8/9/2020 G.R. No.

158227

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Republic of the Philippines

SUPREME COURT

FIRST DIVISION

G.R. No. 158227 October 19, 2005

KEPPEL BANK PHILIPPINES, INC., Petitioner,

vs.
PHILIP ADAO, Respondent.

DECISION

QUISUMBING, J.:

On appeal is the Decision1 dated April 30, 2003 of the Court of Appeals in CA G.R. SP No. 71477. The Court of
Appeals affirmed the Decision of the Regional Trial Court which had earlier sustained the Decision of the
Metropolitan Trial Court, dismissing the ejectment case against respondent Philip Adao.

The case stemmed from the court-approved Compromise Agreement between petitioner Keppel Bank and Project
Movers Realty and Development Corporation (PMRDC).2 By virtue of the agreement, PMRDC through its President
Mario P. Villamor assigned, transferred and conveyed to petitioner, by way of dacion en pago,3 twenty-five
properties consisting of townhouses, condominium units and vacant lots, as partial settlement of their two hundred
million pesos (₱200,000,000) outstanding obligation. Pursuant thereto, petitioner secured Condominium Certificates
of Title over the units.

Upon inspection, petitioner found respondent Philip Adao occupying Unit 4 of the Luxor Villas Townhouse, one of
the 25 properties above-mentioned. On February 18, 2000, petitioner sent a written demand to respondent to vacate
the unit within 30 days from receipt of the notice. Respondent refused and, instead, offered to purchase the unit.
However, the parties failed to reach an agreement on the matter.

On October 19, 2000, petitioner sent respondent a final demand to vacate. Since the demand was not heeded,
petitioner filed a civil case for ejectment docketed as Civil Case No. 8911 against respondent.

In his defense, respondent alleged that he has long been occupying the contested unit by virtue of a Contract to
Sell4 dated February 7, 1995 between him and PMRDC. He stated that to avoid litigation, he offered to purchase the
unit for 2.5 million pesos, in addition to the 3 million pesos he already paid to PMRDC. He added that had his pre-
agreed marketing services with PMRDC been duly audited to his credit, the unit would have already been fully paid.
Respondent contended that petitioner’s remedy is to demand from PMRDC the immediate replacement of the
property as provided in their Compromise Agreement and Dacion en Pago.5

On August 6, 2001, the MeTC dismissed the complaint and held Adao as the lawful possessor of the property.
Petitioner appealed to the Regional Trial Court, which, on March 4, 2002, affirmed in toto the MeTC decision.6 The
RTC held that, by virtue of the dacion en pago, petitioner merely stepped into the shoes of PMRDC. Hence,
petitioner must respect the contract to sell between PMRDC and respondent. It also held that petitioner failed to
show non-payment by respondent, and that in case of non-payment, the remedy of the vendor is either rescission
with recovery of possession or specific performance based on breach of contract, but not ejectment.7 Petitioner
moved for reconsideration but it was denied on June 5, 2002.

Petitioner elevated the case to the Court of Appeals. The appellate court held that petitioner must respect the
contract to sell though such is not annotated in the certificate of title because petitioner was not a purchaser in good
faith, having failed to exercise due diligence required of banks. As an unpaid seller, petitioner can only rescind the
contract under Article 15268 of the Civil Code which does not sanction the filing of an action for ejectment. The
Court of Appeals affirmed the RTC decision and, subsequently, denied reconsideration. It decreed as follows:

WHEREFORE, premises considered, the instant petition is DENIED. The assailed March 4, 2002 decision of the
RTC is hereby AFFIRMED.

