MANUEL LAO, petitioner,vs.

COURT OF APPEALS and BETTER HOMES

REALTY & HOUSING CORPORATION, respondents.
Actions;Ejectment;Unlawful Detainer;Jurisdiction;Where neither party objects to the
allegation of the question of ownership in an ejectment suit and, instead, both present
evidence thereon, argue the question in their various submissions and participate in all
aspects of the trial without objecting to the inferior courts jurisdiction to decide the question
of ownership, the Regional Trial Courtin the exercise of its original jurisdiction as
authorized by Section 11, Rule 40 of the Rules of Courtmay rule on the issue.It is clear,
therefore, that although an action for unlawful detainer is inadequate for the ventilation
of issues involving title or ownership of controverted real property, [i]t is more in keeping
with procedural due process that where issues of title or ownership are raised in the
summary proceedings for unlawful detainer, said proceeding should bedismissed for lack
of jurisdiction, unless, in the case of an appeal from the inferior court to the Court of First
Instance, the parties agree to the latter Court hearing the case in its original jurisdiction
in accordance with Section 11, Rule 40 x x x. In the case at bar, a determination of the
issue of ownership is indispensable to resolving the rights of both parties over the property
in controversy, and is inseparable from a determination of who between them has the right
to possess the same. Indeed, the very complaint for unlawful detainer filed in the
Metropolitan Trial Court of Quezon City is anchored on the alleged ownership of private
respondent over the subject premises. The parties did not object to the incongruity of a
question of ownership being brought in an ejectment suit. Instead they both submitted
evidence on such question, and the Metropolitan Trial Court decided on the issue. x x x
When the MTC decision was appealed to the Regional Trial Court, not one of the parties
questioned the Metropolitan Trial Courts jurisdiction to decide the issue of ownership. In
fact, the records show that both petitioner and private respondent discussed the issue in
their respective pleadings before the Regional Trial Court. They participated in all aspects
of the trial without objection to its jurisdiction to decide the issue of ownership.
Consequently, the Regional Trial Court aptly decided the issue based on the exercise of its
original jurisdiction as authorized by Section 11, Rule 40 of the Rules of Court.
Contracts;Sales;Equitable Mortgages;In determining the nature of a contract, the Court
looks at the intent of the parties and not at the nomenclature used to describe it.In
determining the nature of a contract, the Court looks at the intent of the parties and not at
the nomenclature used to describe it. Pivotal to deciding this issue is the true aim and
purpose of the contracting parties as shown by the terminology used in the covenant, as
well as by their conduct, words, actions and deeds prior to, during and immediately after
executing the agreement. In this regard, parol evidence becomes admissible to prove the
true intent and agreement of the parties which the Court will enforce even if the title of the
property in question has already been registered and a new transfer certificate of title
issued in the name of the transferee.
Same;Same;Same;Pacto de Retro Sales;It is settled that a pacto de retro sale should be
treated as a mortgage where the property sold never left the possession of the vendors.Apply
ing the preceding principles to the factual milieu of this case, we find the agreement
between the private respondent and N. Domingo Realty & Housing Corporation, as
represented by petitioner, manifestly one of equitable mortgage.First, possession of the
property in the controversy remained with Petitioner Manuel Lao who was the beneficial
owner of the property, before, during and after the alleged sale. It is settled that apacto
de retrosale should be treated as a mortgage where the (property) sold never left the
possession of the vendors.Second, the option given to Manuel Lao to purchase the
property in controversy had been extended twice through documents executed by Mr. Tan
Bun Uy, President and Chairman of the Board of Better Homes Realty & Housing
Corporation. The wording of the first extension is a refreshing revelation that indeed the
parties really intended to be bound by a loan with mortgage, not by apacto de retro. It
reads, On June 10, 1988, this option is extended for another sixty days to expired (sic) on
Aug. 11, 1988. The purchase price is increased to P137,000.00. Since Mr. Lao borrow (sic)
P20,000.00 from me. These extensions clearly represent the extension of time to pay the
loan given to Manuel Lao upon his failure to pay said loan on its maturity. Mr. Lao was
even granted an additional loan of P20,000.00 as evidenced by the above-quoted document.
Same;Same;Same;Loans;Necessitous men are not, truly speaking, free men; but to answer
a present emergency, will submit to any terms that the crafty may impose upon them.Unqu
estionably, Manuel Lao and his brother were in such dire need of money that they
mortgaged their townhouse units registered under the name of N. Domingo Realty
Corporation, the family corporation put up by their parents, to Private Respondent Better
Homes Realty & Housing Corporation. In retrospect, it is easy to blame Petitioner Manuel
Lao for not demanding a reformation of the contract to reflect the true intent of the parties.
But this seeming inaction is sufficiently explained by the Lao brothers desperate need for
money, compelling them to sign the document purporting to be a sale after they were told
that the same was just for formality. In fact, this Court, in various cases involving the
same situation, had occasion to state: x x x InJayme, et al. v. Salvador, et al., this Court
upheld a judgment of the Court of First Instance of Iloilo which found the transaction
between the parties to be a loan instead of a sale of real propertynotwithstanding the
terminology used in the document, after taking into account the surrounding circumstances
of the transaction. The Court through Justice Norberto Romualdez stated that while it was
true that plaintiffs were aware of the contents of the contracts, the preponderance of the
evidence showed however that they signed knowing that said contracts did not express
their real intention, and if they did so notwithstanding this,it was due to the urgent
necessity of obtaining funds. Necessitous men are not, truly speaking, free men; but to
answer a present emergency, will submit to any terms that the crafty may impose upon them.

