G.R. No. 158227. October 19, 2005.

KEPPEL BANK PHILIPPINES, INC., petitioner, vs. PHILIP ADAO, respondent.

Ejectment; Forcible Entry; Unlawful Detainer; The Supreme Court consistently held that the only issue
for resolution in an ejectment case is physical or material possession on the property involved,
independent of any claim of ownership by any of the party litigants. However, the question of
ownership may be provisionally ruled upon for the sole purpose of determining who is entitled to
possession de facto.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. 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

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* FIRST DIVISION.

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appropriate proceedings. 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.

Banks and Banking; Torrens System; Persons dealing with registered property can rely solely on the
certificate of title and need not go beyond it. However, 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.It is true that persons dealing with
registered property can rely solely on the certificate of title and need not go beyond it. 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. 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.

Civil Law; Contracts; Sales; Contract to Sell; Unlike in a contract of sale, in a contract to sell, there is yet
no actual sale nor any transfer of title, until and unless, full payment is made.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. 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.

Ejectment; Forcible Entry; Unlawful Detainer; Even though ejectment cases are governed by the Rules
on Summary Procedure, there is still need to present substantial evidence to support respondents claim
of full payment.Even though ejectment cases are

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Keppel Bank Philippines, Inc. vs. Adao

governed by the Rules on Summary Procedure, there is still need to present substantial evidence to
support respondents claim of full payment. Section 9 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.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Divine Grace Fetalvero-Dagoy for Keppel Bank Philippines, Inc.

Pedro Delgado Diwa for respondent.

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

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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 pp. 50-55.

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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 (P200,000,000) 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 petitioners 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,

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3 Id., at pp. 56-58.

4 Id., at pp. 168-173.

5 Id., at pp. 66-67.

6 Id., at p. 83.

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Keppel Bank Philippines, Inc. vs. Adao

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:

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7 Id., at pp. 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.

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Keppel Bank Philippines, Inc. vs. Adao

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 respondents 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 RTCs 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.

iii.b The RTCs 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 petitioners recourse must be against PMRDC and/or its
President, Mario P. Villamor.

v. it affirmed the RTCs position that it was not duty-bound to rule on the issue of ownership to settle
the issue of posses-

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9 Rollo, p. 14.

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Keppel Bank Philippines, Inc. vs. Adao

sion and relied heavily on the alleged Contract to Sell as the basis of respondents 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

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10 Id., at pp. 23-24.

11 Id., at pp. 174-176.

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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.

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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, 461 SCRA 533, 543.

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, 459 SCRA 412, 432.

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Keppel Bank Philippines, Inc. vs. Adao

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 respondents 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

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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.

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Keppel Bank Philippines, Inc. vs. Adao

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 owners 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.

Davide, Jr. (C.J., Chairman), Ynares-Santiago and Carpio, JJ., concur.

Azcuna, J., I take no part. I was a director of Keppel Bank.

Petition granted, judgment reversed and set aside.

Notes.The issue in an ejectment case is the right to physical possession of the premises or possession
de facto. (Del Rosario vs. Court of Appeals, 241 SCRA 519 [1995])
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19 See Mayon Hotel and Restaurant v. Adana, G.R. No. 157634, 16 May 2005, 458 SCRA 609, 641-642.

20 Supra, note 14 at pp. 235-236.

21 Supra, note 12.

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

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Basmayor vs. Atencio

While it is true that a person dealing with registered lands need not go beyond the certificate of title, it
is likewise a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should
put a reasonable man on his guard. (Adriano vs. Pangilinan, 373 SCRA 544 [2002])

o0o Keppel Bank Philippines, Inc. vs. Adao, 473 SCRA 372, G.R. No. 158227 October 19, 2005