Pagarao vs. Trinidad

Tolerance must be present from the very start of possession for unlawful detainer to lie; subsequent tolerance cannot cure an entry that was unlawful from the beginning, and an agreement to enter into a contract to sell does not by itself render such possession lawful. Because Trinidad disavowed knowledge of how possession began, the jurisdictional element of prior lawful possession by contract or tolerance was absent and the unlawful detainer action could not prosper.

Immaculada T. Trinidad is the registered owner of a parcel of land along Audi Street, Cainta, Rizal, covered by Transfer Certificate of Title No. 616372. Noe R. Pagarao, Jr. and Rebecca Caballa are private individuals who came to occupy the property without any pre-existing contractual, tenancy, or other juridical tie to Trinidad.

Sometime in February 2015, Noe R. Pagarao, Jr. and Rebecca Caballa occupied Trinidad's parcel along Audi Street, Cainta, Rizal, and constructed a modest structure that served as their residence and place of business. Trinidad discovered the occupation only in 2018. She verbally demanded that they vacate, but they pleaded to be allowed to continue possessing the property and offered to purchase it for PHP 2.5 million.

Trinidad agreed to the offer subject to execution of a written contract to sell. Before such execution, Pagarao and Caballa requested that she accept PHP 300,000.00 as partial payment as proof of serious intent to proceed with the sale. As a consequence, Trinidad allowed them to continue using and occupying the property.

Later, Pagarao and Caballa refused to sign or execute the contract to sell prepared by Trinidad. Her written demand to vacate fell on deaf ears. On April 1, 2019, she filed before the Municipal Trial Court of Cainta, Rizal a complaint for unlawful detainer, in which she admitted she does not know exactly when and by what manner or reason petitioners had occupied her lot.

The Municipal Trial Court found petitioners' possession initially lawful on the basis of the parties' agreement to enter into a contract to sell, but unlawful upon refusal to vacate when demanded, and ordered them to vacate Block 34, Lot 8, Audi St., Village East, Brgy. Sto. Domingo, Cainta, Rizal, to pay PHP 10,000.00 monthly as reasonable compensation from the February 21, 2019 demand less the PHP 300,000.00 earnest money, plus PHP 20,000.00 as attorney's fees and PHP 5,949.00 as costs. The Regional Trial Court affirmed in toto, deeming Trinidad's lack of knowledge of the initial entry immaterial in view of the subsequent agreement to execute a contract to sell.

• Jurisdiction and Cause of Action: Petitioner argued that the MTC erred in failing to dismiss the case for lack of jurisdiction and lack of cause of action, considering that the complaint did not allege that their initial possession of the contested property was lawful.
• Tolerance From the Start: Petitioner maintained that an element of unlawful detainer is lacking when forcible entry preceded possession by tolerance, citing Bugayong-Santiago vs. Bugayong.
• Unlawful Entry From the Beginning: Petitioner reiterated that if their possession was unlawful from the beginning, an action for unlawful detainer would not be the proper remedy and the complaint should therefore be dismissed.

• Subsequent Permission: Respondent countered that little importance should attach to what transpired prior to the parties' agreement to enter into a contract to sell, and that what carries more weight is the subsequent permission she gave to petitioners to use and occupy her property.

• Propriety of Unlawful Detainer: Whether the courts a quo correctly ruled that Trinidad properly availed of the remedy of unlawful detainer.

• Propriety of Unlawful Detainer: No. Unlawful detainer did not lie, absent the jurisdictional fact of initially lawful possession by contract or tolerance from the start, so the complaint was dismissed for lack of cause of action.

• Propriety of Unlawful Detainer: Unlawful detainer requires (a) initial possession by contract with or tolerance of plaintiff, (b) illegality upon notice of termination of the right of possession, (c) continued deprivation after demand, and (d) filing within one year from last demand. The border between forcible entry and unlawful detainer is defined by the nature of initial entry: illegal entry gives rise to forcible entry, while initially legal possession that later becomes illegal gives rise to unlawful detainer. Here, Trinidad admitted she did not know when or how petitioners occupied the lot, establishing neither permission nor tolerance at inception. The later agreement to enter into a contract to sell did not convert the character of possession, since in a contract to sell ownership and, unless otherwise agreed, possession remain with the seller until full payment, and a buyer's possession without full payment or conveyance of possessory right rests merely on tolerance; moreover, even that later tolerance cannot transform forcible entry into unlawful detainer without rendering the one-year bar for forcible entry illusory.