Same;Same;Same;Same;Where the borrowers urgent need for money places the latter at a
disadvantage vis-a-vis the lender who can thus dictate the terms of their contract, the Court,
in case of an ambiguity, deems the contract to be one which involves the lesser transmission
of rights and interest over the property in controversy.Moreover, since the borrowers
urgent need for money places the latter at a disadvantagevis-a-visthe lender who can
thus dictate the terms of their contract, the Court, in case of an ambiguity, deems the
contract to be one which involves the lesser transmission of rights and interest over the
property in controversy.
Actions;Ejectment;Parties;A mere mortgagee has no right to eject the occupants of the
property mortgaged.Based on the previous discussion, there was no sale of the disputed
property. Hence, it still belongs to petitioners family corporation, N. Domingo Realty &
Development Corporation. Private respondent, being a mere mortgagee, has no right to
eject petitioner. Private respondent, as a creditor and mortgagee, x x x cannot appropriate
the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the
contrary is null and void.
Same;Same;Same;Pleadings and Practice;Estoppel;Where the plaintiff impleaded a
party as a defendant in an ejectment suit, he cannot subsequently question the latters
standing as a party.Private respondent in his memorandum also contends that (1)
petitioner is not the real party in interest and (2) the petition should be dismissed for
raising/stating facts not so found by the Court of Appeals. These deserve scant
consideration. Petitioner was impleaded as party defendant in the ejectment suit by
private respondent itself. Thus, private respondent cannot question his standing as a party.
As such party, petitioner should be allowed to raise defenses which negate private
respondents right to the property in question.
The second point is really academic. Thisponenciarelies on the factual narration of the
Court of Appeals and not on the facts supplied by petitioner.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Ray Anthony F. Fajaritofor petitioner.
Teofilo F. Manalofor private respondent.
PANGANIBAN,J.:
As a general rule, the main issue in an ejectment suit is possessionde facto, not
possessionde jure. In the event the issue of ownership is raised in the pleadings,
such issue shall be taken up only for the limited purpose of determining who
between the contending parties has the better right to possession. However, where
neither of the parties objects to the allegation of the question of ownershipwhich
may be initially improvident or improperin an ejectment suit and, instead, both
present evidence thereon, argue the question in their various submissions and
participate in all aspects of the trial without objecting to the Metropolitan (or
Municipal) Trial Courts jurisdiction to decide the question of ownership, the
Regional Trial Courtin the exercise of its original jurisdiction as authorized by
Section 11, Rule 40 of the Rules of Courtmay rule on the issue and the corollary
question of whether the subject deed is one of sale or of equitable mortgage.
These postulates are discussed by the Court as it resolves this petition under Rule
45 seeking a reversal of the December 21, 1993 Decision and April 28, 1994 Resolution of the Court of
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Appeals inCA-G.R. SP No. 92-14293.