G.R. No. L-29360 January 30, 1982
JOSE C. ZULUETA, petitioner, vs. HON. HERMINIO MARIANO, in his capacity as Presiding Judge of Branch X of the Court of First Instance of Rizal; and LAMBERTO AVELLANA, respondents.

FACTS

Petitioner Jose C. Zulueta, owner of a house and lot, entered into a “Contract to Sell” with respondent Lamberto Avellana. The contract stipulated that upon the buyer’s failure to meet conditions, the owner could extrajudicially recover possession, and all prior payments would be deemed rentals. Alleging Avellana’s failure to pay monthly installments, Zulueta filed an ejectment suit in the Municipal Court of Pasig, claiming the contract was converted into a lease. Avellana contested jurisdiction, arguing the case involved interpretation and rescission of the contract, and raised a counterclaim for a pre-existing debt he claimed should offset his obligations.
The Municipal Court ruled for Zulueta, ordering Avellana to vacate and pay arrearages, treating the matter as a simple issue of possession. It refused to adjudicate the offsetting debt claim, deeming it a separate actionable issue. Avellana appealed to the Court of First Instance (CFI). Before the CFI, Avellana moved to dismiss the appeal, reiterating the Municipal Court’s lack of jurisdiction. The respondent Judge held the motion in abeyance, leading Zulueta to file the present petition for mandamus and prohibition to compel the CFI to assume appellate jurisdiction and order execution of the Municipal Court’s judgment.

ISSUE

Whether the Court of First Instance, on appeal, correctly dismissed the ejectment case for lack of jurisdiction of the inferior court and whether it could assume original jurisdiction over the case.

RULING

The Supreme Court ruled that the Municipal Court indeed lacked jurisdiction over the ejectment case. While the contract provided for extrajudicial rescission, such a stipulation is effective only if the other party does not oppose it. Where, as here, the buyer (Avellana) objected and raised defenses contesting the fact of breach and claiming offsetting obligations, a judicial determination of the rescission was necessary. An ejectment court’s jurisdiction is limited to the issue of physical possession; it cannot adjudicate the validity or resolution of a contract to sell, which involves title or ownership issues beyond its competence. Therefore, the action was not a simple unlawful detainer but one requiring interpretation and judicial declaration of rescission.
Consequently, the respondent CFI Judge correctly dismissed the appeal due to the Municipal Court’s lack of jurisdiction. However, the CFI erred in assuming original jurisdiction over the case. Under Section 11, Rule 40 of the Rules of Court, when an inferior court lacks subject matter jurisdiction, the CFI on appeal must dismiss the case. The CFI may try the case on the merits only if both parties file pleadings and go to trial without objecting to its original jurisdiction. Since petitioner Zulueta expressly objected, the CFI had no authority to try the case anew. The only correct course was to dismiss the appeal entirely. The Supreme Court granted the writ of prohibition, permanently enjoining the CFI from taking cognizance of the case in the exercise of its original jurisdiction, and denied the writ of mandamus for execution of the void Municipal Court judgment.