G.R. No. 255397. September 12, 2022
MARLENE D. DE MESA, PETITIONER, VS. RUDY D. PULUTAN AND MEDY P. BUNDALIAN, RESPONDENTS.

FACTS

Petitioner Marlene D. De Mesa filed an unlawful detainer complaint against respondents Rudy D. Pulutan and Medy P. Bundalian before the MTCC. De Mesa claimed ownership of a house and lot in San Pablo City, which she purchased from Amelia D. Pulutan, the respondents’ mother, in 2006. A deed of absolute sale was executed, leading to the cancellation of Amelia’s title and the issuance of a new one in De Mesa’s name in 2008. Prior to this, the parties entered into a lease agreement from October 2006 to September 2007. Amelia failed to pay rent and was asked to vacate but instead requested a right to repurchase until December 30, 2009, an agreement made before the Barangay. Amelia failed to repurchase and died in 2016. De Mesa then demanded that respondents, who remained in possession, vacate the property. They refused, prompting the ejectment suit.
Respondents defended by asserting that the contract between De Mesa and their mother was not a sale but an equitable mortgage, arguing that Amelia’s continued possession indicated a loan transaction. The MTCC ruled in favor of De Mesa, characterizing the contract as a sale and ordering respondents to vacate. The RTC affirmed the MTCC decision with modification on rental rates. The Court of Appeals, however, reversed the lower courts. The CA applied the presumption of equitable mortgage under Article 1602 of the Civil Code, citing that the vendor (Amelia) remained in possession as a lessee and that a right to repurchase was granted. The CA thus annulled the ejectment order, holding the issue of ownership must first be resolved in a proper proceeding.

ISSUE

Whether the Court of Appeals erred in annulling the decisions of the lower courts and dismissing the unlawful detainer case based on its finding that the contract was an equitable mortgage, a matter allegedly beyond the scope of an ejectment proceeding.

RULING

Yes, the Supreme Court reversed the Court of Appeals and reinstated the RTC Decision. The Court held that the CA committed reversible error by delving into the issue of whether the contract was a sale or an equitable mortgage. In an unlawful detainer case, the only issue for resolution is the physical or material possession of the property (possession de facto), independent of any claim of ownership. The jurisdiction of the first-level court in such proceedings is limited to determining who has a better right of possession based on the allegations of the complaint and the evidence presented on possession.
The Court emphasized that the respondents’ defense of equitable mortgage was essentially an assertion of ownership, which is not a proper subject for an ejectment suit. The MTCC and the RTC correctly confined themselves to the issue of possession. De Mesa, as the registered owner since 2008, had a Torrens title, which is evidence of her ownership and carried with it the right to possess the property. Her prior physical possession, coupled with the expiration of the respondents’ right to occupy under the lease and subsequent tolerance, established her better right of possession for purposes of unlawful detainer. The existence of a Torrens title in the petitioner’s name strengthens her right to possess, and any challenge to that title based on an alleged equitable mortgage must be raised in a separate action for annulment of title or reconveyance. The ejectment case could proceed independently.