The Supreme Court ruled that for an unlawful detainer case to prosper, a prior demand to both comply with the contract’s terms and to vacate the premises is essential and jurisdictional. This means that if a vendor in a Contract to Sell wants to eject a vendee for failing to pay installments or violating the contract, they must first formally demand compliance and demand that the vendee leave the property. Without this dual demand, the lower courts lack the authority to hear the eviction case.

Contract to Sell Gone Sour: When Does Possession Become Unlawful?

This case revolves around a Contract to Sell a piece of riceland between Baby Arlene Laraño (petitioner) and Spouses Alfredo and Rafaela Calendacion (respondents). The spouses failed to pay the agreed installments, leading Laraño to file an unlawful detainer case to reclaim the land. The central legal question is whether the Municipal Trial Court (MTC) had jurisdiction to hear the case, considering the specific requirements for an unlawful detainer action in the context of a Contract to Sell.

The core of the matter rests on the nature of an **unlawful detainer** case. The Supreme Court emphasized that jurisdiction in ejectment cases is determined by the allegations in the complaint itself, as stated in *Habagat Grill v. DMC-Urban Property Developer, Inc.*, G.R. No. 155110, March 31, 2005:

Settled is the rule that jurisdiction in ejectment cases is determined by the allegations pleaded in the complaint. It cannot be made to depend upon the defenses set up in the answer or pleadings filed by the defendant. Neither can it be made to depend on the exclusive characterization of the case by one of the parties. The test for determining the sufficiency of those allegations is whether, admitting the facts alleged, the court can render a valid judgment in accordance with the prayer of the plaintiff.

This principle ensures that the court’s authority is based on the plaintiff’s cause of action as presented in the complaint, not on the defendant’s counter-arguments or the parties’ subjective interpretations.

The requisites for a valid unlawful detainer action are outlined in Section 1, Rule 70 of the Revised Rules of Court:

Section 1. Who may institute proceedings, and when. – Subject to the provisions of the next succeeding section, a person deprived of the possession of any land or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against whom the possession of any land or building is unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract, express or implied, or the legal representatives or assigns of any such lessor, vendor, vendee or other person may, at any time within one (1) year after such unlawful deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession, or any person or persons claiming under them, for the restitution of such possession, together with damages and costs.

The Supreme Court clarified that in cases involving a Contract to Sell, the vendor must fulfill specific requirements before filing an ejectment suit. First, there must be a failure to pay the installment due or comply with the conditions of the Contract to Sell. Second, there must be a demand both to pay or to comply and to vacate within the periods specified in Section 2 of Rule 70, which is 15 days for land and 5 days for buildings. This dual demand is not merely a procedural formality but a **jurisdictional requirement**.

The Court emphasized the necessity of both demands – to comply with the contract and to vacate. These demands are crucial to establishing that the vendee is unlawfully withholding possession, as stated in *Arquelada v. Philippine Veterans Bank, 385 Phil. 1200, 1212 (2000)*:

Both demands – to pay installment due or adhere to the terms of the Contract to Sell and to vacate are necessary to make the vendee deforciant in order that an ejectment suit may be filed. It is the vendor’s demand for the vendee to vacate the premises and the vendee’s refusal to do so which makes unlawful the withholding of the possession. Such refusal violates the vendor’s right of possession giving rise to an action for unlawful detainer.

In this case, the Supreme Court found that Laraño’s complaint was deficient. While the complaint alleged a violation of the Contract to Sell due to the spouses’ failure to pay installments, it did not sufficiently state that Laraño made a proper demand for the spouses to comply with the payment terms *and* to vacate the property. The single demand to vacate within 10 days was deemed insufficient, as it did not meet the 15-day requirement for land under Section 2 of Rule 70.

The absence of a proper demand is not a minor oversight; it directly impacts the court’s jurisdiction. As the Supreme Court noted, without fulfilling the jurisdictional requirements of a valid cause for unlawful detainer, the MTC lacks the authority to hear the case. Furthermore, the Court pointed out that resolving the core issue – the violation of the Contract to Sell – falls outside the MTC’s jurisdiction.

The Supreme Court made a crucial distinction regarding the resolution of contractual disputes. The MTC’s jurisdiction is limited to possession, and it cannot declare a contract rescinded. The power to rescind a contract resides with the Regional Trial Court (RTC), as stated in *Villena v. Spouses Chavez, 460 Phil. 818, 827 (2003)*:

An allegation of a violation of a contract or agreement in a detainer suit may be proved by the presentation of competent evidence, upon which an MTC judge might make a finding to that effect, but certainly, that court cannot declare and hold that the contract is rescinded. The rescission of contract is a power vested in the RTC.

The Court emphasized that a contract’s rescission is a condition precedent for determining the legality of a party’s possession. Without a judicial determination of rescission, even a contractual stipulation allowing one party to take possession upon a violation cannot be enforced against an objecting party.

Therefore, the Supreme Court concluded that the central issue in Laraño’s complaint was not merely possession but the interpretation, enforcement, and potential rescission of the Contract to Sell. This put the case beyond the jurisdiction of the MTC.

FAQs

What was the key issue in this case?	The central issue was whether the Municipal Trial Court (MTC) had jurisdiction over an unlawful detainer case stemming from a Contract to Sell, where the vendor sought to evict the vendee for failing to pay installments. The Supreme Court focused on the necessity of a proper demand to both comply with the contract and to vacate the premises as a jurisdictional requirement.
What is unlawful detainer?	Unlawful detainer is a legal action to recover possession of property from someone who initially had the right to possess it but whose right has expired or been terminated. The action is typically brought by a lessor against a lessee or a vendor against a vendee.
What is a Contract to Sell?	A Contract to Sell is an agreement where the ownership of property is retained by the seller until the buyer has fully paid the purchase price. Only upon full payment does the seller have the obligation to transfer ownership to the buyer.
What are the requirements for a valid unlawful detainer action in a Contract to Sell?	In a Contract to Sell, the vendor must show (1) a failure by the vendee to pay installments or comply with contract conditions, and (2) a demand to both pay or comply *and* to vacate the property within the periods specified in Section 2 of Rule 70 (15 days for land, 5 days for buildings).
Why is a demand to vacate important in an unlawful detainer case?	The demand to vacate is crucial because it is the vendee’s refusal to leave after such demand that makes their possession unlawful. This refusal violates the vendor’s right of possession and gives rise to the unlawful detainer action.
What happens if the demand is not properly made?	If the demand to pay/comply and vacate is not properly made, the MTC does not acquire jurisdiction over the case. This means the court lacks the authority to hear and decide the eviction case.
Can the MTC resolve issues of contract rescission in an unlawful detainer case?	No, the MTC does not have the power to declare a contract rescinded. The power to rescind a contract is vested in the Regional Trial Court (RTC).
What court has jurisdiction over contract rescission?	The Regional Trial Court (RTC) has the authority to hear and decide cases involving the rescission or cancellation of contracts.

This case serves as a crucial reminder of the specific procedural requirements for filing an unlawful detainer action, particularly in cases involving Contracts to Sell. The Supreme Court’s emphasis on the dual demand – to comply with the contract and to vacate – underscores the importance of adhering to legal formalities to ensure the proper exercise of jurisdiction by the courts.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Baby Arlene Larano v. Sps. Alfredo and Rafaela Calendacion, G.R. No. 158231, June 19, 2007