Zulueta vs Judge Mariano and Avellana (Civil Law)

JOSE C. ZULUETA
vs.
HON. HERMINIO MARIANO,

in his capacity as Judge of CFI Rizal Branch 10;

and LAMBERTO AVELLANA

--- An extrajudicial rescission has legal effect where the other party does not oppose it. Where it is objected to, a judicial determination of the issue is still necessary.

--- A violation by a party of any of the stipulations of a contract on agreement to sell real property would entitle the other party to resolved or rescind it. if such violation is proved a justice of the peace court might make a finding to that effect, but it certainly cannot declare and hold that the contract is resolved or rescinded. It is beyond its power to do so.

G.R. No. L-29360 January 30, 1982

MELENCIO-HERRERA, J.:

In this action for mandamus and Prohibition, petitioner seeks to compel respondent Judge to assume appellate, not original jurisdiction over an Ejectment case appealed from the Municipal Court of Pasig and to issue a Writ of Execution in said case.

FACTS:

Jose C. Zulueta is the registered owner of a residential house and lot situated within the Antonio Subdivision, Pasig, Rizal. On Nov. 6, 1964, Zulueta and Lamberto Avellana, a movie director, entered into a "Contract to Sell" the aforementioned property for P75k payable in 20 years with respondent buyer assuming to pay a down payment of P5k and a monthly installment of P630.00 payable in advance before the 5th day of the corresponding month, starting with December, 1964.

It was further stipulated:

That upon failure of the BUYER to fulfill any of the conditions herein stipulated,

- BUYER automatically and irrevocably authorizes OWNER to recover extra-judicially, physical possession of the land, building and other improvements which are the subject of this contract,

and to take possession also extra-judicially whatever personal properties may be found within the aforesaid premises

from the date of said failure to answer for whatever unfulfilled monetary obligations BUYER may have with OWNER;

- and this contract shall be considered as without force and effect also from said date;

- all payments made by the BUYER to OWNER shall be deemed as rental payments without prejudice to OWNER's right to collect from BUYER whatever other monthly installments and other money obligations which may have been paid until BUYER vacates the aforesaid premises;

upon his failure to comply with any of the herein conditions

- BUYER forfeits all money claims against OWNER and shall pay a monthly rental equivalent to his monthly installment under Condition 1 of this Contract

from the date of the said failure to the date of recovery of physical possession by OWNER of the land, building and other improvements which are the subject of this Contract;

- BUYER shall not remove his personal properties without the previous written consent of OWNER, who, should he take possession of such properties following the aforesaid failure of BUYER, shall return the same to BUYER only after the latter shall have fulfilled all money claims against him by OWNER;

- in all cases herein, demand is waived;

Respondent Avellana occupied the property from December, 1964, but title remained with petitioner Zulueta.

On June 1966, Zulueta commenced an Ejectment suit before MTC Pasig against Avellana, alleging that the latter had failed to comply with the monthly amortizations stipulated in the contract, despite demands to pay and to vacate the premises, and that thereby the contract was converted into one of lease, pursuant to the abovementioned stipulation. Petitioner prayed that respondent be ordered to vacate the premises, pay the sum of P11,751.30 representing respondent's balance owing as of May, 1966; and to pay P 630.00 every month after May, 1966, and costs.

Avellana’s defense was that the MTC has no jurisdiction over the nature of the action as it involved the interpretation and/or rescission of the contract; his other defense was a set-off - P31,269.00 (cost of two movies respondent made for petitioner for the latter’s political campaign in 1964 when petitioner ran for Congressman) as well as the cost of one 16 millimeter projector (petitioner borrowed from respondent and which had never been returned), which amounts, according to their understanding, would be applied as down payment for the property and to whatever obligations respondent had with petitioner. Avellana’s total counterclaim against petitioner was in the amount of P42,629.99 representing petitioner's pleaded indebtedness to private respondent, claim for moral damages, and attorney's fees.

The counterclaim was dismissed by the Municipal Court for being in an amount beyond its jurisdiction. However, as a special defense, private respondent sought to offset the sum of P31,269.00 against his obligations to petitioner.

