In Samuel Malabanan v. Rural Bank of Cabuyao, Inc., the Supreme Court clarified that an ejectment case, specifically an unlawful detainer suit, can proceed independently of a pending action questioning the ownership of the same property. The Court affirmed that the core issue in ejectment cases is the right to physical possession, not ownership. This means a person can be legally evicted even if they are contesting the validity of the title transfer in a separate lawsuit, as the determination of ownership in the ejectment case is merely provisional. The ruling emphasizes the summary nature of ejectment proceedings, designed to quickly restore possession while ownership disputes are resolved elsewhere. Ultimately, Malabanan was required to vacate the property despite his pending case to annul the dacion en pago (payment in kind) that transferred the title to the bank.

Mortgage Default and Dacion En Pago: Who Has the Right to Possess?

Samuel Malabanan’s case against the Rural Bank of Cabuyao centered on a disputed property in Calamba, Laguna. Malabanan had taken out a loan of P5,000,000.00 from the bank, securing it with a real estate mortgage (REM) on his land. When he failed to repay the loan, he allegedly executed a dacion en pago, transferring the property’s ownership to the bank as payment for the debt. Subsequently, when Malabanan refused to surrender possession of the property, the bank filed an unlawful detainer case against him. Malabanan countered, claiming the dacion en pago was invalid and that he never appeared before the notary public for its execution. Before the ejectment case, Malabanan had already filed an action to annul the dacion en pago and the transfer certificate of title (TCT) in the bank’s name. The key legal question before the Supreme Court was whether the pending annulment case should halt the ejectment proceedings.

The petitioner argued that the unlawful detainer case should be dismissed due to litis pendencia (a pending suit) and forum shopping. He claimed the annulment case before the RTC involved the same issue of possession, with identical evidence. The Supreme Court disagreed, citing established jurisprudence that a judgment in an ejectment case does not bar a separate action concerning title to the land. This is because ejectment suits focus on physical possession, whereas actions like annulment of title address juridical possession, or the right to possess based on ownership. As a result, a provisional determination of ownership in an ejectment case does not have finality.

“It bears emphasizing that in ejectment suits, the only issue for resolution is the physical or material possession of the property involved, independent of any claim of ownership by any of the party litigants. However, the issue of ownership may be provisionally ruled upon for the sole purpose of determining who is entitled to possession de facto.”

The court emphasized that the elements of forum shopping were not met because a judgment in the ejectment case would not amount to res judicata (a matter already judged) in the annulment case. Res judicata requires that the judgment in one case will have a binding conclusive effect on the other case on the issue of ownership. Even though ownership was also being contended with similar pieces of evidence, the Supreme Court decided that since the ejectment case is merely for physical possession of the property it would not bar the action for annulment of title. The Court cited numerous precedents establishing that an ejectment case is designed to summarily restore physical possession without prejudice to the settlement of opposing claims of juridical possession in other proceedings. A pending action involving ownership of the same property does not bar or suspend an ejectment suit.

Moreover, the Court delved into the propriety of the unlawful detainer suit itself. An unlawful detainer action arises when a person unlawfully withholds possession after the expiration or termination of their right to possess under a contract, express or implied. The complaint filed by the bank stated that Malabanan initially possessed the property as the registered owner. After the execution of the dacion en pago and the subsequent transfer of title to the bank, Malabanan’s possession became one of mere tolerance. It further stated that after the demand by the bank, Malabanan refused to vacate the property.

Malabanan challenged the dacion en pago, pointing to a discrepancy in the TCT numbers. He asserted the deed referred to TCT No. T-255916, while the property was covered by TCT No. T-265916. The Court found that the trial court noted the discrepancy may be attributed to a typographical oversight because the technical descriptions of the properties covered by both titles clearly showed that they refer to one and the same property. Furthermore, Malabanan failed to sufficiently explain why the seemingly erroneous TCT No. T-255916 covers the same property that he admitted to mortgaging to the bank, covered under Real Estate Mortgage. The Court reiterated that the issue to be resolved in the case is merely physical possession and not juridical.

Ultimately, the Supreme Court affirmed the Court of Appeals’ decision, ordering Malabanan to vacate the property. However, the Court modified the ruling regarding reasonable rentals, deleting the award in favor of the bank. It held that the bank failed to provide sufficient evidence to support its claim for P100,000.00 monthly rentals, relying only on a self-serving assertion in an unverified position paper.

FAQs

What is the main principle established in this case?	An ejectment case can proceed even if there is a pending case questioning the ownership of the property. The central issue is physical possession, not ownership.
What is an unlawful detainer case?	It is a legal action filed to recover possession of a property from someone who initially had lawful possession but whose right to possess has expired or been terminated.
What is a dacion en pago?	It is a special form of payment where a debtor cedes ownership of a property to the creditor in satisfaction of a debt.
What is litis pendencia?	It exists when there is another pending action involving the same parties, rights asserted, and reliefs prayed for, such that the judgment in one case would amount to res judicata in the other.
What is res judicata?	It is a legal doctrine that prevents a party from re-litigating an issue that has already been decided by a court.
What type of evidence did the bank provide regarding the property’s value?	The bank only submitted an unverified position paper asserting a monthly rental value of P100,000.00, which the Court deemed insufficient.
Did the Supreme Court completely side with the bank?	No, while the Court upheld the order for Malabanan to vacate the property, it removed the award of reasonable rentals due to lack of sufficient evidence.
What does the decision mean for property owners and tenants?	Property owners can pursue ejectment cases even with pending ownership disputes. For tenants or occupants, it highlights the importance of understanding their rights of possession separate from claims of ownership.

The Malabanan case serves as a clear reminder that the right to possess a property is distinct from the right to own it. Even when complex questions of title are being litigated, ejectment actions provide a swift means of resolving who has the immediate right to physical possession. Both property owners and occupants should understand these principles and seek legal advice when facing such disputes.

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: Samuel Malabanan v. Rural Bank of Cabuyao, Inc., G.R. No. 163495, May 08, 2009