IN THE MATTER OF THE PETITION FOR CONSOLIDATION OF OWNERSHIP OF REAL PROPERTY. MARIA V. LINDAYAG, PETITIONER AND APPELLANT, VS. DIOSCORO M. DANA, RESPONDENT AND APPELLEE.

Lindayag versus Dana

The Case

This is the case of Lindayag versus Dana, a petition filed by Maria V. Lindayag against Dioscoro M. Dana to consolidate in herself the ownership of a residential house in Olongapo, Zambales, which she claimed to have acquired through a deed of sale with pacto de retro, that is, a sale with a right to repurchase. The trial court dismissed her petition on the ground that the action was barred by a previous judgment, and the question that reached the Supreme Court was whether that earlier judgment operated as res judicata. The case matters because it teaches when a judgment rendered in a case that began as an unlawful detainer action will nevertheless bind the parties on the question of ownership, and how the rule on conclusiveness of judgment is applied.

Procedural History

The earlier case, an action for unlawful detainer, was first instituted by Lindayag against Dana in the Justice of the Peace Court of Olongapo, Zambales. Dana moved to dismiss on the grounds of lack of jurisdiction and lack of cause of action, contending that the transaction was an equitable mortgage and not a sale with right to repurchase. The Justice of the Peace dismissed the complaint, holding that under Article 1606 of the Civil Code the action was premature because the vendor in an equitable mortgage may still redeem the property. The case was appealed to the Court of First Instance of Zambales, which sustained the dismissal and expressly found that the transaction was an equitable mortgage. No appeal was taken from that decision, so it became final.

Lindayag then filed the present petition in the Court of First Instance of Zambales, seeking to consolidate ownership of the same house. The trial court dismissed the petition upon motion of Dana, on the ground of res judicata arising from the earlier decision. Lindayag appealed, and the Court of Appeals endorsed the appeal to the Supreme Court because it involved purely legal questions.

Facts

Dioscoro M. Dana executed in favor of Maria V. Lindayag a deed of sale with pacto de retro covering a residential house in Olongapo, Zambales. On its face the document purported to be a sale with a right to repurchase, and it provided that the vendor would remain in possession of the house only up to the termination of the period for exercising the right to repurchase.

When Dana did not repurchase the house within the stipulated period, Lindayag brought an action for unlawful detainer before the Justice of the Peace Court of Olongapo, claiming that she had become the absolute owner and that Dana's right to possession had ended. Dana resisted, insisting that the transaction was really a loan secured by a mortgage. The Justice of the Peace dismissed the complaint as premature, and the Court of First Instance affirmed, finding that the transaction was an equitable mortgage. Among the circumstances it relied upon were that the price was unusually inadequate, that the vendor remained in possession, and that Dana had made partial payments on the amount given him. That decision became final.

Lindayag thereafter filed the present petition to consolidate ownership in herself under the deed. The trial court dismissed it on the ground of res judicata, and the matter reached the Supreme Court.

Issues

• Whether or not the final judgment in the earlier case, which began as an action for unlawful detainer, bars the present petition to consolidate ownership by reason of res judicata.
• Whether or not the finding in the earlier case that the deed is an equitable mortgage may be raised again between the same parties.

Applicable Provisions

Section 45 of Rule 39 of the Rules of Court, on what is deemed adjudged in a former judgment, provides:

That only is deemed to have been adjudged in a former judgment which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto.

This provision defines the scope of the bar and supports the holding that the nature of the contract, having been actually decided in the earlier case, cannot be litigated again.

Section 7 of Rule 72 of the Rules of Court, on the limited effect of a judgment in an unlawful detainer case, provides:

The judgment rendered in such action shall not bar an action between the same parties respecting title to the land or building, nor shall it be held conclusive of the facts therein found in a case between the same parties upon a different cause of action involving possession.

The Court considered this provision but found it inapplicable, because the earlier case was in truth an action involving ownership and was decided as such by the Court of First Instance.

Ruling

On the first issue, the Court held that the petition is barred. Although the earlier case carried the title of unlawful detainer, an examination of the complaint showed that Lindayag sought a ruling that she had become the absolute owner of the property because the vendor had failed to repurchase within the period. The action was therefore clearly one involving ownership, over which the Justice of the Peace had no jurisdiction. When the case reached the Court of First Instance, that court acquired jurisdiction by virtue of its original jurisdiction, and it tried and decided the case as an action to determine the nature of the contract. Since the court had passed upon the question of ownership, that point could not be raised again between the same parties.

On the second issue, the Court held that the finding that the deed is an equitable mortgage is conclusive between the parties. The nature of the same contract was again the very issue in the present case, and it could not be relitigated. The Court applied the rule that only that which appears on the face of the former judgment to have been adjudged, or which was actually and necessarily included therein, is deemed adjudged. Here the character of the contract was actually and necessarily decided, so the present petition, which rested on the contrary premise that the deed was a sale with a right to repurchase, could not prosper.

Doctrine

A bar candidate should retain these rules. First, the label given to an action does not control its true nature; the court looks to the allegations of the complaint. If the complaint seeks a declaration of ownership, the action involves ownership, and the Justice of the Peace has no jurisdiction over it. Second, when such a case reaches the Court of First Instance and is decided there as an action to determine the nature of the contract, the judgment is binding on the parties on that question. Third, under Section 45 of Rule 39, a matter actually and necessarily adjudged in a former final judgment may not be relitigated between the same parties, and this is the rule of conclusiveness of judgment. Fourth, the limitation in Section 7 of Rule 72, that a judgment in an unlawful detainer case does not bar an action respecting title, applies only where the case is genuinely one of unlawful detainer; it does not shield a party who in truth litigated ownership.

Disposition

The Supreme Court affirmed the order of dismissal, with costs against the petitioner and appellant, Maria V. Lindayag. Dana prevailed.

Remember This

The single line worth memorizing is that a judgment that actually and necessarily adjudged the nature of a contract binds the parties in a later case between them, whatever label the earlier action bore. Examiners use this case to test res judicata and conclusiveness of judgment, and to test whether a student knows that the jurisdictional limitation on unlawful detainer judgments does not apply when the case was really one of ownership.