G.R. No. L-6314; January 22, 1954
Pedro Teodoro, plaintiff-appellee, vs. Agapito Balatbat et al., defendants-appellants.

FACTS

The case originated from a complaint for recovery of possession filed by plaintiff Pedro Teodoro against defendants Agapito Balatbat et al. in the Justice of the Peace Court of Hagonoy, Bulacan. Teodoro alleged the defendants were his lessees who refused to vacate the land and house after the lease expired. The defendants denied the lease and claimed ownership, asserting that the property was merely mortgaged to Teodoro as security for a usurious loan. They alleged that to conceal the usury, the transaction was disguised as a simulated contract of sale with right of repurchase, which they signed under the assurance it would only serve as evidence of indebtedness and not be enforced as a true pacto de retro sale. The justice of the peace dismissed the case for lack of jurisdiction, ruling that the question of possession could not be resolved without first deciding ownership. Teodoro appealed to the Court of First Instance of Bulacan. The defendants moved to dismiss, alleging the court lacked jurisdiction to try the case on the merits, but the motion was denied. After defendants filed an answer and plaintiff filed a reply, the court held that the justice of the peace had jurisdiction and ordered the case remanded to that court for trial. The defendants appealed from that order.

ISSUE

Whether the Justice of the Peace Court had jurisdiction over the case for recovery of possession, given that the resolution of the possession issue depended on the determination of ownership based on the disputed nature (sale with pacto de retro versus equitable mortgage) of the contract between the parties.

RULING

The Supreme Court ruled that the Justice of the Peace Court had no jurisdiction. While a defendant cannot divest a justice of the peace court of jurisdiction in a forcible entry and detainer case by merely claiming ownership, jurisdiction is lost if, during trial, the question of possession cannot be properly determined without settling the question of ownership. Here, the plaintiff’s claim to possession ultimately rested on his claim of ownership derived from a contract of sale with right of repurchase. The defendants claimed this contract was a simulated pacto de retro sale that actually cloaked an equitable mortgage tainted with usury. The resolution of possession hinged on determining whether the contract was a true sale (making plaintiff the owner entitled to possession) or a mortgage (making defendants the owners, not mere lessees). Therefore, the case hinged on a question of ownership, which is beyond the jurisdiction of the justice of the peace court. The order remanding the case to the justice of the peace court was revoked. The case was ordered returned to the Court of First Instance of Bulacan to proceed with the trial in the exercise of its original jurisdiction. Costs were imposed on the appellee.