• Unlawful Detainer; Jurisdictional Facts — An action for unlawful detainer, a summary action for recovery of possession, lies against one who unlawfully withholds possession after expiration or termination of the right to hold possession by virtue of any contract, express or implied. It requires: (a) initial possession by contract with or tolerance of plaintiff; (b) possession becoming illegal upon notice of termination; (c) continued possession depriving plaintiff of enjoyment; and (d) filing within one year from last demand. Applied here, element (a) was absent.
• Forcible Entry vs. Unlawful Detainer — The distinction turns on the nature of initial entry or possession. If entry is illegal, the remedy is forcible entry; if entry is legal but possession thereafter becomes illegal, the remedy is unlawful detainer. The ruling was applied to hold that petitioners' initially unexplained occupation pointed to forcible entry, not unlawful detainer.
• Tolerance From Inception — Tolerance or permission must have been present at the beginning of possession; if possession was unlawful from the start, unlawful detainer is improper and should be dismissed. Subsequent tolerance cannot convert forcible entry into unlawful detainer, otherwise forcible entry would become imprescriptible by mere demand and plea of tolerance beyond the one-year period. Applied to reject the lower courts' reliance on later permission.
• Contract to Sell; Possession — In a contract to sell, ownership is reserved in the seller and is not transferred until full payment of the purchase price, payment being a positive suspensive condition. The right of possession, as an incident of ownership, likewise remains with the seller unless otherwise provided; without full payment or an agreement conveying possessory right, the buyer's possession rests solely on the seller's tolerance, and failure to materialize the contract extinguishes any right to continue possession. Applied to hold that the unperfected contract to sell did not render petitioners' possession contract-based and lawful from the start.

• "[T]olerance or permission must have been present at the beginning of possession; if the possession was unlawful from the start, an action for unlawful detainer would not be the proper remedy and should be dismissed." — States the controlling tolerance-from-inception rule that defeated the ejectment suit.
• "such tolerance must be present right from the start of possession sought to be recovered, to categorize a cause of action as one of unlawful detainer — not of forcible entry" — Defines the doctrinal line between the two ejectment remedies and warns against allowing forcible entry to masquerade as unlawful detainer.
• "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." — Explains why the parties' purchase agreement did not confer a lawful possessory right.

• Spouses Liu vs. Espinosa, 858 Phil. 677, 683-684 (2019) — Cited as basis for the nature of unlawful detainer and its jurisdictional facts.
• Zacarias vs. Anacay, 744 Phil. 201, 211 (2014) — Cited for the principle that the border between forcible entry and unlawful detainer is defined by the nature of initial entry or possession.
• Sabellina vs. Buray, 768 Phil. 224, 236 (2015) — Cited to support that subsequent tolerance cannot convert forcible entry into unlawful detainer.
• Jose vs. Alfuerto, 699 Phil. 307 (2012) — Followed for the rule that tolerance must exist from the start, otherwise unlawful detainer must be dismissed.
• Galacgac vs. Bautista, 889 Phil. 379 (2020) — Elaborated the rationale against allowing delayed forcible entry suits to proceed as unlawful detainer on a plea of tolerance.
• Bugayong-Santiago vs. Bugayong, 822 Phil. 394 (2017) — Invoked by petitioners for the proposition that unlawful detainer fails when forcible entry preceded tolerance; distinguished by the CA but ultimately consistent with dismissal.
• Keppel Bank Philippines, Inc. vs. Adao, 510 Phil. 158 (2005) — Followed to hold that a contract to sell alone does not give the buyer possessory right absent full payment, leaving possession by mere tolerance.
• Union Bank of the Phils. vs. Maunlad Homes, Inc., 692 Phil. 667 (2012) — Cited to show the buyer's possessory right is extinguished when the contract to sell fails to materialize.
• Agustin vs. De Vera, 851 Phil. 240, 253 (2019) — Cited for the rule that ownership in a contract to sell is reserved in the seller until full payment.

Caguioa (Chairperson), Inting, and Gaerlan, JJ., concur. Singh, J., on official business.