G.R. No. 161589 November 24, 2014
PENTA PACIFIC REALTY CORPORATION, Petitioner, vs. LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, Respondent.

FACTS

Petitioner Penta Pacific Realty Corporation owned the 25th floor of the Pacific Star Building in Makati City. Respondent Ley Construction and Development Corporation leased a portion (444.03 sq. m.) of this floor under a contract of lease dated January 31, 1997, which allowed the petitioner to repossess the property upon the respondent’s default in monthly rentals. Subsequently, on March 19, 1997, the parties executed a reservation agreement (a contract to sell) for the entire floor, with the respondent making a down payment and agreeing to monthly amortizations. The agreement contained a forfeiture clause allowing the petitioner to cancel the agreement and forfeit payments upon the respondent’s failure to pay. The respondent stopped paying the amortizations after paying US$538,735.00. After an exchange of letters where the respondent proposed to apply its payments as rentals and the petitioner rejected this, the petitioner, through counsel, formally cancelled the reservation agreement, forfeited the payments, demanded payment of rentals, and demanded that the respondent vacate the property. Upon the respondent’s failure to comply, the petitioner filed a complaint for ejectment in the Metropolitan Trial Court (MeTC) on July 9, 1999. The MeTC ruled in favor of the petitioner, ordering the respondent to vacate and pay unpaid rentals. The respondent appealed to the Regional Trial Court (RTC), which nullified the MeTC decision for lack of jurisdiction, holding the proper action was accion publiciana or accion reivindicatoria. The Court of Appeals affirmed the RTC, concluding the action was not for unlawful detainer. The petitioner elevated the case to the Supreme Court.

ISSUE

Whether the complaint filed by the petitioner was for unlawful detainer (within the MeTC’s jurisdiction) or for accion publiciana or accion reivindicatoria (outside the MeTC’s jurisdiction).

RULING

The Supreme Court ruled that the complaint was for unlawful detainer, and thus the MeTC had jurisdiction. The Court explained that jurisdiction over the subject matter is determined by the allegations in the complaint. The petitioner’s complaint alleged that the respondent’s possession was by virtue of a contract of lease, and that such possession became unlawful upon the respondent’s failure to pay the agreed monthly rentals, despite demand. The Court held that an unlawful detainer action can be based on the expiration or termination of the right to hold possession under a contract, such as a lease. The fact that a separate contract to sell (reservation agreement) existed did not negate the lease agreement or convert the action into one for recovery of ownership. The respondent’s failure to pay the purchase price under the reservation agreement, which led to its cancellation, resulted in the respondent having no right to continue possession under any contract, making its withholding of possession unlawful. The one-year period for filing an unlawful detainer action was met, as the final demand to vacate was made on May 25, 1999, and the complaint was filed on July 9, 1999. Therefore, the MeTC had jurisdiction, and its decision was reinstated.