PAZ MERCADO, CAROLINA S. CHICO, LUCIANA CABRERA, JOAQUINIGNACIO, ELMER FLORES, AVELINA C. NUCOM, ET AL., PETITIONERS, VS. HON. COURT OF APPEALS, HON. BENIGNO PUNO, LOLITA C. BUL…

Mercado versus Court of Appeals

The Case

This is the case of Mercado versus Court of Appeals, decided by the Supreme Court in June 1988. The petitioners, the Mercado Group, were sublessees of market stalls in Baliuag, Bulacan, who lost a summary judgment in the trial court and then failed to appeal it on time. They went to the Court of Appeals on certiorari, and when that failed, they came to the Supreme Court insisting that the judgment was void for having applied the wrong provision of the Civil Code and for having awarded damages without a hearing. The case matters because it draws the line every bar candidate must know: an error in the exercise of jurisdiction is corrected by appeal, not by certiorari, and once a judgment becomes final, even an erroneous one binds.

Procedural History

The Bulaong Group filed several individual complaints in the Court of First Instance of Bulacan against the Mercado Group and the Municipality of Baliuag, seeking recovery of their stalls and damages. After pre-trial, the Mercado Group moved for summary judgment. The trial court granted the motion and rendered a summary judgment in all the cases. The Mercado Group and the Municipality moved for reconsideration, which was denied. The Mercado Group then filed a notice of appeal, an appeal bond, and a motion for extension of time to file their record on appeal, but the trial court disallowed the appeal, ruling that the judgment had become final because the appeal papers were not seasonably filed, and ordered execution.

The Mercado Group then filed a special civil action of certiorari and prohibition in the Court of Appeals, seeking to annul the award of damages and to restrain enforcement of the judgment. The Court of Appeals upheld the trial court: the summary judgment was properly rendered, any error in appreciating the affidavits was an error of judgment and not of jurisdiction, there was no denial of due process, and certiorari could not substitute for the lost appeal. Reconsideration was denied. The Mercado Group then came to the Supreme Court on a timely appeal by certiorari.

Facts

The members of the Bulaong Group had been individual lessees of stalls in the public market of Baliuag, Bulacan, from 1956 to 1972. The market was destroyed by fire in February 1956. The members of the Bulaong Group constructed new stalls at their own expense and thereafter paid rentals to the Municipality of Baliuag.

Sometime in 1972, the Bulaong Group subleased their individual stalls to the Mercado Group. After the Mercado Group had been in possession for some months, the municipal officials cancelled the long standing leases of the Bulaong Group and declared the Mercado Group the rightful lessees in substitution. The municipality justified this by invoking a municipal ordinance prohibiting subleasing, and a directive from the Office of the President requiring its enforcement. A later municipal ordinance confirmed the Mercado Group's rights.

The Bulaong Group sued to recover their stalls and damages, anchored on their claimed ownership of the stalls they had built. At pre-trial, the parties stipulated upon practically all the facts. The Mercado Group moved for summary judgment. The Bulaong Group opposed, identifying only the claim for actual damages as needing proof, and filed affidavits and photographs on the value of their improvements, to which the Mercado Group interposed no objection and never asked for a hearing on damages. The trial court rendered summary judgment, declaring the Bulaong Group builders in good faith entitled to retain the stalls until indemnified, but also holding both groups in part delicto for knowingly violating the ordinance. It annulled the Mercado Group's leases and fixed the value of the stalls, with payment to follow should the municipality insist on ousting the Bulaong Group.

Issues

• Whether or not certiorari may be availed of to reverse a judgment of the trial court that had already become final for failure to appeal within the reglementary period.
• Whether or not the trial court acted without or in excess of jurisdiction, or denied due process, in awarding damages on the basis of affidavits without receiving evidence at a formal hearing.
• Whether or not the trial court's application of the wrong provision of the Civil Code, treating the Bulaong Group as builders in good faith instead of as lessees, rendered the judgment void.

Applicable Provisions

Section 1 of Rule 65 of the Rules of Court provides:

When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

This is the extraordinary remedy the Mercado Group invoked, and its own terms require that there be no appeal, which is precisely what defeated them.

Section 3 of Rule 41 of the Rules of Court, as the Court applied it, provides that from the thirty-day reglementary period of appeal shall be deducted the time during which a motion to set aside the judgment or order or for a new trial has been pending. This governs the computation that showed the Mercado Group's appeal was one day late.

Article 526 of the Civil Code provides:

He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.

The trial court invoked this article in favor of the Bulaong Group, and the Supreme Court held this was error, because lessees of market space cannot claim to be builders in good faith.

Article 1678 of the Civil Code provides:

If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby.

This is the provision that should have governed the Bulaong Group as lessees, rather than the rule on builders in good faith.

Ruling

On the first issue, the Court held that certiorari was not available. The Mercado Group failed to perfect its appeal within the reglementary period. The Court adopted the Court of Appeals' computation: the judgment was received on November 3, 1975; the motion for reconsideration was filed eleven days later; the denial was received on December 18, 1975; and the notice of appeal, bond, and motion for extension were filed only on January 7, 1976, twenty days later, one day beyond the thirty-day period. The Court held that the availability of the right of appeal precludes certiorari, and certiorari cannot substitute for an appeal lost through the party's own fault or inexcusable negligence.

On the second issue, the Court held there was no denial of due process and no lack of jurisdiction. Jurisdiction, once acquired, is not lost by any error in its exercise. The Mercado Group itself had moved for summary judgment and knew the rule that such a motion is granted if the pleadings, depositions, admissions, and affidavits show that, except as to the amount of damages, there is no genuine issue as to any material fact. They never asked for a hearing on damages and submitted no counter-affidavits. The Court clarified the rule: only the ascertainment of the character of the issues may be done by affidavits; genuine issues must be resolved on evidence at a formal hearing. But the peculiar circumstances here, where the petitioners stayed silent, made the case an exception, affirming rather than eroding the rule.

On the third issue, the Court agreed that the trial court erred in treating the Bulaong Group as builders in good faith under Article 526, since they were admittedly lessees and could not assert title to the land. But this error did not go to jurisdiction. It was an error in the exercise of jurisdiction, correctable by appeal, not certiorari. The Court held that a judgment contrary to the express provisions of a statute is erroneous, but it is not void; and if it becomes final and executory, it becomes as binding and effective as any valid judgment.

Doctrine

First, jurisdiction once acquired is not lost by any error in its exercise; an error of judgment is reviewable only by appeal, not by certiorari or prohibition.

Second, certiorari under Section 1 of Rule 65 lies only when there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law; it cannot substitute for an appeal lost through the party's fault or inexcusable negligence.

Third, a judgment contrary to the express provisions of a statute is erroneous but not void; once final and executory, it binds and is enforced according to its terms.

Fourth, only the ascertainment of the character of the issues may be done through affidavits; genuine issues must be resolved upon proof at a formal hearing, subject only to exceptional circumstances.

Disposition

The Supreme Court dismissed the petition and affirmed the judgment of the Court of Appeals in full, with costs against the petitioners.

Remember This

Memorize the line: an error in the exercise of jurisdiction is cured by appeal, not certiorari, and a final judgment, though erroneous, binds. Examiners use this case to test the requisites of certiorari, the finality of judgments, and the distinction between errors of jurisdiction and errors of judgment.