SO ORDERED.9

Petitioner now comes before us and alleges that the Court of Appeals seriously erred when:

i. … it ruled that the petitioner Bank must respect the terms and conditions of the Contract to Sell allegedly executed
on 07 February 1995 despite the fact that petitioner had no knowledge thereof and that said Contract to Sell was not
annotated on CCT No. 9522-R prior to the execution of the court-approved Compromise Agreement and Dacion en
Pago between the petitioner and PMRDC.

ii. … it affirmed the finding of the RTC that respondent had fully paid the purchase price under the Contract to Sell
on the basis of respondent’s unsubstantiated and general allegation in his Answer with Compulsory Counterclaim
and when it shifted the burden of proof upon petitioner to prove that respondent had not fully paid the alleged
purchase price. Such ruling contravenes the well-settled legal rule that "he who alleges must prove the same."

iii. … it affirmed the ruling of the RTC that the complaint for ejectment filed by petitioner is not the proper remedy.

iii.a The RTC’s suggested remedy, as affirmed by the Court of Appeals, of filing an action for "rescission with
recovery of possession based on breach of contract" wrongfully presumes that the alleged Contract to Sell is
binding on the petitioner.
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iii.b The RTC’s suggested remedy, as affirmed by the Court of Appeals, is contrary to law and jurisprudence
because in a contract to sell, ownership is retained by the seller until the buyer has fully paid the purchase price;

iv. … it affirmed the ruling of the RTC that petitioner’s recourse must be against PMRDC and/or its President, Mario
P. Villamor.

v. … it affirmed the RTC’s position that it was not duty-bound to rule on the issue of ownership to settle the issue of
possession and relied heavily on the alleged Contract to Sell as the basis of respondent’s right to possess the
Subject Property.10

In sum, the issues for our resolution are: (1) Is petitioner bound by the contract to sell? (2) Is the remedy of
ejectment legally available to the petitioner? and (3) Who is entitled to physical possession of the property?

Petitioner contends he is not bound by the contract to sell as it was not annotated in the certificate of title. It
maintains that the contract to sell specifically provides that title shall be transferred to the respondent only after full
payment of the purchase price. Not having fully paid the price, respondent is not the owner. Petitioner adds that
respondent has the burden of proving payment since under the rules on evidence, a party must prove his own
affirmative allegation. Petitioner also maintains that PMRDC merely tolerated the possession by the respondent but
such possession became illegal when, as the new owner, it demanded that respondent immediately vacate the
property.

Respondent counters that an ejectment suit is merely concerned with possession de facto and the issue of
ownership need not be resolved. He claims to have a better right of possession having fully paid the purchase price.
Further, respondent asserts that petitioner, being a successor-in-interest of PMRDC, is bound by the Contract to
Sell. Finally, respondent avers that ejectment cases are governed by the Rules on Summary Procedure which relies
merely on affidavits and position papers submitted. Hence, his Affidavit11 dated June 25, 2001 was sufficient to
prove full payment.

Prefatorily, this case started with a complaint for ejectment filed with the MeTC. In previous cases, this Court
consistently held that the only issue for resolution in an ejectment case is physical or material possession of the
property involved, independent of any claim of ownership by any of the party litigants.12 Ejectment cases are
designed to summarily restore physical possession to one who has been illegally deprived of such possession,
without prejudice to the settlement of the parties’ opposing claims of juridical possession in appropriate
proceedings.13 We also said that the question of ownership may be provisionally ruled upon for the sole purpose of
determining who is entitled to possession de facto.14

Respondent bases his right of possession on the Contract to Sell. On the other hand, petitioner argues it is not
bound by the said contract since the same is not annotated in the Certificate of Title.

It is true that persons dealing with registered property can rely solely on the certificate of title and need not go
beyond it.15 However, as correctly held by the Court of Appeals, this rule does not apply to banks. Banks are
required to exercise more care and prudence than private individuals in dealing even with registered properties for
their business is affected with public interest.16 As master of its business, petitioner should have sent its
representatives to check the assigned properties before signing the compromise agreement and it would have
discovered that respondent was already occupying one of the condominium units and that a contract to sell existed
between respondent and PMRDC. In our view, petitioner was not a purchaser in good faith and we are constrained
to rule that petitioner is bound by the contract to sell.

Nonetheless, in this case, the contract to sell does not by itself give respondent the right to possess the property.
Unlike in a contract of sale, here in a contract to sell, there is yet no actual sale nor any transfer of title, until and
unless, full payment is made. The payment of the purchase price is a positive suspensive condition, the failure of
which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from
acquiring an obligatory force.17 Respondent must have fully paid the price to acquire title over the property and the
right to retain possession thereof. In cases of non-payment, the unpaid seller can avail of the remedy of ejectment
since he retains ownership of the property.

