting their defense in the ejectment case, the Melos filed a separate action for reformation of instrument in the Court of First Instance in February 1980, seeking to enjoin the ejectment proceedings. The CFI refused to issue an injunction. The Melos then filed a certiorari petition with the Intermediate Appellate Court (IAC), which was dismissed, upholding the Municipal Court’s jurisdiction and finding the equitable mortgage claim a sham defense. The Supreme Court subsequently denied the Melos’ petition.

ISSUE

The primary issues were: (1) whether the IAC erred in strictly applying the Habaluyas doctrine to deny the Ramoses’ motion for extension to file a motion for reconsideration, despite their petition for review being filed earlier; and (2) whether the trial court erred in ignoring the “law of the case” by re-characterizing the ejectment action as one incapable of pecuniary estimation and thus beyond municipal court jurisdiction.

RULING

The Supreme Court reversed the IAC’s procedural ruling and affirmed the substantive findings on jurisdiction and the nature of the transaction. On the first error, the Court held that the IAC’s strict application of Habaluyas was improper. The Ramoses had filed their petition for review ten days before the IAC’s denial of their motion for extension. The Habaluyas rule, which prohibited extensions of time to file motions for reconsideration, was not intended to be applied retroactively with oppressive rigidity to dismiss appeals where a petition was already pending. The Court emphasized that procedural rules should serve justice, not defeat it. On the second error, the Court ruled that the trial court disregarded the “law of the case” established by the IAC and affirmed by the Supreme Court, which had conclusively settled that the action was one for ejectment within the municipal court’s exclusive original jurisdiction. The Melos’ claim of equitable mortgage was a transparent dilatory tactic. The Court affirmed the Municipal Court’s judgment, declaring the transaction a true sale vesting title and possession in the Ramoses. The decision was made immediately executory.