RUPERTO DE GUZMAN, PETITIONER, VS. THE HONORABLE COURT OF APPEALS (SPECIAL FIFTEENTH DIVISION) AND DR. FORTUNATO V. CORREA, RESPONDENTS.

De Guzman versus Court of Appeals

The Case

This is a petition for review on certiorari brought by Ruperto de Guzman against the Court of Appeals and Dr. Fortunato Correa. At bottom it is an ejectment dispute over a rice mill and warehouse in Angat, Bulacan. The petitioner was the tenant; the private respondent claimed to be the owner. The case matters for two reasons. First, it teaches when a prior dismissal for lack of a jurisdictional requisite bars a second ejectment suit, and when it does not. Second, it fixes the measure of damages recoverable in an ejectment suit, which is a favorite bar question.

Procedural History

The private respondent filed the first ejectment case before the Municipal Trial Court of Angat, Bulacan. That court decided in his favor, and its decision became final and executory. The petitioner then went to the Court of First Instance of Bulacan, now the Regional Trial Court, filing a petition for relief from judgment with a prayer for injunction. On the hearing date he filed a separate petition for certiorari, prohibition and mandamus with restraining order, injunction and damages, docketed as Special Civil Action SM-960. The trial court granted that petition, declared the proceedings in the first ejectment case null and void, and dismissed that case for lack of the requisite demand.

The private respondent then filed a second ejectment case before the same Municipal Trial Court. That court ordered the petitioner to vacate and to pay rentals, damages and attorney's fees. The petitioner appealed to the Regional Trial Court, Branch 16, Malolos, Bulacan, which affirmed the Municipal Trial Court. He then went to the Court of Appeals on a petition for certiorari, prohibition and mandamus, which the appellate court dismissed for lack of merit. His motion for reconsideration was denied. He then came to the Supreme Court by petition for review on certiorari.

Facts

The petitioner was the tenant of the late Teodora Villarama, mother of the private respondent, over a rice mill and a warehouse in Angat, Bulacan. The written lease expired on April 29, 1975. After that, the private respondent allegedly took over management of the premises and orally agreed with the petitioner that the lease would be on a month to month basis. The petitioner continued to occupy the premises but failed to pay the monthly rentals for May and June 1977. The private respondent then notified him that he was terminating the agreement and demanded the return of the premises.

Because the petitioner did not comply, the private respondent filed the first ejectment case. The Municipal Trial Court decided in his favor, and the decision became final and executory. The petitioner then filed the petition for relief and, later, the petition in Special Civil Action SM-960. The trial court declared the first ejectment proceedings null and void and dismissed that case for lack of the requisite demand.

The private respondent then filed the second ejectment case. The Municipal Trial Court ordered the petitioner to vacate, to pay a monthly rental of 175 pesos from May 1977 until he vacates, with 14 percent interest per annum, plus 10,000 pesos as moral damages, 5,000 pesos as exemplary damages, 5,000 pesos as attorney's fees, and costs. The Regional Trial Court affirmed, the Court of Appeals dismissed the petition, and the petitioner elevated the matter to the Supreme Court.

Issues

• Whether or not the dismissal of the first ejectment case in Special Civil Action SM-960 bars the second ejectment case by reason of litis pendencia or res judicata.
• Whether or not the private respondent had a cause of action against the petitioner over premises covered by a written lease with his deceased mother.
• Whether or not the Regional Trial Court had jurisdiction to decide the petitioner's appeal despite the absence of an approved order of consolidation with SM-960.
• Whether or not the award of moral and exemplary damages in an ejectment suit is proper.

Applicable Provisions

Section 2 of Rule 70 of the Rules of Court, as it stood, provides:

When the lessee or the person holding under him fails to pay the rent due, the lessor may demand the former to pay the rent or to vacate the premises, and upon refusal, the lessor may bring an action for ejectment.

This is the jurisdictional requisite of demand whose absence caused the dismissal of the first ejectment case, and it is the reason that dismissal was not an adjudication on the merits.

Article 2208 of the Civil Code provides:

In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.

This is the basis for sustaining the award of attorney's fees in favor of the private respondent.

Ruling

On the first issue, the Court held that the dismissal in SM-960 cannot be pleaded as a bar to the second ejectment case, because the dismissal was due only to non-compliance with the jurisdictional requisite of demand. The first court never acquired jurisdiction, so its judgment could not operate as an adjudication on the merits. The disposition of the deposited rentals in SM-960 was a personal undertaking of the petitioner, distinct and separable from the issue in that case, and SM-960 was already terminated. Neither litis pendencia nor res judicata could be pleaded.

On the second issue, the Court held that the private respondent had a cause of action. He held absolute title over the premises by virtue of a transfer certificate of title issued to him in February 1973. The essential elements of a cause of action were present: his right to demand rent, the petitioner's correlative obligation to pay, and the petitioner's refusal to pay and vacate in violation of that right. The Court rejected the petitioner's claim of good faith as an officious manager, since it would produce the absurd situation of the petitioner occupying the premises while being paid for it.

On the third issue, the Court held that the lack of an approved order of consolidation did not affect the jurisdiction of the Regional Trial Court to decide the appeal. The appeal and SM-960 were distinct and separate in nature and purpose: the appeal reviewed the second ejectment decision on the merits, while SM-960 corrected the jurisdictional error in the first case.

On the fourth issue, the Court held that the award of moral and exemplary damages was erroneous. The only damages recoverable in an ejectment suit are the fair rental value or reasonable compensation for the use and occupation of the real property. The award of attorney's fees, however, was sustained under Article 2208, since the private respondent was compelled to incur expenses to protect his interest.

Doctrine

A dismissal of an ejectment case for lack of the requisite demand under Section 2 of Rule 70 is not an adjudication on the merits, because the court never acquired jurisdiction; it therefore cannot bar a subsequent ejectment suit. Litis pendencia requires that the first court have jurisdiction over the subject matter. In an ejectment suit, the only damages recoverable are the fair rental value or reasonable compensation for the use and occupation of the property; moral and exemplary damages are not proper. Attorney's fees may be awarded under Article 2208 of the Civil Code where the defendant's act or omission compelled the plaintiff to incur expenses to protect his interest.

Disposition

The petition was denied and the decision of the Court of Appeals was affirmed, with the modification that the award of moral and exemplary damages was deleted, with costs against the petitioner.

Remember This

Memorize this line: in ejectment, the only damages recoverable are the fair rental value or reasonable compensation for use and occupation. Examiners use this case to test the damages rule in ejectment and the effect of a dismissal for lack of demand on a later suit.