G.R. No. 158227 October 19, 2005
KEPPEL BANK PHILIPPINES, INC., Petitioner, vs. PHILIP ADAO, Respondent.

FACTS

Petitioner Keppel Bank acquired a condominium unit via a court-approved dacion en pago from Project Movers Realty and Development Corporation (PMRDC) to settle a debt. Upon securing the title, Keppel found respondent Philip Adao occupying the unit. Keppel demanded that Adao vacate, but he refused, claiming rights under a prior unregistered Contract to Sell with PMRDC dated 1995. Adao alleged he had made substantial payments and offered to complete the purchase from Keppel, but no agreement was reached. Keppel subsequently filed an ejectment case.
The Metropolitan Trial Court dismissed the complaint, ruling Adao was a lawful possessor. This was affirmed by the Regional Trial Court and the Court of Appeals. The appellate courts held that Keppel, as PMRDC’s successor-in-interest via dacion en pago, merely stepped into the vendor’s shoes and was bound by the Contract to Sell. They ruled ejectment was improper, and Keppel’s remedy was an action for rescission of that contract, not a summary action for possession.

ISSUE

The core issues are: (1) Is an ejectment suit the proper remedy for Keppel Bank? (2) Who is entitled to physical possession of the property?

RULING

Yes, ejectment is the proper remedy. The Supreme Court reversed the lower courts. In an ejectment case, the sole issue is physical or material possession (possession de facto), independent of claims of ownership. The plaintiff must prove prior physical possession and that such possession was unlawfully withheld after a demand to vacate. Keppel, as the registered owner by virtue of the dacion en pago and the corresponding Condominium Certificate of Title, has a clear right to possess the property. Its predecessor, PMRDC, retained ownership under the Contract to Sell until full payment, which was not proven by Adao. Therefore, PMRDC’s (and subsequently Keppel’s) prior possession is presumed.
The Court clarified that Keppel’s action is not based on the Contract to Sell but on its better right of possession as the titled owner. Adao’s claim under the unregistered contract does not override Keppel’s right to institute an ejectment suit. The existence of the contract and any claims for its enforcement or rescission are separate matters that do not preclude a summary action for possession. Consequently, Keppel’s demand to vacate terminated any tolerance of Adao’s possession, making his continued stay unlawful. The judgment in this ejectment case is without prejudice to any action involving title to the property.