Respondent avers that since ejectment cases are decided merely on the basis of affidavits and position papers, his
affidavit before the MeTC sufficiently proves his full payment of the purchase price. Nothing could be more
erroneous because even though ejectment cases are governed by the Rules on Summary Procedure, there is still
need to present substantial evidence to support respondent’s claim of full payment. Section 918 of the Rules on
Summary Procedure provides that parties shall submit, together with their position papers, the affidavits of their
witnesses and other evidence on the factual issues defined. His lone affidavit is self-serving, and cannot be
considered as substantial evidence. As a general rule, one who pleads payment has the burden of proving it. Even
where the petitioner alleged non-payment, the general rule is that the burden rests on the respondent to prove
payment, rather than on the petitioner to prove non-payment.19

Considering that respondent failed to discharge the burden of proving payment, he cannot claim ownership of the
property and his possession thereof was by mere tolerance. His continued possession became unlawful upon the
owner’s demand to vacate the property.20 We stress, however, that this adjudication, is only a provisional
determination of ownership for the purpose of settling the issue of possession,21 and does not bar or prejudice an
action between the same parties involving title to the property.22

WHEREFORE, the petition is GRANTED. The Decision dated April 30, 2003 of the Court of Appeals in CA G.R. SP
No. 71477 is REVERSED and SET ASIDE. Respondent is hereby ordered to vacate the property.

Costs against respondent.

SO ORDERED.

LEONARDO A. QUISUMBING

Associate Justice

WE CONCUR:

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HILARIO G. DAVIDE, JR.

Chief Justice

Chairman

CONSUELO YNARES-SANTIAGO, ANTONIO T. CARPIO

Associate Justice Associate Justice

ADOLFO S. AZCUNA

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s
Division.

HILARIO G. DAVIDE, JR.

Chief Justice

Footnotes

1 Rollo, pp. 7-14. Penned by Associate Justice Elvi John S. Asuncion, with Associate Justices Ruben T.
Reyes, and Lucas P. Bersamin concurring.
2 Id. at 50-55.

3 Id. at 56-58.

4 Id. at 168-173.

5 Id. at 66-67.

6 Id. at 83.

7 Id. at 80-81.

8 Art. 1526. Subject to the provisions of this Title, notwithstanding that the ownership in the goods may have
passed to the buyer, the unpaid seller of goods, as such, has:

(1) A lien on the goods or right to retain them for the price while he is in possession of them;

(2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the
possession of them;

(3) A right of resale as limited by this Title;

(4) A right to rescind the sale as likewise limited by this Title.

Where the ownership of the goods has not passed to the buyer, the unpaid seller has, in addition to his other
remedies, a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in
transitu where the ownership has passed to the buyer.

9 Rollo, p. 14.

10 Id. at 23-24.

11 Id. at 174-176.

12 National Onion Growers Cooperative Marketing Association, Inc. v. Lo, G.R. No. 141493, 28 July 2004,
435 SCRA 358, 362.
13 Barnes v. Quijano Padilla, G.R. No. 160753, 28 June 2005, pp. 10-11.

14 Umpoc v. Mercado, G.R. No. 158166, 21 January 2005, 449 SCRA 220, 238-239.

15 Lim v. Chuatoco, G.R. No. 161861, 11 March 2005, 453 SCRA 308, 322-323.

16 Manlapat v. Court of Appeals, G.R. No. 125585, 8 June 2005, p. 26.

17 Rivera v. Del Rosario, G.R. No. 144934, 15 January 2004, 419 SCRA 626, 638.

18 SEC. 9. Submission of affidavits and position papers. – Within ten (10) days from receipt of the order
mentioned in the next preceding section, the parties shall submit the affidavits of their witnesses and other
evidence on the factual issues defined in the order, together with their position papers setting forth the law
and the facts relied upon by them.
19 See Mayon Hotel and Restaurant v. Adana, G.R. No. 157634, 16 May 2005, pp. 29-30.

20 Supra, note 14 at 235-236.

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21 Supra, note 12.

22 Co v. Militar, G.R. No. 149912, 29 January 2004, 421 SCRA 455, 459.

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