Deciding the case on May 10, 1967, the Municipal Court ruled in favor of petitioner, finding that respondent Avellana had failed to comply with his financial obligations under the contract. That conclusion was premised on the finding that breach of any of the conditions by private respondent converted the agreement into a lease contract and upon the following considerations:

The issue in this case being that of possession, the claim of defendant against plaintiff or P 31,269.00 indebtedness, has no place as a defense here. It should be the subject- matter of a separate action against, plaintiff Jose C. Zulueta.

Respondent Avellana appealed to the CFI Rizal presided by respondent Judge. Thereat, petitioner summoned for execution alleging private respondent's failure to deposit in accordance the monthly rentals, which the latter denied. Respondent Judge held resolution thereof in abeyance.

On February 19, 1968, respondent Avellana filed a Motion to Dismiss Appeal alleging that, inasmuch as the defense set up in his Answer was that he had not breached his contract with petitioner, the case necessarily involved the interpretation and/or rescission of the contract and, therefore, beyond the jurisdiction of the Municipal Court. Petitioner opposed claiming that the Complaint had set out a clear case of unlawful detainer considering that judicial action for the rescission of the contract was unnecessary due to the automatic rescission clause therein and the fact that petitioner had cancelled said contract so that respondent's right to remain in the premises had ceased.

On March 21, 1968, respondent Judge dismissed the case on the ground of lack of jurisdiction of the Municipal Court, and ruled that the CFI “takes cognizance of the case and will try the case as if it has been originally filed in this Court.”

Petitioner then availed of the instant recourse.

ISSUE:

Was the action before the MTC Pasig essentially for detainer and, therefore, within its exclusive original jurisdiction, or one for rescission or annulment of a contract, which should be litigated before a CFI?

HELD: The issue is of rescission and not possession.

In his Complaint, petitioner had alleged violation by respondent Avellana of the stipulations of their agreement to sell and thus unilaterally considered the contract rescinded. Respondent Avellana denied any breach on his part and argued that the principal issue was one of interpretation and/or rescission of the contract as well as of set-off. Under those circumstances, proof of violation is a condition precedent to resolution or rescission. It is only when the violation has been established that the contract can be declared resolved or rescinded. Upon such rescission, in turn, hinges a pronouncement that possession of the realty has become unlawful. Thus, the basic issue is not possession but one of rescission or annulment of a contract. which is beyond the jurisdiction of the Municipal Court to hear and determine.

A violation by a party of any of the stipulations of a contract on agreement to sell real property would entitle the other party to resolved or rescind it. An allegation of such violation in a detainer suit may be proved by competent evidence. And if proved a justice of the peace court might make a finding to that effect, but it certainly cannot declare and hold that the contract is resolved or rescinded. It is beyond its power so to do. And as the illegality of the possession of realty by a party to a contract to sell is premised upon the rescission of the contract, it follows that an allegation and proof of such violation, a condition precedent to such resolution or rescission, to render unlawful the possession of the land or building erected thereon by the party who has violated the contract, cannot be taken cognizance of by a justice of the peace court. ... 

True, the contract between the parties provided for extrajudicial rescission. This has legal effect, however, where the other party does not oppose it. Where it is objected to, a judicial determination of the issue is still necessary.

But while respondent Judge correctly ruled that the Municipal Court had no jurisdiction over the case and correctly dismissed the appeal, he erred in assuming original jurisdiction, in the face of the objection interposed by petitioner.

Section 11, Rule 40, leaves no room for doubt on this point:

Section 11. Lack of jurisdiction —A case tried by an inferior court without jurisdiction over the subject matter shall be dismiss on appeal by the Court of First Instance. But instead of dismissing the case, the Court of First Instance may try the case on the merits, if the parties therein file their pleadings and go to trial without any objection to such jurisdiction.

There was no other recourse left for respondent Judge, therefore, except to dismiss the appeal.

The foregoing premises considered, petitioner's prayer for a Writ of Execution of the judgment of the Municipal Court of Pasig must perforce be denied.

WHEREFORE, the Writ of mandamus is denied, but the Writ of Prohibition is granted and respondent Court hereby permanently enjoined from taking cognizance of Civil Case No. 10595 in the exercise of its original jurisdiction. No costs.