Dizon v. CA

G.R. No. 116854 (November 19, 1996)

Aida Dizon was evicted post-foreclosure; court ruled ejectment focuses on possession, not ownership.

Facts:

Petitioner Aida Dizon mortgaged her house and lot to Monte de Piedad Bank on October 23, 1990. Due to her inability to pay the mortgage, the bank foreclosed on the property. Subsequently, Dizon learned from the bank that she could repurchase the property. She then sought the assistance of private respondent Elizabeth Santiago, who agreed to repurchase the property on Dizon's behalf. On May 28, 1987, Santiago paid the bank P550,000.00, and the next day, Dizon executed a Deed of Absolute Sale in favor of Santiago and her siblings (collectively referred to as the Santiagos).

On the same day, Dizon and the Santiagos entered into another agreement granting Dizon an "option to buy back" the property within three months. This agreement stipulated that if Dizon failed to exercise her option, she would vacate the premises and turn over possession to the Santiagos, including any lessees of the building. Following the execution of these documents, Dizon's Transfer Certificate of Title (TCT) was canceled, and a new TCT was issued in the name of the Santiagos.

During the three-month option period, Dizon was allowed to remain in the property. However, when the option period expired without Dizon exercising her right to repurchase, the Santiagos requested her to vacate the premises. Dizon refused, leading the Santiagos to file an ejectment suit against her in the Metropolitan Trial Court (MTC) and to seek payment of rentals starting September 1, 1987.

In her defense, Dizon claimed that she could not be compelled to vacate the property because she was the owner, asserting that the Deed of Absolute Sale was, in fact, an equitable mortgage. After trial, the MTC ruled in favor of the Santiagos, ordering Dizon and all persons claiming rights under her to vacate the property.

Dizon appealed the MTC's decision to the Regional Trial Court (RTC), which surprisingly set aside the MTC ruling and ordered the cancellation of the Santiagos' TCT, reinstating Dizon's TCT. The Santiagos then filed a petition for review with the Court of Appeals (CA), arguing that the RTC exceeded its authority by canceling their title, as ownership is not a definitive issue in an ejectment suit. The CA initially dismissed the petition but later reinstated the MTC ruling upon reconsideration, leading to the current petition.

Legal Issues:

The primary legal issue in this case is whether a court, in an ejectment case, can order the cancellation of a TCT and definitively rule on the issue of ownership.

Arguments:

  • Petitioner (Dizon): Dizon contended that she could not be compelled to vacate the property because she was the rightful owner. She argued that the Deed of Absolute Sale was an equitable mortgage, and thus, she retained ownership rights over the property.

  • Respondents (Santiagos): The Santiagos argued that the RTC erred in canceling their TCT, as ownership is not a matter that can be definitively resolved in an ejectment suit. They maintained that the only issue in such cases is possession, and since they held a valid TCT, they were entitled to possession of the property.

Court's Decision and Legal Reasoning:

The Supreme Court ruled in favor of the Santiagos, affirming the CA's reinstatement of the MTC ruling. The Court reiterated the well-established principle that in ejectment suits, the primary issue is possession de facto, not ownership. The Court noted that even if ownership is raised in the pleadings, it may only be considered to the extent that it clarifies the issue of possession.

The Court emphasized that the determination of ownership in an ejectment case is not final and does not affect the ownership of the property. The Court also pointed out that the Santiagos, as the holders of a TCT, had conclusive evidence of ownership, which entitled them to possession of the property once Dizon failed to exercise her option to repurchase within the stipulated period.

Furthermore, the Court highlighted that Dizon had agreed to vacate the property if she did not buy it back within the agreed timeframe. Since she failed to comply with this condition, her possession became illegal, justifying the Santiagos' right to eject her from the property.

Significant Legal Principles Established:

  1. Possession vs. Ownership: In ejectment cases, the primary issue is possession de facto, and ownership is only relevant to determine possession. The court cannot make a final ruling on ownership in such cases.

  2. Effect of TCT: A Transfer Certificate of Title serves as conclusive evidence of ownership, and the holder is entitled to possession of the property.

  3. Conditions of Possession: If a party agrees to vacate a property upon failing to exercise an option to repurchase, their continued possession after the expiration of that option becomes illegal.